Introduction:

The present situation in Portugal, more than revealing the fragility of the budgetary circumstance, reflects mainly the weakness of its productive structure. This weakness results from an economic policy that has favoured the non-tradable sector, and from the new conditions of global trade that have undermined Portuguese industry. These realities have resulted from the global economy model that was adopted in Portugal when it joined the EU as the European Single Market (ESM) was being launched. The adoption of supply-side and anti-inflationary policies through currency appreciation has conditioned the industrial sector renewal and particularly the export sector. These political guidelines were reinforced when the government decided that Portugal should be in the founding group of the European Monetary Union (EMU). In what concerns the conditions of global trade, there are two factors that have penalized the Portuguese tradable sector. One is the emergence of new players, namely China, directly competing with Portuguese labour intensive products. The other one is the new international supply chains framework.

Therefore, the dynamics of the present crisis in Portugal must be discussed within the economic and institutional framework of the EU, but also consider the effects of the global economy model on the Portuguese economy, i.e. blockages in the so-called real economy, that underlie the present crisis. This text tries precisely to give an integrated view of these questions.