Portugal’s slow-motion economic crisis

Portugal's economy is in its worst recession in 40 years, having stagnated for over a decade.

A question hitherto "confined to university seminars" has gone mainstream, says Patricia Kowsmann in The Wall Street Journal. Should Portugal leave the euro? The economy is in its worst recession in 40 years. Portugal didn't even enjoy a bubble before the bust. Instead, it has been in a slow-motion crisis. The economy has stagnated for over a decade amid a decline in competitiveness in its low-tech export industries, such as textiles, and weak productivity growth.

Both the private and public sectors went into debt to make up for it, with governments focusing on infrastructure and construction and households splurging on plastic. By 2008, corporate and household debt had reached 200% of GDP. Government debt has reached 123%. By 2011, the markets were no longer prepared to lend to Portugal at sustainable interest rates, so it negotiated a e78bn bail-out package.

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