June 10, 2013

Portugal's Best Bet May Be Dumping the Euro

Nita Ghei

Director of Policy Editing
Summary

While the majority of Portuguese citizens continue to support staying in the Eurozone, 20 percent of respondents supported the idea of a return to Portugal's domestic currency, the escudo, in a poll conducted a year ago. There is also some support from the left, with the Communist party turning against euro membership.

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A major motivation for the rivers of funds poured into the Greek bailouts was a grim determination to preserve the single currency within the European Union. As Greece remains mired in recession, the benefits of the outpouring of debt remain questionable at best. Now, Portugal is challenging the value of remaining a member of the eurozone, with an economics tract perching on its bestseller lists. Joao Ferreira do Amaral, a professor at Instituto Superior de Economia e Gestao, has sparked a much overdue debate in that crisis-wracked nation about the purported benefits of keeping the euro in his book "Why We Should Leave the Euro."

While the majority of Portuguese citizens continue to support staying in the Eurozone, 20 percent of respondents supported the idea of a return to Portugal's domestic currency, the escudo, in a poll conducted a year ago.  There is also some support from the left, with the Communist party turning against euro membership.

Exiting the eurozone expands policy options for Portugal, but does not mean that the adjustment will be quick, easy or painless. There are no painless or easy options left. The calculus now is which is the least costly way to return the economy to growth and create jobs – particularly for the almost 40 percent of youth currently unemployed.

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