Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

Instead, in a constitutionally dubious arrangement, Silva made Costa’s appointment conditional on promises.89 The government must respect Portugal’s commitments to the European Union’s stability pact, whereby all eurozone members were required to reduce budget deficits to below 3 percent of GDP. It must remain committed to NATO. It must continue with the restructuring of Portugal’s ailing banking system as previously planned. It must limit the role of trade unions in deciding government policy and respect the existing balance between employers and labor. Schäuble had announced that elections should not change economic policy. Portugal’s president clearly agreed. Watched over by the president, the creditor governments of the EU, the ECB, the bond-rating agencies and the bond markets, the Left coalition took office. What it could do with political power, whether Portuguese democracy within the frame of the eurozone was more than a matter of extend-and-pretend, would depend on its ability to bend the constraints imposed upon it. At least, unlike Greece, the arithmetic of Portugal’s debts did not condemn it from the start.