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Can Portugal Escape Stagnation without Opting Out from the Eurozone?

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  • Pedro Leao
  • Alfonso Palacio-Vera

Abstract

The creation of the Economic and Monetary Union (EMU) has not brought significant gains to the Portuguese economy in terms of real convergence with wealthier eurozone countries. We analyze the causes of the underperformance of the Portuguese economy in the last decade, discuss its growth prospects within the EMU, and make two proposals for urgent institutional reform of the EMU. We argue that, under the prevailing institutional framework, Portugal faces a long period of stagnation, high unemployment, and painful structural reform, and conclude that, in the absence of institutional reform of the EMU, getting out of the eurozone represents a serious political option for Portugal.

Suggested Citation

  • Pedro Leao & Alfonso Palacio-Vera, 2011. "Can Portugal Escape Stagnation without Opting Out from the Eurozone?," Economics Working Paper Archive wp_664, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_664
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    References listed on IDEAS

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    1. J.M.C. Santos Silva & Silvana Tenreyro, 2010. "Currency Unions in Prospect and Retrospect," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 51-74, September.
    2. International Monetary Fund, 2010. "Kenya: Staff Report for the 2009 Article IV Consultation," IMF Staff Country Reports 2010/026, International Monetary Fund.
    3. International Monetary Fund, 2010. "Peru: Staff Report for the 2010 Article IV Consultation," IMF Staff Country Reports 2010/098, International Monetary Fund.
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    Cited by:

    1. Sergio Cesaratto, 2014. "Balance of payments or monetary sovereignty? In search of the EMU’s original sin – a reply to Lavoie," a/ Working Papers Series 1406, Italian Association for the Study of Economic Asymmetries, Rome (Italy).
    2. Sergio Cesaratto, 2017. "Alternative interpretations of a stateless currency crisis," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 41(4), pages 977-998.
    3. C. J. Polychroniou, 2012. "The Mediterranean Conundrum: The Link between the State and the Macroeconomy, and the Disastrous Effects of the European Policy of Austerity," Economics Public Policy Brief Archive ppb_124, Levy Economics Institute.
    4. Sergio Cesaratto, 2015. "Balance of Payments or Monetary Sovereignty? In Search of the EMU’s Original Sin," International Journal of Political Economy, Taylor & Francis Journals, vol. 44(2), pages 142-156, April.

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    More about this item

    Keywords

    Nominal Wage Cuts; Eurozone; Relative Unit Labor Costs; Zero-sum Game;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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