Nowadays, crisis is the biggest problem for the whole world. Sometimes, we try new methods and sometimes we try to use old methods and these events can lead to instability. Because of them, countries had big regressions in their economies. If we want to give an example, we can tell Portuguese economy is in this situation because Portuguese people have been facing their biggest crisis since ever. However, European countries had the big development index.
European countries lived Golden Age for their economies in 1945-75. They reached the big economic and social welfare ever attained. European welfare model and economy politics were together in this period. Unemployment decreased to its lowest rate, economic growth and total productivity had steady growth and European citizens had a lot of good rights for their social and economic issues. European countries cached 4.6% economic growth rate, so annual gross domestic product per capita increased about 3.6%
The most important factor for this evolution was Keynes' economic policies. All world countries had big improvement in the development area through Keynes' economic policies and annual per capita income increased 2%. Besides, inflation rate was about 4%, unemployment rate was about 3%, but this happy scenario finished one day.
Regression occurred due to petrol shock, demographic change, globalization and technological problems in the European countries economy after 1970s. As a consequence of these events, European countries had a recession in their welfare and economic growth. They couldn't reach their potential growth, decreasing unemployment rate, and effectiveness rate of labour. So, they saw that inflation rate was about 11%, while unemployment rate which was about 3%, increased to about 10%. Many European countries witnessed this situation.
Greece, Ireland and some other countries faced this big crisis because of the big problems they suffered from. If we want to give an example, instability in housing market is a very good example. Banks opened credit to people who had not enough budget to get it. Then, these people had properties but they couldn't pay the money of the loans, here at the banks collapsed. These banks could be countries' central banks, so countries were influencing this bad situation.
The European countries governments had expenditures which were the outcome of the cheap and abundant capital they had access before and the reforms weren't made according to their target. This is another example for explaining the crisis. If we want to give another example of these countries, we can speak of Portugal.
Portuguese were faced with a crisis in 2008. Everything started collapsing, including, later, one of the biggest Portuguese banks (Banco Espirito Santo) and the government applied wide belt-tightening policies. Government imposed restriction in a lot of area. Sometimes, they took right decision, sometimes they took wrong decision to impose restriction. Portuguese citizens lived hard times due to those strict policies. They couldn't take advantage of their health system, education, life pattern and other rights. So, Unemployment rate increased to 11.6 %. Budget deficit was estimated being 9.1 % in 2010 and government Portuguese officials appealed for aid from European Union to get rid of this bad situation. The European countries governments faced expenditures which were the outcome of the cheap and abundant capital they benefited from before.
While some European Union members were putting support behind to help Portuguese (such as France), some other members wanted to have stricter policies from the Portuguese government. The Portuguese government accepted conditions established and took € 78.000.000 monetary assistance in 2011. In this way, while Portuguese were having a 7.2 % budget deficit. This rate was determined to be 4,4% in 2015. Under the favour of many other improvements (such as winning European championship in football competition), specialists are predicting lower rates for budget deficit.
Taking everything into account, crisis does not influence only a country. It influences the entire world and every country lived a set of problems in the past. Portuguese lived the same situation but if government takes required precautions, increase the importance of education, improve development of sport and other important area, the country will be in a very good position in future in the world stage.
Nisa İpar Yılmaz
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[artigo de opinião produzido no âmbito da unidade curricular “Economia Portuguesa e Europeia” do 3º ano do curso de Economia (1º ciclo) da EEG/UMinho]