Causes and Consequences: A Perspective from Portugal

The document challenges the narrative that Portugal's sovereign debt crisis was solely caused by national misgovernment, instead highlighting three structural weaknesses: low education levels, a low-value-added economic specialisation profile, and a peripheral geographic position. It argues that EU-level decisions—such as the process of nominal convergence and the management of the euro—exacerbated these issues. The author contends that the current adjustment program, focused on austerity and internal devaluation through wage cuts, is pro-cyclical and risks deepening the recession while undermining long-term competitiveness by cutting investments in education and infrastructure.

• Portugal's economic performance has been hindered by three primary structural weaknesses: low education levels of the labor force, a specialization profile focused on low value-added and low technology activities, and its peripheral position relative to main European and world markets.
• EU-level policies and institutions contributed to the crisis, specifically through the process of nominal convergence which led to a 35% appreciation of the escudo between 1986 and 1999, and a sharp reduction in real interest rates that encouraged investment in non-tradable sectors over export industries.
• The Portuguese economy faced significant external shocks after the introduction of the euro, including the entry of China into the WTO, EU enlargement to the East, and the appreciation of the euro against the dollar between 2001 and 2008, all of which eroded the competitiveness of traditional Portuguese industries.
• The author disputes the claim that wage profligacy caused the crisis, noting that between 2000 and 2008, real compensation per employee in Portugal grew slower than productivity, leading to a decrease in the wage share of aggregate income.
• The adjustment program implemented since May 2011 focuses on reducing the public deficit (from 9.8% of GDP in 2010 to under 3% by 2013) through austerity measures that the author argues are pro-cyclical and likely to cause a deep recession.
• The strategy of 'internal devaluation'—reducing labor costs to improve price-competitiveness—is criticized for being risky in a context where other EU countries are adopting similar austerity measures, potentially leaving few outlets for exports.
• The adjustment program may undermine long-term competitiveness by cutting expenditures on education and social assistance, and by postponing critical transport infrastructure investments.

APA

Mamede, R. (2012). Causes and Consequences: A Perspective from Portugal. Green European Journal. https://www.greeneuropeanjournal.eu/causes-consequences-a-perspective-from-portugal/

Chicago

Mamede, Ricardo. Causes and Consequences: A Perspective from Portugal. Green European Journal, 2012. https://www.greeneuropeanjournal.eu/causes-consequences-a-perspective-from-portugal/.

Wikipedia

{{cite report |last1=Mamede |first1=Ricardo |title=Causes and Consequences: A Perspective from Portugal |publisher=Green European Journal |date=1 March 2012 |url=https://www.greeneuropeanjournal.eu/causes-consequences-a-perspective-from-portugal/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mamede2012causes, author = {Mamede, Ricardo}, title = {{Causes and Consequences: A Perspective from Portugal}}, institution = {Green European Journal}, year = {2012}, month = mar, url = {https://www.greeneuropeanjournal.eu/causes-consequences-a-perspective-from-portugal/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }