Portugal's EU-IMF adjustment programme and the unemployment surge

After borrowing costs became unsustainable, Portugal requested external assistance on April 7, 2011, leading to a EUR 78 billion programme split evenly between the European Financial Stabilisation Mechanism, the European Financial Stability Facility, and the IMF, with the Bank of Portugal responsible for safeguarding financial stability throughout the adjustment. Governor Carlos Costa, addressing the programme's progress in a November 2013 speech, framed the period as one requiring the economy to correct, within a currency union that ruled out devaluation, imbalances that had built up over a decade of weak competitiveness and a current account deficit that had reached roughly 10% of GDP before the crisis. The fiscal tightening built into the programme cut the budget deficit from 9.8% of GDP in 2010 toward a 3% target by 2013, but GDP contracted by roughly 6.8% in real terms over the adjustment years and unemployment climbed past 16%, with an estimated 469,000 jobs lost. Costa later described programme ownership, the fact that Portuguese authorities and the public broadly accepted the programme's urgency despite the social cost, as the key reason Portugal exited cleanly in May 2014 without a follow-up precautionary arrangement.