As it is known by everyone that reads newspapers and watches the news nowadays, Portugal, as a peripheral European country, with a weak economic structure and huge public imbalances faces a serious situation. International pressure have pushed government to implement austerity measures similar to the ones applied in other European countries. However, it is important to refer that these austerity measures will deteriorate the situation and create social unrest that will affect even more the GDP expansion. Going back in history we can see that Portugal was a country that based their economic expansion of the 80’s on small industry, low salaries and exports to central Europe and US. At the time Portugal had power to manage their own monetary policy and provide the respective adjustments when needed and also the tools to protect their economic interests. The Euro integration should have been a positive issue pushing Portugal to converge and reform their economy to be more heavy industry and service biased as the German economy is. However that did not happen because of several reasons that would take us through a long conversation. Instead Portugal kept the same approach and lived from subsidies and leverage through all these years. Now someone has to pay… and as there is less tools available than before, i.e. there is only the fiscal tool as the monetary is centered in Brussels … the solution will be harder and will have very extreme consequences.

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