Portugal seeks a way out of stagnation
Financial inflows have failed to transform the country into a dynamic, growth economy. However, its present crisis, which the government seems determined to solve, might be an opportunity to put in place reforms. Jeff Lewis reports.
WHEN PORTUGAL’S COLONY in Brazil began to produce vast quantities of gold in the 18th century, the country’s ruling class thought they knew exactly how to make the best use of the bounty. They built palaces, churches and monasteries, providing the country with stunning monuments that would become tourist attractions in the following centuries. What they didn’t do was use the money wisely to build up the country’s infrastructure, improve the educational system, or invest in industries that could provide jobs, and more wealth, for the mass of the Portuguese population.
When Portugal joined the European Union in 1986, the country again enjoyed a huge inflow of wealth, this time from its new partners to the north. For over 20 years, EU transfers to Portugal have helped fund the construction of infrastructure. Unfortunately, successive governments, from the administration of prime minister Anibal Cavaco Silva (now Portugal’s president) in 1986 through to the present government of prime minister José Sócrates, were no better than their predecessors in the 18th century at turning all that money, and all the new infrastructure, into a more productive, faster-growing economy.