2010–2014 Portuguese financial crisis
To prevent an insolvency situation in the debt crisis, Portugal applied in April 2011 for bail-out programs and drew a cumulated €78 billion from the IMF, the EFSM, and the EFSF.
[8] Unlike other European countries that were also severely hit by the Great Recession in the late 2000s and received bailouts in the early 2010s (such as Greece and Ireland), in Portugal the 2000s were not marked by economic growth, but instead were already a period of economic crisis, marked by stagnation, two recessions (in 2002–03[10][11] and 2008–09[12][11]) and government-sponsored fiscal austerity in order to reduce the budget deficit to the limits allowed by the European Union's Stability and Growth Pact.
[24] In the Stability and Growth Programme for 2005–2009, the Sócrates' government proposed to let the budget deficit to be higher than 6% in 2005, but to structurally reduce it to below 3% until 2008, a plan which was accepted by the European authorities.
[40] Bento also points out that Euro was the root cause for many of the internal macroeconomic disequilibria inside Eurozone – such as excessive external deficits in periphery countries (such as Portugal) and excessive external surplus in core countries – and that such disequilibria were the main cause of the 2010s European debt crisis (and were, to a great extent, more to important to explain the crisis than states' public finances).
[43] A set of economists (including former Prime Minister and eventual President Aníbal Cavaco Silva, an economically liberal scholar and politician) points to the excessive size of the Portuguese government, whose total expenditures overtook 45% of the GDP in 2005.
[40] For Ricardo Reis, the accession to Euro was a root cause for the 2000s crisis, but for different reasons than the ones put forward by Ferreira do Amaral: the low interest rates allowed an influx of foreign capital, which the country's weak financial system misallocated to the low-productive non-tradable sector, reducing the economy's overall productivity.
[44][40] Meanwhile, the Social Security system was demanding increasing public spending, and the constant tax hikes in the 2000s limited the potential for growth of the Portuguese economy.
In the opening weeks of 2010, renewed anxiety about the excessive levels of debt in some EU countries and, more generally, about the health of the Euro spread from Ireland and Greece to Portugal, Spain, and Italy.
From the perspective of Portugal's industrial orders, exports, entrepreneurial innovation and high-school achievement, the country matched or even surpassed its neighbors in Western Europe.
[54] In September 2010, the XVIII Constitutional Government of Portugal announced a fresh austerity package following other Eurozone partners, through a series of tax hikes and salary cuts for public servants.
In November risk premiums on Portuguese bonds hit euro lifetime highs as investors and creditors worried that the country would fail to rein in its budget deficit and debt.
[57][58][59] On 23 March 2011, José Sócrates resigned following passage of a no confidence motion sponsored by all five opposition parties in parliament over spending cuts and tax increases.
[61] In May 2011, the European Union and the International Monetary Fund sealed a three-year €78 billion financial rescue plan for Portugal in a bid to stabilise its public finances.
[62] After the bailout was announced, the newly-elected Portuguese government headed by Pedro Passos Coelho managed to implement measures to improve the State's financial situation and the country started to be seen as moving on the right track.
Despite the unemployment rate has reached new highs above 15 per cent in the second quarter 2012, the country would be able to overcome the crisis and emerge stronger because the economic adjustment was producing the desirable effects on the Portuguese economy and public debt situation.
Recently the ECB announced they will be ready also, to begin additional support to Portugal, with some yield-lowering bond purchases (OMTs), when the country regained complete market access.
