Working Paper: CEPR ID: DP10972
Authors: Ricardo Reis
Abstract: Portugal?s adjustment program in 2010-14 under the troika was extensive and aimed at addressing its large debt and anemic growth, so it may serve as a blueprint for reforms in the Eurozone. This paper argues that, conditional on a diagnosis of the underlying problems of the Portuguese economy, the adjustment program failed to deliver in definitely addressing the problems in public finances, but succeeded in leaving promising signs of reform in the structure of the economy. In particular, on the negative side, public debt is still high, primary surpluses improved modestly, and public spending barely fell as the problem of ever-rising pension payments remained unsolved. On the positive side, unemployment fell sharply, exports and the current account balance rose, capital and labor reallocated to more productive and tradable sectors, and the country is growing faster than the EU for the first time in 15 years.
Keywords: Fiscal Austerity; Fiscal Consolidation; Structural Reforms
JEL Codes: E65; F44; F45; H63; O52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Adjustment Program (F32) | Public Debt Levels (H63) |
| Adjustment Program (F32) | Unemployment Rate (J64) |
| Adjustment Program (F32) | Economic Growth (O49) |
| Adjustment Program (F32) | Public Spending (H59) |