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Manuela Ferreira Leite

When Manuela Ferreira Leite became Portugal's Finance Minister in March, 2002, she inherited Europe's worst fiscal mess. The previous government had let public spending run out of control, sending the budget deficit soaring to 4.1% of gross domestic product -- way above the 3% ceiling allowed under the European Union's Stability & Growth Pact. "Our economy was like a drowning man," says Leite. "We had to act to save it."

Leite swiftly put in place a resuscitation plan. She hiked the value-added tax from 15% to 17%, unloaded state-owned assets, and slapped a controversial toll on the ring road around Lisbon. She also slashed spending on defense and sacked thousands of civil servants while keeping public sector salary increases below inflation. Not surprisingly, these moves met with plenty of opposition, including a one-day general strike by unions last November. Even some of Leite's fellow Social Democrats kicked up a fuss. But the feisty 62-year-old, who gained the sobriquet Iron Lady of Portugal for her uncompromising stance as Minister of Education in the 1990s, stood her ground.

Leite's tough-love approach paid off. She stared down the unions and was able to reduce the deficit to 3.7% in 2002. Despite Portugal's sputtering economy, she's on course to push it even lower this year. Leite hopes the sacrifices of the past year will spur corporate investment and economic growth. With her holding the purse strings, the chances look good.

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