How dare they swim upstream of popular economic theory
At a time of mounting uncertainty in Europe, the country has defied critics who insisted on austerity as the answer to the Continent’s economic and financial crisis.
By Liz Alderman and cross-posted from The New York Times
Ramón Rivera had barely gotten his olive oil business started in the sun-swept Alentejo region of Portugal when Europe’s debt crisis struck. The economy crumbled, wages were cut, and unemployment doubled. The government in Lisbon had to accept a humiliating international bailout.
But as the misery deepened, Portugal took a daring stand: In 2015, it cast aside the harshest austerity measures its European creditors had imposed, igniting a virtuous cycle that put its economy back on a path to growth. The country reversed cuts to wages, pensions and social security, and offered incentives to businesses.
The government’s U-turn, and willingness to spend, had a powerful effect. Creditors railed against the move, but the…
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