This paper teases out the explanatory role of changes in Portugal’s domestic political configuration for its shifting economic performance. It traces these changes across three phases of European integration: from accession to implementation of the Single Market and adoption of the Maastricht Treaty; the run-up to EMU; and the experience of membership of the Eurozone.
Like Spain, Portugal’s experience of post-authoritarian democratic consolidation was given added impetus by the compliance requirements first of the ‘acquis communautaire’ and then by the conditionality of EMU. Also like Spain, the privileges that had growth in the large sheltered domestic sector were not seriously challenged. While growth during the 1990s brought Portugal onto a convergence trajectory, like the other EU peripheral countries, the strong role of demand-led growth, dependent on government-led investment efforts, caused the growth profile to stall after the introduction of the Euro. While Portugal similarly experienced a surge of inward capital flow consequent upon the availability of cheap credit, this was not concentrated in property, but neither did it generate sustainable productive activities. Portugal’s large private debt liabilities, which are considerably larger than those of the public sector, mirror the Spanish situation.