Portugal Essay

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Civilization can be traced  in Portugal  back to neolithic times, through  the settlements  of the Phoenicians, Carthaginians,  and Romans. Later, the Christian  “reconquista” halted  the  Muslim  advance  and colonization of the country and gave rise to the maritime empire that provided for economic growth in the 15th and 16th centuries. This, in turn, was followed by a period of Spanish domination and occupation  during the Napoleonic wars. By this stage, Portugal had lost much of its power and influence.

It was not until the end of the 19th century that poor living standards  and inept government  precipitated  a republican  backlash. The monarchy  was finally overthrown  on October  5, 1910, replaced  by a republic. However, the political scene was far from stable. From 1910 to 1946, military intervention became the normal means of governmental  change in Portugal. A Catholic monarchist,  General António Óscar Carmona, emerged as president and remained in office until 1951. During this period, Portugal had many of the trappings of a fascist state, including secret police and tacit support for Franco during the Spanish Civil War.

It  was also  during  this  period  that  Antonio  de Oliveira Salazar first served as prime minister in 1932. Salazar is often credited as being the guiding hand of Portuguese  development  and its progress to a modern economy. Indeed, from 1950 until Salazar’s death, it is estimated that gross domestic product (GDP) per capita in Portugal rose at an average rate of 5.66 percent per year, well ahead of European  counterparts. Salazar remained  in power until 1968, when he suffered a stroke. He died in 1970.

The continuing  economic  and  political problems of  the  right-wing  government   caused  tensions  to grow and  resulted  in an almost  bloodless left-wing coup, led by disenchanted army officers on April 25, 1974. However, until  November  1975, the situation remained  precarious, with various factions vying for power. The summer of 1975 saw elections and victory for the socialist party under the leadership of Mario Soares. This signalled the beginning of a period that has seen gradual  strengthening of democratic  processes and  further  integration  of Portugal  into  the European economy. In 1986 Portugal joined the European Community (EC), giving it access to funding and the potential for much-needed economic growth.

For administrative  purposes,  Portugal  is divided into 18 districts and 2 autonomous regions (the Azores and Madeira), and in 2008 the population of Portugal is estimated  to  be approximately  10.5 million. The president is the head of state, elected by popular vote, with a five-year term. The leader of the majority party or the majority coalition is appointed  prime minister and head of government  by the president  and leads the unicameral Assembly of the Republic. The assembly comprises  230 seats, with  members  elected  to serve a four-year term. In the elections of February 20, 2005, the Portuguese  Socialist Party was the biggest winner, with 121 seats.

The Portuguese economy has developed gradually over the last 20 years, and like many Western  economies, it has diversified and become increasingly service based. The basis of this change has been policies, similar to the  Thatcherite  policies dominant  in the United Kingdom in the 1980s, which have seen privatization of public sector organizations and liberalization of key markets.

At  the  turn   of  the  millennium,   the  economy appeared  to falter, with a widening gap in GDP per capita  and  a corresponding fall in living standards. The budget deficit increased from 4 percent  of GDP in 2004 to 6 percent in 2005. In 2005 growth was also a major problem, running at only 0.5 percent of GDP. By 2007 GDP per capita was around two-thirds of the European Union (EU) average. One of the reasons for this could be increased  competition  for Portuguese business  following the  accession  of lower-cost  east European  states into the EU. It is also interesting  to note that in 1998 Portugal, along with 11 EU partners, joined the European Monetary Union (EMU), and the euro began circulating in January 2002.

A number  of problem  areas have been identified. These include poor standards of attainment at upper secondary  and  tertiary  education  levels; regulatory restraints  creating  barriers  to competition;  an inefficient  and  protected   public  sector;  a complicated tax  system; and  employment  protection legislation that provides too much protection and causes inflexibility in labor markets. The new government  of José Sócrates agreed in 2005 with the European Commission to reduce the budget deficit to below the threshold of 3 percent of GDP stipulated by the criteria for EMU by 2009. It recognized that solving these problems was central, and the government  endeavored to tackle each one, although the latter one appears to be more problematic.

By 2007 statistics  showed  that  the  economy  was growing at a higher and sustainable pace of 1.9 percent, driven wholly by the private sector. Export growth in traditional  goods, business  services, and  technology was improving  and  also moving  beyond  traditional markets, and unemployment started to decrease in the second quarter of 2007. The budget deficit was reduced to under 3 percent of GDP in 2007, and public spending as a percentage  of the GDP had also decreased. While there is more work to do, the government  has placed Portugal in a more secure position to withstand the swings in the global economy.

Bibliography:

  1. Rui Baptista, Vitor Escaria, and Paulo Madruga, “Entrepreneurship, Regional Development  and Job Creation:  The Case of Portugal,” Small Business Economics (v.30/1, 2008);
  2. Herman Z. Bennett, Competitiveness in the Southern Euro Area: France, Greece, Italy, Portugal and Spain (International Monetary Fund, 2008);
  3. Annette Bongardt and Celeste Amorim Varum, Competitiveness Factors: A Portuguese Perspective (Instituto  Nacional  de Administração,  2007);
  4. CIA, “Portugal,” World  Factbook, www.cia.gov (cited  March  2009);
  5. Michael Derrick,  The Portugal of Salazar (Gates of Vienna Books, 2009);
  6. R. Disney, A History of Portugal and the Portuguese Empire (Cambridge University Press, 2009);
  7. Keiko Honjo, Andréa Lemgruber Viol, and Yuan Xiao, Portugal: Selected Issues (International Monetary Fund, 2007);
  8. M. Magone, “Portugal,” European Journal of Political Research (v.45, 2005);
  9. Organisation for Economic Co-operation and Development, “Progress in Responding to the 2007 Policy Priorities: Country Notes” (OECD, 2008).

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