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Grupo de Estudos Monetários e Financeiros

Estudos do GEMF, N.º 16 de 2011


The Fundamentals of the Portuguese Crisis

(Publicado em Panoeconomicus 58(2): 195-218, 2011)

João Sousa Andrade
University of Coimbra and GEMF

Adelaide Duarte
University of Coimbra and GEMF

This paper analyses the fundamentals of the Portuguese crisis. The financial crisis of 2007 worsened and triggered the current Portuguese crisis. We argue that the main problem that the economy is facing is its output stagnation due to a kind of Dutch disease that has created high and increasing levels of indebtedness, low and decreasing levels of saving and has reduced Portuguese competitiveness. Moreover, the existence of a dualist labour market and a new vague of emigration reproduces inefficiency increasing unemployment of younger workers and the supply of human capital abroad funded by the Portuguese taxpayers. Governance problems such as bad public budget governance, lack of transparency and accountability are also at stake and have to be solved to allow the economy to return to its long-run growth path.

JEL Classification: E21, F34, G01, H10, H63.

Growth, Debt, Saving, Dutch disease, Unemployment, Budget policy.

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