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Can Portugal Escape Stagnation without Opting Out from the Eurozone?

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Listed author(s):
  • Pedro Leao
  • Alfonso Palacio-Vera
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    Abstract

    The creation of the Economic and Monetary Union (EMU) has not brought significant gains to the Portuguese economy in terms of real convergence with wealthier eurozone countries. We analyze the causes of the underperformance of the Portuguese economy in the last decade, discuss its growth prospects within the EMU, and make two proposals for urgent institutional reform of the EMU. We argue that, under the prevailing institutional framework, Portugal faces a long period of stagnation, high unemployment, and painful structural reform, and conclude that, in the absence of institutional reform of the EMU, getting out of the eurozone represents a serious political option for Portugal.

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    File URL: http://www.levyinstitute.org/pubs/wp_664.pdf
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    Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_664.

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    Date of creation: Mar 2011
    Handle: RePEc:lev:wrkpap:wp_664
    Contact details of provider: Web page: http://www.levyinstitute.org

    Keywords: Nominal Wage Cuts; Eurozone; Relative Unit Labor Costs; Zero-sum Game;

    Find related papers by JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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    1. J.M.C. Santos Silva & Silvana Tenreyro, 2010. "Currency Unions in Prospect and Retrospect," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 51-74, 09.
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    Cited by:

    1. Sergio Cesaratto, 2015. "Alternative Interpretations of a Stateless Currency crisis," a/ Working Papers Series 1508, Italian Association for the Study of Economic Asymmetries, Rome (Italy).

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