Journal Article

Portugal’s bailout and the crisis of the European Union from a capability perspective

Leonardo Costa, Nuno Ornelas Martins and Francisca Guedes de Oliveira

in Cambridge Journal of Economics

Volume 40, issue 6, pages 1479-1496
Published in print November 2016 | ISSN: 0309-166X
Published online April 2016 | e-ISSN: 1464-3545 | DOI: https://dx.doi.org/10.1093/cje/bew007

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The global financial crisis revealed the weaknesses of the EU integration process, in general, and of the Eurozone, in particular. The EU institutions responded to the crisis in an inadequate way, in the belief that government debt stabilisation had to be pursued before the economy recovers. This strategy was based on economic forecasting errors, exposing member-states to the speculative behaviour of financial markets, leading to the bailout of countries such as Portugal, and undermining the confidence in the single currency, in the European economy and in the European project itself. We analyse here the crisis of the European Union (EU) in light of the bailout of Portugal, and propose an alternative strategy for Portugal and the EU, drawing upon Amartya Sen’s capability approach.

Keywords: Portugal; European Union; Capability approach; Financial crisis; Bailout; E02; F15; I30

Journal Article.  8754 words.  Illustrated.

Subjects: International Trade ; Welfare and Poverty