Portugal’s ‘Sardine Capitalism’ Enters Choppy Waters

Portugal (population: 10 million) has enjoyed a miracle recovery since the dark days of its 2011 euro-crisis bailout. Sun, sea and tax breaks have pulled in tourists and wealthy expats, debt has fallen, populism has been largely avoided and unemployment is below neighboring Spain’s. Enthusiasts call it “sardine capitalism.”

The sardine is lately entering choppy waters. The economy is slowing, higher interest rates are biting and a cost-of-living backlash has seen those tax breaks and other sweeteners start to get cut. And now the aura of political stability is cracking after corruption probes into several infrastructure projects this week toppled Prime Minister Antonio Costa, in office since 2015 and re-elected with a majority only last year. That leaves his Socialists rudderless and at an obvious disadvantage going into a March snap election that may produce no overall winner; polls taken before the scandal showed the Socialists broadly level with the center-right party that governed during the bailout years.