The Portuguese Economy in the Context of Economic, Financial and Monetary Integration

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There seems to have been an overspending on these functions, since Portugal has had only a very discrete role in international conflicts and the crime rate is also quite moderate. There was a big controversy about the purchase of two submarines, whose need has been questioned. Also the expenses in the sub-section of "outpatient services", belonging to the "health" function" was very high compared to the EU average, in opposition to the in-patient "hospital services" where the expenses were very low in It is also very relevant to explain the difficulties in controlling the deficits if we take into account the payments of interests concerning to loans contracted by the State.

Having been stable around 3. In , The unemployment rate has been continuously falling since the end of , marking the reversal of the increase of unemployed people trend that had been recorded since the s. This negative trend had been pronounced with the impact of the financial crisis of — , causing the unemployment rate to climb, achieving a record of The decrease of the unemployment is related with the expanding of the Portuguese Economy registered since the third quarter of after shrinking in , and , with a yearly GDP growth of 1.

The increase of the number of people that emigrated to work in other countries also impacted positively the reduction of the unemployment, this happening specially in , when the labor force decreased 1. Other factors have also impacted the decrease, like the methodology used by the Statistics Portugal for instance, people doing internships or professional training do not count as unemployed , the previous heavy loss of jobs, the increase of tourism and the resurgence of the agricultural sector, where many jobs were created.

Although being both a developed country and a high income country , Portugal has the lowest GDP per capita in Western Europe and according to the Eurostat it had the 9th lowest purchasing power among the 27 member states of the European Union in Less pressure does not mean, however, a better job. The last European survey of workers, published in and which formed the basis of this research study showed that Portugal is the 5th European country with lower quality of work. The first quarter of marked a new unemployment rate record for Portugal, as it reached Since , the year when Troika arrived to Portugal to apply the bailout program, around ,, people have left the country, many of them qualified young people.

In , unemployment was at Around 70, jobs were created while 59, people became unavailable to work either due to not finding employment for a long time or emigration. The number of part-time employees who are considered under-employed and as such, would like to work more hours per day, is at , people while , people are currently inactive not working, or studying.

The minimum monthly wage in Portugal is January and the previous was euros. This minimum wage was established in January and marked an increase from the previous euros. In , about 8 per cent [82] of the people with a degree were unemployed , and a much larger proportion was underemployed. This was directly correlated with a general lack of employability and a student's under-preparation for the workplace that was seen among many courses in a number of fields that were offered by certain higher education institutions or departments.

The implementation of the Bologna process and other educational reforms, such as the compulsory closing of a number of courses, departments, colleges and private universities after due to a lack of academic rigour and low teaching standards, was a completely new approach to tackle the problem. In some major private universities were investigated by state agencies and two were immediately closed.

Additionally, a number of degrees of the public system were also discontinued due to lack of quality, low demand from potential students or scarce interest from potential employers in these fields. As of March , the graduate unemployment between 15 and 24 years old rate is over Poverty and inequality are significant social problems that Portugal has attempted to address through various social policy measures.

The European economic crisis has increased the number of households that remain below the poverty line in Portugal with the greatest affected being the youth due to high unemployment rates.

Economy of Portugal

The minimum wage policy which came after negotiations with labor organizations and employers was only possible after substantial recovery of the economy and will increase the sustainability of the economy with aims at reducing poverty. Portugal uses tax and transfer payments to increase equality between high-income earners and the low-income earners in the country. The government tax policy ensures that the high-income earners face higher taxes in comparison to low-income earners which have enabled the low-income earners to be able to stimulate demand for goods and services in the country economy.

The Act no. This decade old means tested approach ensures a minimum income which grants financial stability for the citizens of Portugal. The GMI program aims at providing the low-income earners who are above 18 years social and economic autonomy to encourage them to participate in the economic growth of the country. This report shows GMI policy measures as effective in eradicating poverty and increasing income equality in Portugal [92]. The tertiary sector is presently the most important component of the Portuguese economy, representing It is followed by the industry sector, which represents Cork is a major production, with Portugal producing half of the world's cork.

Significant mining resources are lithium , tungsten , tin , and uranium. After years of decline, the agriculture in Portugal had a surprising resurgence, involuntarily caused by the Portuguese debt crisis, when a number of highly qualified persons lost their jobs in the tertiary sector and decided to turn themselves to the development of agricultural businesses, despite having little or no experience in this sector. Despite presently representing only a small percentage of the economy, a considerable part of continental Portugal is dedicated to agriculture.

