The resignation of Portugal’s Socialist Prime Minister Antonio Guterres was, as he said, a reaction to the Socialist Party’s defeat in municipal polls over the weekend. It is a truism that this defeat would not have resulted in the government’s overthrow had it not been accompanied by an economic crisis. These are, in fact, interrelated phenomena. In a desperate attempt to tackle the ongoing crisis, the Portuguese prime minister adopted strict measures which in turn swelled public discontent. The reason for Portugal’s severe economic crisis is nothing but the disequilibrium in the balance of trade. Following a long period of economic austerity in order to meet the criteria for EMU membership, the strong escudo caused a precipitous increase in imports, which disrupted the balance. It should be pointed out that the euro protects us against monetary crises but not from economic ones. The disequilibrium in the balance of trade may no longer put devaluation pressures on the currency but can have a negative impact on the economy. More specifically, it leads to a decrease in income, which brings demand under control, since the weapon of custom duties is no longer available. The crisis in Portugal is of particular interest because it is not an isolated case. It is actually a phenomenon which threatens other, relatively weak, EU economies, the Greek one included. The fact that Greece has lagged behind in the area of economic reforms and, particularly, of privatizations, combined with the fact that the expected rise in imports has not yet taken place seems to make for equilibrium. But this equilibrium is fragile. There is a lurking danger that the Greek economy could slide into a prolonged crisis. The entry into the eurozone no doubt constitutes a historical turning point, but it would be a grave error to cultivate the impression that the Greek economy will from now on be invulnerable. Greece is called upon to survive in a highly competitive environment. It will only achieve this if it broadens its production base, that is, if it goes on to produce goods and services which can compete in the European market. We do not have to be plunged in a crisis for the government to realize that its own stability depends on its economic performance.

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