Paul Krugman (right) at yesterday's conference, sitting alongside finance minister Fernando Medina
Paul Krugman (right) at yesterday's conference, sitting alongside finance minister Fernando Medina

Portugal described as “form of economic miracle”

Country ‘basks’ in two positive endorsements in same day

With the country’s political parties already in ‘campaign mode’ ahead of the dissolution of parliament, the outgoing government received two undeniable pats on the back yesterday as former Nobel economist Paul Krugman described Portugal as a “form of economic miracle”, and the European Commission agreed that everything points to public debt “continuing to reduce” in 2024.

In spite of the various crises in health, education, housing, justice etc., PS Socialists have reasons to be positive – not least because Brussels has already said that it doesn’t see the current ‘political crisis’ as likely to cause Portugal any economic impacts.

The mood was clear at a conference to mark 20 years of the country’s ‘Jornal de Negocios’ (financial news provider) in Lisbon yesterday. Finance minister Fernando Medina affirmed that “as a country, we owe less, which means everyone is on the right track: businesses, families and the State”.

Reducing debt is a “prerequisite to gaining credibility in the eyes of international markets”, he went on, as the executive vice-president of the European Commission, Valdis Drombrovskis, sent a “positive message” to the country to say that it “should reach its mid-term budgetary objectives in 2024”.

The ‘cherry on the cake’ came from guest speaker Paul Krugman, the winner of the Nobel prize for economy in 2008, and given a lot of space by the media in Portugal due to his expert analysis.

“Portugal is a kind of economic miracle”, he told the conference – in a speech that did not allow journalists’ questions, nor any kind of recording.

During the “debt crisis, we tended to put Portugal and Spain in the same basket,” he went on. “Both had had massive capital inflows, had become seriously overvalued in terms of labour costs, had high levels of debt and were facing a prolonged period of austerity.

“Spain eventually achieved economic recovery, but it did so through years and years of high unemployment, internal devaluation and falling costs,” while “Portugal had a recovery without that.

“I’ve had long conversations with my friend Olivier Blanchard, the former chief economist of the IMF, and he says: ‘I don’t understand how Portugal did so well. How did they do it?”.

Krugman admitted that tourism is “not trivial” in this analysis and says that “exports are also part of the story. 

“But it’s a bit of a mystery how things turned out so well,” he said.

It was also the point at which Portuguese reports largely ‘stopped’ – as it was a good point to stop at.

Elsewhere, there are articles that attest to Paul Krugman having “a notable history of being wrong about absolutely everything” – but that perhaps is raining on Portugal’s parade. Ýesterday was all about positivity. Reports breezed through the part in which Brussels also “urged” the country to reduce energy support measures as soon as possible

The popular press focused on Paul Krugman’s belief that Portugal has many reasons for optimism. He even labelled the crisis in housing is “a happy problem to have” as it shows “people want to be in Portugal”.

Outgoing prime minister António Costa commented on Krugman’s analysis, saying the government has shown that “it is possible to grow, create employment, improve salaries and have healthy public finances”.

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