The South has developed an extensive monoculture of cereals and olive trees and the Douro Valley of vineyards. Portuguese wine and olive oil are especially praised by nationals for their quality, thus external competition even at much lower prices has had little effect on consumer demand.

Portugal is a traditional wine grower, and has exported its wines since the dawn of western civilization; Port Wine , Vinho Verde and Madeira Wine are the leading wine exports. Other exports include horticulture and floriculture products, beet sugar, sunflower oil, cork , and tobacco. The Portuguese fishing industry is fairly large and diversified. Fishing vessels classified according to the area in which they operate, can be divided into local fishing vessels, coastal fishing vessels and long-distance fishing vessels. These vessels are usually equipped to use more than one fishing method, such as hooks, gill nets and traps, and constitute the so-called polyvalent segment of the fleet.

Their physical output is low but reasonable levels of income are attained by virtue of the high commercial value of the species they capture: octopus, black scabbardfish, conger, pouting, hake and anglerfish. Purse seine fishing is also part of the local fleet and has, on the mainland, only one target species: the sardine. These vessels operate in areas farther from the coast, and even outside the Portugal's Exclusive Economic Zone. The coastal fishing fleet comprises polyvalent, purse seine and trawl fishing vessels. The trawlers operate only on the mainland shelf and target demersal species such as horse mackerel, blue whiting, octopus and crustaceans.

The crustacean trawling fishery targets Norway lobster, red shrimp and deepwater rose shrimp. Crustaceans were 0. Presently, the major industries in Portugal include: machinery , electrical and electronics industries, automotive and shipbuilding industries, injection moulding , plastics and ceramics industries, textile, footwear and leather industries, oil refinery , petrochemistry and cement industries, beverages and food industries and furniture, pulp and paper , wood and cork industries.

Coimbra and Oeiras have growing technological-based industries, including pharmaceuticals and software. Sines has the largest oil refinery in the country and is a major petrochemical centre, as well as the busiest port in Portugal. Maia has one of the largest industrial parks of the country, including noted [ according to whom?

Marinha Grande is the most reputed glass making centre of Portugal. Modern non-traditional technology-based industries like aerospace , biotechnology and information technology, have been developed in several locations across the country.

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Since after the turn of the 21st century, many major biotechnology and information technology industries have been founded and are concentrated in the metropolitan areas of Lisbon , Porto , Braga, Coimbra and Aveiro. Since the late s, when wind power was virtually nonexistent in Portugal, the country has become the 6th producer of this kind of renewable energy. Along with the traditional Hydroelectric energy, the Portuguese companies, including the biggest one in the country — EDP — and with the support of the government have heavily invested in new kinds of renewable energy, from then on.

Fossil fuels are still the source of In May , Portugal became the second country in the world to be able to have all its energy consumption fully covered by renewable energy alone, for four consecutive days. In the s, the country abandoned the plan to install nuclear plants and opted not to invest in nuclear power , so there are no such plants in Portugal.

The tertiary sector has grown, producing The most significant growth rates are found in the trade sector, due to the introduction of modern means of distribution, transport and telecommunications. Financial tertiary companies have benefited from privatisation , also gaining in terms of efficiency. Tourism in Portugal has developed significantly, generating In , the number of foreign tourists jumped 12 percent to Including domestic tourists, the total is about 21 million. Worth to notice is also TAP Portugal , a company often used by transit passengers traveling between Europe, Africa and Latin America mainly Brazil , which is particularly regarded by its safety record.

In the Portuguese financial market , the major stock exchange is the Euronext Lisbon which is part of the NYSE Euronext , the first global stock exchange. It is supervised and regulated by the Portuguese Securities Market Commission. The PSI is Portugal's most selective and widely known stock index. Portuguese banks hold strategic stakes in other sectors of the economy, including the insurance sector.

Overall, Portugal's financial system is sound, well managed and competitive, with shorter-term risks and vulnerabilities quite well contained, and with the system buttressed by a strong financial policy framework. Despite being relatively small and concentrated, Portugal's banking system generally compares well with other European Union EU countries in terms of efficiency , profitability , and asset quality, with solvency also close to European levels. Across all the financial sub-sectors, and with particular reference to the larger institutions, supervision of Portuguese financial institutions is active, professional and well organized.

