Looking for a success: the euro crisis adjustment programs

It is difficult to call an adjustment process a success when the country in question has barely grown in 15 years and unemployment is 12.4%. Yet, the Portuguese economy has changed in many directions that seem promising. The misallocation of resources that plagued it seems to have reversed, as export sectors have grown, employment shifted to more educated workers, protection of local interests declined, and output per hour increased in the least productive sectors. At the same time, it is easy to claim success when looking at the profile of stable and small payments that the Portuguese state has to make in the near term. Another debt crisis is unlikely. Yet, behind the low interest rates and longer maturities, public debt is 130% of GDP, austerity was far from being decisive and to generate large primary surpluses, and public spending will keep on rising given the lack of a reform of the pension system. Without a quiet restructuring of the debt to the European authorities over the next few year that lowers its market value without affecting its face value, there are reasons to be worried, and the Greek crisis of 2015 may have made this goal harder to reach. In the long run, the definite tests of adjustment will be whether fast economic growth in the next few years is able to offset the stagnation of the last 15 years and whether public debt significantly falls.