Portugal: Can Socialism Survive?

By: Richard H.K. Vietor and Haviland Sheldahl-Thomason

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Synopsis: "In late 2017, Prime Minister António Costa of the Socialist Party had come to an agreement with the far left parties that allied with his government and approved a budget for 2018 that included increased government spending as well as a belief that the fiscal deficit would fall to a record low of 1.1% of GDP.1 The country had recently emerged from a bailout package imposed in 2011 following the global financial crisis, and had sustained positive growth and a decreased fiscal deficit in the years since. Indeed, citing 3% growth in the second quarter of 2017, the Wall Street Journal characterized Portugal as “the comeback kid.”2 While the country had suffered from low productivity and a lack of competitiveness before the crisis, many hoped that the structural reforms and fiscal balancing would let Portugal recoup what it had foregone in the years following the crisis. Costa’s government had so far baffled critics, as the coalition parties agreed to budgets that accomplished a lower fiscal deficit while partially undoing austerity measures and returning pensions and wages to pre-bailout levels."