Prime Minister Sócrates Resigns Over Handling of Financial Crisis
Running a minority government proved to be a painstaking process, as Sócrates was forced to negotiate legislation on a micro level. Sócrates' situation was complicated by the international financial crisis the peaked in Europe in 2010 and hit Portugal particularly hard. Mired in debt, high unemployment, and an enormous budget deficit, the government was forced to implement austerity measures, including tax hikes and spending cuts. When those measures failed to shore up the economy, two additional rounds of tax hikes and spending cuts were implemented. They were not popular with either the people or businesses. In March 2011, opposition parties in Parliament thwarted Sócrates' proposal for a fourth round of deficit-reduction steps, and Sócrates resigned. Sócrates headed the caretaker government, and requested a bailout from the European Union. Portugal received a $116 billion aid package in May. Under the agreement, Portugal agreed to reduce its deficit to 3% of gross domestic product by 2013. Portugal is the third European country, behind Ireland and Greece, to receive a bailout.
June 2011 witnessed the victory of the Social Democrat's Pedro Passos Coelho over the Socialist Party and incumbent prime minister Sócrates. Prime Minister Coelho's first order of business: the implementation of the 78 billion euro ($115 billion) bailout agreed on by the previous government, the EU, and the IMF.
In Sept. 2012, the lenders agreed to relax the terms of Portugal's bailout by reducing the 2013 budget deficit target to 4.5% from 3% of GDP. Still, the country struggled to come up with an acceptable budget program that would get the job done without alienating the Portuguese.
Just before a planned review of the Portuguese bailout in July 2013 by the EU, the IMF, and creditors, the Portuguese finance minister, Vítor Gaspar, resigned, followed by the foreign minister and head of the People's Party, Paulo Portas. Treasury Secretary Maria Luis de Albuquerque was named as the new finance minister. Portugal recently began its third year of recession and high unemployment.
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