The insurance sector has performed well, partly reflecting a rapid deepening of the market in Portugal.

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While sensitive to various types of market and underwriting risks , both the life and non-life sectors, overall, are estimated to be able to withstand a number of severe shocks, even though the impact on individual insurers varies widely. The Global Competitiveness Report for —, published by the World Economic Forum , placed Portugal on the 36th position on the economic index. A study concerning competitiveness of the 18 Portuguese district capitals, complying with World Economic Forum methodology, was made by Minho University economics researchers.

There are many higher education institutions awarding academic degrees in economics and business management , spread across the whole country. Programmes in management and administration are offered by almost every Portuguese universities and polytechnics.

Programmes in economics are offered by all public and by some private universities. Besides the higher education institutions, both the Bank of Portugal and the Statistics Portugal develop lengthy and thoroughly systematic research and make reports on the Portuguese economy. When pensions are included the percentage goes down to In January , the poverty stats was updated to According to ISEG economist, Carlos Farinha Rodrigues Portugal went back 10 years in terms of social reality, having lost all the progress that was made until The risk of poverty after social transfers for men is The National Statistics Institute made a separate calculation, basing their data in in order to have a poverty line that doesn't decrease because of the income decreases associated with the crisis: with this calculation, the poverty risk increase is far greater with From Wikipedia, the free encyclopedia.

Fixed exchange rates. Fiscal year. Inflation CPI. Population below poverty line. Gini coefficient. Average net salary. Ease-of-doing-business rank. FDI stock. Gross external debt. Public debt. Credit rating. Main article: Economic history of Portugal. Main article: European sovereign debt crisis. Main article: Agriculture in Portugal. Main article: Fishing in Portugal. Main articles: Energy in Portugal and Renewable energy in Portugal. International Monetary Fund.

Retrieved 10 October Retrieved 14 December Retrieved 18 November Retrieved 17 April Retrieved 23 January Archived from the original PDF on 7 January Retrieved 22 January Banco de Portugal. Retrieved 14 September Retrieved 15 June Standard and Poor's. Retrieved 12 May Fitch Ratings.

Fitch Ratings, Inc. Scope Ratings. Retrieved 8 April ARC Ratings. ARC Ratings, S. Retrieved 25 October Retrieved 2 October Focus Economics. Retrieved 28 July Bloomberg L. Retrieved 17 August Expresso in Portuguese. Portugal Daily View. Library of Congress , countrystudies. Retrieved 7 October What in fact happened was that the Prussian government, eager to maintain monetary control, followed a different course. It started by creating an exclusively Prussian central bank in ; it was only later, after the political unification in , that this became the Bank of the Empire in the Reichsbank in , as a clear symbol of its supremacy over the federation.

The latter were the object of a Kulturkampf culture war driven by the protestant and Prussian elite that dominated the State. The third aspect concerns the use of this federal model for analogies with the current European economic and monetary unification. The comparison is not evident without taking into consideration the previous political unification — in the case of Germany in the 19 th century but not in the European Union in the 21st century. Although this aspect made all the difference, it was underestimated by federalism, which continued to believe that the historic role played by the Euro would be to create conditions for the political unification of Europe That of Monnet, the French businessman, is characterised by its essentially pragmatic character and is not explicitly federalist.

Above all, it opts in favour of advancing economic integration with the aim of ultimately triggering a spill over effect. This will lead to even greater economic integration which will require federal solutions and political institutions. The latter approach, championed mostly by the Italian left-wing politician, Spinnelli, is openly and explicitly federalist and advocates that federal solutions and political institutions should be adopted without waiting for the spill over effects of the economy. In fact, there is a certain scepticism about the possibility that the strategy to move towards economic integration may, in the future, generate a spill over effect that will lead to a federal political union.

This is clearly the case within the European Union institutions, namely those with a supranational profile, such as the Commission, the Parliament, and the Court of Justice.

The case of Altiero Splinelli is emblematic. He was a member of the Commission consecutively from to , and later a member of the European Parliament from to But the Court of Justice is the most interesting and possibly least well-known aspect except in legal areas of the federalist ambition pervading European institutions.

An article by Eric Stein written over thirty years ago on the role played by this institution in the creation of a transnational Constitution, through jurisprudence, clearly showed this tendency In fact, the case of European Union Law, in which historically the role of establishing the interpretation and application of the Court of Justice is enormous, is an example of what can be called integration by stealth This expression suggests the idea that integration is made by elite groups, backstage, almost furtively and away from the public eye.

