Reversed Fortunes
First, a little history. Some 600 years ago, sailors took a final look at the mouth of Lisbon's Tagus River, then set out on what was to become two centuries of Portuguese maritime exploration, trade and colonization. The period - which historians call The Discoveries - was initiated by an aggressive monarchy (beginning with the Kingdom of Dom Joao I in 1415) and a connected merchant class willing to step up and assist the Crown in financing expeditions. It was fueled, as so often was the case, by religious fervor. But the enabler was emerging technology, including the mariners' quadrant and radically new ship and sail design. This was exploited by a remarkable community of Christian, Jew and Arab scholars who descended on Sagres, at the most south-westerly point of Portugal, to develop a new school of navigation, focused on penetrating Prince Henry's obsession - the unknown world beyond the cliffs of Sagres. And, with this support, fearless explorers, with names like Gil Eanes, Bartholomew Dias, Pedro Cabral, Vasco da Gama and Ferdinand Magellan, would burst through one exploration barrier after another to eventually establish a Portuguese empire stretching from Brazil across the Atlantic, to West Africa, around the Cape of Good Hope to India, and then to East Timor and Macau in the Far East. The era was Portugal's apogee; even the Spaniards and Venetians couldn't compete.
But the Portuguese would never again achieve such heights after the 16th century. The Spaniards, the Dutch, the English, then the Japanese, the Americans and the Chinese, all entered the world trading markets as effective competitors. Fast forward to the 20th century, and Portugal's world dominance had long faded away, to be replaced by a series of assassinations and coups d'etat, fascist and military dictators, the persistent threat of a communist take-over through the 1970's, and desperate, ultimately unsuccessful, attempts to hold on to its remaining African colonies of Angola, Mozambique and Guinea-Bissau. Economic growth over these decades was fitful at best, and by 1986, when Portugal joined the European Economic Community (known today as the European Union), it was the poorest country of Western Europe. It had, however, finally transitioned to a parliamentary democracy.
It remains democratic, and poor, in the 21st century. Like its much larger Iberian neighbor, Spain, the Portuguese economy is only now beginning to show tentative signs of recovery from its deepest and longest recession in over 40 years. Prime Minister Pedro Passos Coelho and his coalition government ( comprised of center-right and far-right parties) are in the third year of an austerity program, imposed by the so-called Troika of creditors ( the EU, European Central Bank and IMF), in return for a bail-out loan of 78 billion euros.
Massive sovereign debt (127% of GDP), annual budget deficits (falling, but still above 5% of GDP), massive private sector debt (255% of GDP), an unemployment rate of 18%, and political fragility remain the central features characterizing Portugal as 2013 nears an end. Even if the governing coalition manages to hold together, few believe that the country will be able to withstand the further austerity outlined in the 2014 budget without a second bail-out loan.
Prime Minister Coelho, in announcing the austerity program in 2011, predicted that the country faced two truly "terrible years" as it attempted to comply with the terms. He was right. But he could have just as correctly looked back to the nearly four centuries of decline since the era of The Discoveries and described them, as well, as truly terrible years for a once mighty Portugal.