While not foundering as badly as Greece, Portugal is also a bailout country with high debts and a shrinking economy. In the depths of the Great Recession, it’s economy shrank 2 percent. This year it’s on track to decline 3 percent, according to the OECD.
Still, Portugal is doing what other European nations wish Greece would do. It is taking the difficult steps to return to growth. It has cut its 2010 government deficit by half in 2011, cut government workers, and this year reduced public-sector pay by 14 percent, earning praise from the IMF for largely meeting its commitments to reform after receiving a bailout last year.
Its success is by no means assured. Unemployment has soared to a record 15.2 percent and tax revenues have fallen, which will make it difficult for Portugal to make this year’s budget target. Its much larger trading neighbor, Spain, is struggling with its own sovereign debt problems that have clouded its economic future. But Portugal is likely to start growing again far sooner than Greece.