Nevertheless, neither of these principles is the direct and unequivocal result of the European Treaty texts. This jurisprudential formulation became dominant because it was generally accepted by the doctrine and national judges, and away from the eyes of public opinion. However, it does not completely set aside the possibility of contestation. Ultimately, the question of primacy would only be closed with a provision similar to the one in the abandoned European Constitutional Treaty project.

In other words, if it had been approved, the precedence of the primary law Treaties and secondary law legal acts by the institutions over any national rule, including the Constitution, would have been unequivocally established in writing. This was very probably for political reasons. It suggests an integration strategy that has been followed far from the eyes of public opinion. Such a provision — one that anyone initiated in matters of European Union Law can easily understand — would have clear political implications. Although this would not be a problem in some member states, in others, where public opinion is more Eurosceptic or there is greater scrutiny of European processes, it would probably be difficult to accept for political reasons.

The option was to continue the integration away from the public eye, as has been the case so far. By not including this provision in the Treaties, it avoided a delicate political problem for governments.

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Using this subterfuge, they managed to sidestep the thorny issue of having to explain absolute primacy over national law to national electors. The article by Majone 17 on this specific European political culture and the fear of how citizens vote in referendums is one such example. As well as legal federalism and the jurisprudence interpretation of the Treaties, monetary integration is another interesting case of influence by federalist ideas.

This aspect is mainly linked to the creation of the Economic and Monetary Union EMU initiated with the Delors Plan in and which culminated with the adoption of the Euro as physical currency on 1st January, Upon the creation of the EMU, it was established that member states wishing to participate in this process would have to comply with a set of rules, usually known as nominal convergence criteria. The aim was to ensure that they met all the necessary conditions to participate in the Euro without putting its good operation at risk. With this in mind, among other requirements that had to be met — namely in terms of full liberalisation of the movement of capital and the independence of the central bank from governments — the following rules were determined: budget deficit no more than 3 per cent of GDP; an accumulated public debt not exceeding 60 per cent of GDP; inflation below the average of the three countries with the lowest rates, plus 1.

In theory, these were sine qua non conditions for the Euro. The reality was different A flexible interpretation of these economic targets prevailed. In terms of accumulated public debt, for example, the criteria of not exceeding 60 per cent of GDP was replaced with a benevolent interpretation: it was enough to be reasonably close to this figure and show a downward trend in the accumulated public debt.

However, this was also subjected to a more flexible evaluation varying up to 15 per cent. As regards the deficit not exceeding 3 per cent of GDP, although most countries met or nearly met this requirement, European institutions were not concerned about or were prevented from being concerned about Apparently, at the time, the European Commission and Eurostat did not see the lack of statistical rigour or the dubious manner in which the actual national public accounts were presented as being problematic. Nevertheless, as we now know, systematically resorting to extraordinary revenue, privatisations, pension funds, etc.

To some extent, this explains how Club Med countries 19 were able to be part of the Euro from the start.

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At the time, there was no shortage of specialist literature warning of the risks of weak economies which had chronic difficulties with their public accounts adopting a strong common currency. The very idea of a common currency in the European Union was questioned by some economists, especially North Americans. The better known of these are Paul Krugman and Milton Friedman, two economists with very different views on the economy and from very different political backgrounds.

Taking substantially different perspectives Krugman with a Keynesian perspective, and Friedman neoliberal , both believed that the requirements for an optimum monetary area 20 in the European Union were not in place. For example, at the start there were no requirements on free movement of the workforce, generalisation of preferences, a suitable common budget, etc.

What is the explanation for the flawed architecture of the Euro? And the ineffective rules for access to and remaining in the Euro? Excessive optimism about the future creation of an optimum monetary area? Was the Euro being used as leverage for a federal-type political union?

Any careful analysis shows that the project to create the Euro had significant shortcomings from the outset. The most obvious has already been pointed out: the requirements for an optimum monetary area were not verified.

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Such an intrinsic weakness should in itself have been a warning for a more careful, differently configured process, or, should that not be possible, delaying or even dismissing its adoption. Were the European decision-makers unaware of these risks? Probably not, but it is likely they were underestimated due to a set of intellectual and political constraints linked to the manner in which the European construction is usually viewed. In this way, the successive advances in economic integration — customs union, common market, the Euro, etc. In fact, the ideologically contradictory coalition that supported its creation can only be understood by taking this intellectual atmosphere into account, which worked as an obstacle to critical thought in the political debate.

