The beginning of this decade was a harsh time for Portugal with its Rate of Real GDP Growth plumbing down almost 6 points between 2010 and 2012.
After fourteen years of a very optimistic economic growth (between 1986 and 2000) much due to the Portuguese entry in the European Union, the Portuguese economy suffered an almost stagnation in the passage of the millennium.
In order to understand the phenomenal growth of the Portuguese economy in the decades of 80 and 90, it´s important to note that the Portuguese dictatorship only ended in 1974 followed by a troublesome year of 75 when the communist “red threat” almost took over the country.
Time Magazine cover for 11 of August of 1975, depicting the communist threat after the fascist dictatorship
The 80’s and 90’s were dedicated to rebuilding the country. It was necessary to improve the education and health facilities debilitated by the long fascist dictatorship. The number of public workers rose especially in the 90´s reaching a maximum 14% of the public expenditure, 4% more than in the previous decade. The country’s entry in the European Union in 1986 was also a key factor for this economic growth. In the 90’s the big increase in credit (1000% in consuming credit and 733% in housing credit) reflected the national and international confidence in the Portuguese economy. This was the quiet before the storm, however, or at least the quiet before stagnation.
In 75 the provisional government (also known as Revolutionary Process in Course) headed by Vasco Gonçalves nationalized the major banks and Portuguese companies. This was the major impact of the year-long “Portuguese red threat”. The nationalization process consisted of creating an agglomerate of several private companies (putting seven cement companies together creating a major cement company, for example), and then nationalizing this new, big company. Even though the following governments reverted this process, they did not dismantle these big companies into their original parts. The following governments did privatize the companies seized by the RPC in 75, but they privatized the big conglomerates created by the RPC, creating an oligopoly effect. This aligned with the limitations for foreign investments, led to the stagnation of a blooming, but still developing economy (70% of the EU average) at the beginning of the XXI century.