«The Portuguese are among the glummest people in Europe. According to a Eurobarometer poll, 92% see the economic situation as bad; fully 95% are depressed about their job prospects; and over half are “dissatisfied with the life they lead”.
Part of the problem was that joining the euro in 1999 pushed interest rates too low. The Portuguese borrowed heavily to buy houses, cars and airline tickets. Easy credit and rising wages sucked in imports, swelling the current-account deficit to 12% of GDP last year. Productivity failed to keep up. Instead of compensating for a limited domestic market, exports have remained stubbornly stuck at 30% of GDP—less than in most comparable small EU countries.
To improve its performance, Portugal needs more flexible labour laws, less bureaucracy, a better educated workforce, more competition and a smaller state. As the IMF states in a recent report, the country’s fundamental problems are domestic, not global, in nature. But political leaders find reforms hard to push through»
[Socratic dialogue, Economist, Apr 30th 2009]