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PORTUGAL, CULTURE AND DEVELOPMENT
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The evolution and changes in the
Portuguese economy
The last 20 years of the Portuguese economy
were marked by integration into the euro zone
as one of the founding countries. The years im-
mediately prior to that and in preparation for
joining the Economic and Monetary Union were
marked by the government of Cavaco Silva
(PSD), who had an absolute majority in
Parliament (1987-1995) after two years of mi-
nority government (1985-1987). With Mário
Soares as President of the Republic and the re-
form of the Constitution to make it compatible
with the underlying economic principles of
European integration (the reform of 1989) – par-
ticularly as far as economic freedom, free com-
petition, was concerned, in the context of eco-
nomic and social cohesion – it became possible
to meet the conditions for a long period of po-
litical stability that enabled very significant pro-
gress in terms of convergence, meeting the
goals laid down in Maastricht.
In 1995, the victory of António Guterres (PS)
allowed a rotation of power without interrupt-
ing the political stability essential to integration
into the euro zone. Despite not having an abso-
lute majority in Parliament, the government
managed to guarantee the stability for meeting
the criteria laid down by the European Union.
The resignation of the government over the
Socialist Party’s defeat in the local elections of
2001 led to general elections being called in
2002, which in turn led to a coalition govern-
ment between the right and centre, PSD and
CDS, headed by José Manuel Durão Barroso.
Following, Durão Barroso’s election as
President of the European Commission in 2004,
he was replaced as head of the government by
Pedro Santana Lopes, in the same coalition.
However, owing to internal problems of the
government, President Jorge Sampaio was
forced to dissolve Parliament and call early gen-
eral elections in 2005. The Socialist Party won
an absolute majority and José Sócrates was ap-
pointed Prime Minister.
After initially coming close to meeting the cri-
teria of European integration in the budgetary
sphere, as of autumn 2008 the international fi-
nancial crisis triggered by subprime mortgages
imported from the United States took a severe toll.
The political and economic effects and
consequences of the crisis of 2008
Signs of economic weakening were already per-
ceptible in 2002. They had an effect on one an-
other and became evident in a drop in tax rev-
enues and in an increase in the budget deficit,
with the resulting growth of public debt.
In 2009, the Socialist Party won the elec-
tions, but failed to secure a parliamentary ma-
jority, forcing the government into a complicat-
ed management of expectations and election
promises in the face of a drop in output and the
grave effects of the financial crisis. That would
lead the government to bow to market pressure
and seek a bailout from the International
Monetary Fund, the European Central Bank and
the European Commission.
General elections were called in 2011, which
were won by the PSD led by Pedro Passos
Coelho. However, he needed to enter into a
coalition with the CDS of Paulo Portas. The new
government was forced to undertake a tough
adjustment programme and a serious policy of
austerity imposed by the so-called Troika (IMF,
ECB and European Commission). The 2011-
2015 term of office would be marked by that
bailout and by the introduction of the fiscal
measures required by the Troika, fundamentally