Table of Contents

The Global Financial Crisis and its Budget Impacts in OECD Nations

The Global Financial Crisis and its Budget Impacts in OECD Nations

Fiscal Responses and Future Challenges

Edited by John Wanna, Evert A. Lindquist and Jouke de Vries

The global financial crisis of 2007–09 constituted the biggest shock to the economies of the OECD nations since the Second World War and caused most of their governments to move into intense crisis mode. They made significant adjustments to their fiscal policy regimes, including massive interventions to stabilize markets and economies. But how they reacted to the crisis, and what measures they took to deal with it, still underpin their economic and budgetary positions. This singular shock provides the editors and authors of this book with an intriguing opportunity to examine how different OECD budgetary systems performed. Chapters cover the EU, North America and Asia, assessing how governments responded to the challenge and how their budget systems evolved in the aftermath.

Chapter 9: Portugal and the global financial crisis: short-sighted politics, deteriorating public finances and the bailout imperative

Paulo T. Pereira and Lara Wemans

Subjects: economics and finance, public finance, public sector economics


In April 2011 Portugal became the third country in a row, after Greece and Ireland, to receive a bailout from the ‘Troika’ of the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF). Financial markets began to become suspicious about the ability of the country to fulfill its sovereign debt liabilities, risk premiums increased up to a point where access to capital markets was no longer an option, and a debt default soon became imminent. At this point the Portuguese minority Socialist government of Jose Socrates had no option other than to negotiate a bailout in the form of a memorandum of understanding with the Troika lending consortium. The natural question is: Why did Portugal suffer this fate? This chapter aims to explain the political and institutional foundations that led to this bailout by exploring two key dimensions: the democratic features of Portuguese governments, and their fiscal policy settings shaped within the context of the European Union’s (EU) budgetary framework. Firstly, the chapter examines the long-run trends in the management of Portugal’s public finances. Secondly, it explores the economic and fiscal situation before the crisis emerged.

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