Despite agreeing with the diagnosis of the failure of current European economic governance, the proponents of a federal solution for the European Union naturally put forward another interpretation, and above all, another solution. Faced with recession and the added risks of sovereign and bank insolvency, it was the European Central Bank ECB that played the stabilising role.

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We now examine the current economic governance model, and what it consists of besides its monetary aspects. As expected, it results in part from the above-mentioned European preference for integration by stealth, with its ensuing consequences, including that of its questionable democratic legitimacy.

But before our critical analysis, we will review its fundamental features and also take a close look at the presentation made by Jamet Jamet talks of three domains in which this model is used, the main features of which are described below. A second domain of European economic governance is that of ensuring national policies are coherent with a specific set of rules negotiated among the member states.

Examples of these are the previously mentioned budgetary rules for the Eurozone, which sought to prevent quite distinct national policies putting the common currency at risk. The idea of further solidarity if there were any budgetary difficulties was also implicit. The main proposals have been that of moving towards a banking and fiscal union, issuing Eurobonds, and, in more general terms, European economic governance. Our focus goes to this last proposal as it is the most ambitious and has the greatest impact. Before assessing its merits or shortcomings, it is important to understand what European economic governance means.

The first problem is that the use of the concept has taken various shapes and forms. At the time, it was primarily a kind of slogan for the European Union used in French politics. Meanwhile, it re-emerged in the context of the current crisis. This perspective has to a great extent been the inspiration for a number of directives and regulations proposed by the Commission and voted by the Parliament and the Council. Among others, it includes the creation of the European semester 29 , which allows for the Commission and the Council to issue opinions on proposals for national budgets.

The idea of European economic governance underwent further developments. In the summer of , Germany and France introduced a clearly political dimension to the debate. How would this European economic government be put into effect? Various proposals were made. One was that there would be a common Presidency of the Commission and European Council, headed by the same person. While aware of the advantages of this solution, Jamet recognises that it would be difficult to put into practice. We now turn to analysing the advantages of a solution of European economic federalism as described above from a Portuguese perspective.

This implies two major risks from the outset, not to mention the question of democratic legitimacy, which for the purposes of simplicity we do not analyse herein. Preserving exchange sovereignty was not a political choice but was due to the weakness of both economies. As a result, the Portuguese economy was able to meet — statistically at least — most of the required nominal convergence criteria.

Ironically, a high price was paid and will probably continue to be paid for this success; a price which Portuguese society is only now beginning to fully understand. GDP growth rates were below the European average over the entire previous fifteen years. Whether it was a coincidence or not, the fall in the growth rates stems back to the end of the s, when the exchange rates were fixed for the 3 rd stage of the EMU. The second risk involves a subject that is not officially part of European rhetoric: the power relationships within the European Union.

Once we admit that strengthening European integration is, in itself, advantageous, it is important to reflect on how a federalising solution could be conceived and implemented. Basically, what should its precise form be? We will take the case of the broadest and most ambitious idea of European economic governance. Not only is there no official proposal that clearly outlines the discussion, but different meanings and appeals for the Southern and Northern EU countries are implicit from the outset.

The Portuguese Economy in the Context of Economic, Financial and Monetary Integration The Portuguese Economy in the Context of Economic, Financial and Monetary Integration
The Portuguese Economy in the Context of Economic, Financial and Monetary Integration The Portuguese Economy in the Context of Economic, Financial and Monetary Integration
The Portuguese Economy in the Context of Economic, Financial and Monetary Integration The Portuguese Economy in the Context of Economic, Financial and Monetary Integration
The Portuguese Economy in the Context of Economic, Financial and Monetary Integration The Portuguese Economy in the Context of Economic, Financial and Monetary Integration
The Portuguese Economy in the Context of Economic, Financial and Monetary Integration The Portuguese Economy in the Context of Economic, Financial and Monetary Integration
The Portuguese Economy in the Context of Economic, Financial and Monetary Integration The Portuguese Economy in the Context of Economic, Financial and Monetary Integration
The Portuguese Economy in the Context of Economic, Financial and Monetary Integration The Portuguese Economy in the Context of Economic, Financial and Monetary Integration
The Portuguese Economy in the Context of Economic, Financial and Monetary Integration The Portuguese Economy in the Context of Economic, Financial and Monetary Integration

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