LISBON — Ramón Rivera had barely gotten his olive oil business started in the sun-swept Alentejo region of Portugal when Europe’s debt crisis struck. The economy crumbled, wages were cut, and unemployment doubled. The government in Lisbon had to accept a humiliating international bailout.

But as the misery deepened, Portugal took a daring stand: In 2015, it cast aside the harshest austerity measures its European creditors had imposed, igniting a virtuous cycle that put its economy back on a path to growth. The country reversed cuts to wages, pensions and social security, and offered incentives to businesses.

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The government’s U-turn, and willingness to spend, had a powerful effect. Creditors railed against the move, but the gloom that had gripped the nation through years of belt-tightening began to lift. Business confidence rebounded. Production and exports began to take off — including at Mr. Rivera’s olive groves.

“We had faith that Portugal would come out of the crisis,” said Mr. Rivera, the general manager of Elaia. The company focused on state-of-the-art harvesting technology, and it is now one of Portugal’s biggest olive oil producers. “We saw that this was the best place in the world to invest.”

At a time of mounting uncertainty in Europe, Portugal has defied critics who have insisted on austerity as the answer to the Continent’s economic and financial crisis. While countries from Greece to Ireland — and for a stretch, Portugal itself — toed the line, Lisbon resisted, helping to stoke a revival that drove economic growth last year to its highest level in a decade.

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Praça do Comércio in Lisbon. In Greece, discouragement lingers after a decade of spending cuts. Portugal’s recovery has pivoted around restoring confidence to get people and businesses motivated again.

The renewal is visible just about everywhere. Hotels, restaurants and shops have opened in droves, fueled by a tourism surge that has helped cut unemployment in half. In the Beato district of Lisbon, a mega-campus for start-ups rises from the rubble of a derelict military factory. Bosch, Google and Mercedes-Benz recently opened offices and digital research centers here, collectively employing thousands.

Foreign investment in aerospace, construction and other sectors is at a record high. And traditional Portuguese industries, including textiles and paper mills, are putting money into innovation, driving a boom in exports.

“What happened in Portugal shows that too much austerity deepens a recession, and creates a vicious circle,” Prime Minister António Costa said in an interview. “We devised an alternative to austerity, focusing on higher growth, and more and better jobs.”

Voters ushered Mr. Costa, a center-left leader, into power in late 2015 after he promised to reverse cuts to their income, which the previous government had approved to reduce Portugal’s high deficit under the terms of an international bailout of 78 billion euros, or $90 billion. Mr. Costa formed an unusual alliance with Communist and radical-left parties, which had been shut out of power since the end of Portugal’s dictatorship in 1974. They united with the goal of beating back some of the toughest aspects of austerity, while balancing the books to meet eurozone rules.

The government raised public sector salaries, the minimum wage and pensions and even restored the amount of vacation days to prebailout levels over objections from creditors like Germany and the International Monetary Fund. Incentives to stimulate business included development subsidies, tax credits and funding for small and midsize companies.

Mr. Costa made up for the givebacks with cuts in infrastructure and other spending, whittling the annual budget deficit to less than 1 percent of its gross domestic product, compared with 4.4 percent when he took office. The government is on track to achieve a surplus by 2020, a year ahead of schedule, ending a quarter-century of deficits.

European officials are now admitting that Portugal may have found a better response to the crisis. Recently, they rewarded Lisbon by elevating the country’s finance minister, Mário Centeno, who helped engineer the changes, to president of the Eurogroup, the influential collective of eurozone finance ministers.

The economic about-face had a remarkable impact on Portugal’s collective psyche. While discouragement lingers in Greece after a decade of spending cuts, Portugal’s recovery has pivoted around restoring confidence to get people and businesses motivated again.

“The actual stimulus spending was very small,” said João Borges de Assunção, a professor at the Católica Lisbon School of Business and Economics. “But the country’s mind-set became completely different, and from an economic perspective, that’s more impactful than the actual change in policy.”

