Alternative Views on Portuguese Stagnation: From the Euro’s Inception to the COVID-19 Pandemic

Abstract Over the past two decades, real GDP per capita in Portugal has nearly stagnated. The conventional account attributes this to the mismanagement of public finances and the lack of structural reforms in labor and product markets prior to the “adjustment program” agreed with the troika in the early 2010s. In the same vein, the neoclassical-inspired interpretation explains the subsequent recovery based on supply-side and fiscal reforms implemented during the troika years, which would account for the reduced fiscal deficits, external equilibrium and employment growth registered in the pre-COVID-19 period. In this article, we challenge this optimistic view, identifying structural weaknesses of the Portuguese economy that would have soon become apparent even if the pandemic had not happened. Addressing these weaknesses requires changes that go beyond the EU and national responses to the pandemic crisis.