page_title: European debt crisis
section_title: Portugal
hierarchical_section_title: European debt crisis / Evolution of the crisis / Portugal
caption_attribution_description: English: Portuguese debt history since 1999. 1999-2011: Eurostat data: http://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/data/main_tables (see "General government gross debt") (see also: epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-23042012-AP/DE/2-23042012-AP-DE.PDF) 2010-2015: Eurostat data: http://ec.europa.eu/economy_finance/publications/european_economy/2013/pdf/ee7_en.pdf (latest update: October 2013) 2016-2017: Once Ernst &amp; Young updates their forecasts, then we could use their data as well: 2015-2016 estimates from Ernst &amp; Young using data from Oxford Economics http://ey-charts.living-digital.com/view-chart?key=19&#160;; see also: http://www.ey.com/GL/en/Issues/Business-environment/EUROZONE-COUNTRY (latest update: June 2012)
context_page_description: The European debt crisis is a multi-year debt crisis that has been taking place in the European Union since the end of 2009. Several eurozone member states were unable to repay or refinance their government debt or to bail out over-indebted banks under their national supervision without the assistance of third parties like other eurozone countries, the European Central Bank, or the International Monetary Fund.
  The eurozone crisis was caused by a balance-of-payments crisis. The crisis was worsened by the inability of states to resort to devaluation. Debt accumulation in some eurozone members was in part due to macroeconomic differences among eurozone member states prior to the adoption of the euro. The European Central Bank adopted an interest rate that incentivized investors in Northern eurozone members to lend to the South, whereas the South was incentivized to borrow. Over time, this led to the accumulation of deficits in the South, primarily by private economic actors. A lack of fiscal policy coordination among eurozone member states contributed to imbalanced capital flows in the eurozone.
context_section_description: Unlike other European countries that were also severely hit by the Great Recession in the late 2000s and eventually received bailouts in the early 2010s (such as Greece and Ireland), Portugal had the characteristic that the 2000s were not marked by economic growth, but were already a period of economic crisis, marked by stagnation, two recessions (in 2002–03 and 2008–09) and government-sponsored fiscal austerity in order to reduce the budget deficit to the limits allowed by the European Union's Stability and Growth Pact.
  According to a report by the Diário de Notícias, Portugal had allowed considerable slippage in state-managed public works and inflated top management and head officer bonuses and wages in the period between the Carnation Revolution in 1974 and 2010. Persistent and lasting recruitment policies boosted the number of redundant public servants. Risky credit, public debt creation, and European structural and cohesion funds were mismanaged across almost four decades. When the global crisis disrupted the markets and the world economy, together with the US subprime mortgage crisis and the eurozone crisis, Portugal was one of the first economies to succumb, and was affected very deeply.
  In the summer of 2010, Moody's Investors Service cut Portugal's sovereign bond rating, which led to an increased pressure on Portuguese government bonds. In the first half of 2011, Portugal requested a €78 billion IMF-EU bailout package in a bid to stabilise its public finances.
  Portugal's debt was in September 2012 forecast by the Troika to peak at around 124% of GDP in 2014, followed by a firm downward trajectory after 2014. Previously the Troika had predicted it would peak at 118.5% of GDP in 2013, so the developments proved to be a bit worse than first anticipated, but the situation was described as fully sustainable and progressing well. As a result, from the slightly worse economic circumstances, the country has been given one more year to reduce the budget deficit to a level below 3% of GDP, moving the target year from 2013 to 2014. The budget deficit for 2012 has been forecast to end at 5%. The recession in the economy is now also projected to last until 2013, with GDP declining 3% in 2012 and 1% in 2013; followed by a return to positive real growth in 2014. Unemployment rate increased to over 17% by end of 2012 but it has since decreased gradually to 10,5% as of November 2016.
  As part of the bailout programme, Portugal was required to regain complete access to financial markets by September 2013. The first step towards this target was successfully taken on 3 October 2012, when the country managed to regain partial market access by selling a bond series with 3-year maturity. Once Portugal regains complete market access, measured as the moment it successfully manage to sell a bond series with a full 10-year maturity, it is expected to benefit from interventions by the ECB, which announced readiness to implement extended support in the form of some yield-lowering bond purchases (OMTs), aiming to bring governmental interest rates down to sustainable levels. A peak for the Portuguese 10-year governmental interest rates happened on 30 January 2012, where it reached 17.3% after the rating agencies had cut the governments credit rating to "non-investment grade" (also referred to as "junk"). As of December 2012, it has been more than halved to only 7%. A successful return to the long-term lending market was made by the issuing of a 5-year maturity bond series in January 2013, and the state regained complete lending access when it successfully issued a 10-year maturity bond series on 7 May 2013.
  According to the Financial Times special report on the future of the European Union, the Portuguese government has "made progress in reforming labour legislation, cutting previously generous redundancy payments by more than half and freeing smaller employers from collective bargaining obligations, all components of Portugal's €78 billion bailout program". Additionally, unit labour costs have fallen since 2009, working practices are liberali
caption: Debt of Portugal compared to eurozone average since 1999
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