The brighter outlook has lifted companies like Elaia, the olive oil producer. Its parent company, Sovena, opened Elaia as a start-up on a vast agricultural plain in southern Portugal in 2007, just before the downturn. Its timing could hardly have been worse, but managers persisted, paving the way for a surge in production when the crisis ebbed.

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For our viewers at home (some background on the Portugese Gov.)

PORTUGAL-POLITICS-GOVERNMENT-MEETING

Costa’s first role in a Socialist government was as Minister of Parliamentary Affairs under Prime Minister António Guterresbetween 1997 and 1999. He was Minister of Justice from 1999 to 2002.

Costa was a Member of the European Parliament for the Socialist Party (PES), heading the list for the 2004 European elections after the dramatic death of top candidate António de Sousa Franco. On 20 July 2004 he was elected as one of the 14 Vice-Presidents of the European Parliament. He also served on the Committee on Civil Liberties, Justice and Home Affairs.

Costa resigned as an MEP on 11 March 2005 to become Minister of State and Internal Administration in the government of José Sócrates following the 2005 national elections.

Mayor of Lisbon, 2007–2015

António Costa resigned all government offices in May 2007 to become his party’s candidate for the municipality of Lisbon, Portugal’s capital city. He was elected as Lisbon’s mayor on 15 July 2007 and reelected in 2009 and 2013, with a bigger majority each time. In April 2015 he resigned his duties as a mayor, while he was already the Secretary General of the Socialist Party and the party’s candidate for Prime Minister, so that he could prepare his campaign for the October 2015 general elections.

Candidate for Prime Minister, 2014–2015

In September 2014, the Socialist Party chose Costa as its candidate to be Prime Minister of Portugal in the 2015 national elections; in a ballot to select the party’s candidate, gaining nearly 70 percent of the votes, he defeated party leader António José Seguro, who announced his resignation after the result. By April 2015, he stepped down as mayor to focus on his campaign.

During the campaign, Costa pledged to ease back on austerity and give more disposable income back to households.He proposed to boost incomes, hiring and growth in order to cut the budget deficits while scrapping austerity measures and cutting taxes, asserting that would still allow deficits to reduce in line with the Euro convergence criteria.[8] Also, he pledged to roll back a hugely unpopular hike in value added tax on restaurants and reinstate some benefits for civil servants.[6]

Prime Minister of Portugal, 2015–present

On 4 October 2015, the conservative Portugal Ahead coalition that had ruled the country since 2011 came first in the elections winning 38.6% of the vote, while the Socialist Party came second with 32.3%. Passos Coelho was reappointed Prime Minister the following days, but António Costa formed an alliance with the other parties on the left (the Left Bloc, the Portuguese Communist Party and the Ecologist Party “The Greens”), which altogether constitute a majority in Parliament, and toppled the government on 10 November (the People–Animals–Nature party also voted in favour of the motion of rejection presented by the left alliance). After toppling the conservative government, Costa was chosen as the new Prime Minister of Portugal by President Cavaco Silva on 24 November and assumed office on 26 November.[4][9]

Since coming to power, Costa’s government has managed to combine fiscal discipline with measures to support growth, while reversing most of the austerity policies imposed by the previous center-right administration during the 2010-13 debt crisis.[10]

By March 2017, polls put support for Costa’s Socialists at 42 percent, up 10 points from their share of the vote in the 2015 election and close to a level that would give them a majority in parliament were the country to vote again.[11] In the 2017 local elections, Costa further consolidated power in Portugal as his party captured a record haul of 158 town halls out of the country’s 308 cities and towns; nationwide, the Socialists’ vote share topped 38 percent, again up from their result in the 2015 parliamentary election.[12]

During his tenure, Portugal experienced its deadliest wildfires ever, firstly in Pedrogão Grande in June 2017 (65 dead) and later across the country in October 2017 (41 dead).[13] In October 2017, the opposition People’s Party (CDS) launched a motion of no-confidence in Costa’s government over its failure to prevent the loss of human lives in the lethal Iberian wildfires, the second such disaster in four months; the motion was largely symbolic as the minority Socialist government continued to be backed in parliament by two left-wing parties.

 

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