Current Events > Portugal rejected austerity and is now thriving

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https://www.nytimes.com/2018/07/22/business/portugal-economy-austerity.html

Ramn Rivera had barely gotten his olive oil business started in the sun-swept Alentejo region of Portugal when Europes debt crisis struck. The economy crumbled, wages were cut, and unemployment doubled. The government in Lisbon had to accept a humiliating international bailout.

But as the misery deepened, Portugal took a daring stand: In 2015, it cast aside the harshest austerity measures its European creditors had imposed, igniting a virtuous cycle that put its economy back on a path to growth. The country reversed cuts to wages, pensions and social security, and offered incentives to businesses.

The governments U-turn, and willingness to spend, had a powerful effect. Creditors railed against the move, but the gloom that had gripped the nation through years of belt-tightening began to lift. Business confidence rebounded. Production and exports began to take off including at Mr. Riveras olive groves.

We had faith that Portugal would come out of the crisis, said Mr. Rivera, the general manager of Elaia. The company focused on state-of-the-art harvesting technology, and it is now one of Portugals biggest olive oil producers. We saw that this was the best place in the world to invest.

At a time of mounting uncertainty in Europe, Portugal has defied critics who have insisted on austerity as the answer to the Continents economic and financial crisis. While countries from Greece to Ireland and for a stretch, Portugal itself toed the line, Lisbon resisted, helping to stoke a revival that drove economic growth last year to its highest level in a decade.

The renewal is visible just about everywhere. Hotels, restaurants and shops have opened in droves, fueled by a tourism surge that has helped cut unemployment in half. In the Beato district of Lisbon, a mega-campus for start-ups rises from the rubble of a derelict military factory. Bosch, Google and Mercedes-Benz recently opened offices and digital research centers here, collectively employing thousands.

Foreign investment in aerospace, construction and other sectors is at a record high. And traditional Portuguese industries, including textiles and paper mills, are putting money into innovation, driving a boom in exports.

What happened in Portugal shows that too much austerity deepens a recession, and creates a vicious circle, Prime Minister Antnio Costa said in an interview. We devised an alternative to austerity, focusing on higher growth, and more and better jobs.

Voters ushered Mr. Costa, a center-left leader, into power in late 2015 after he promised to reverse cuts to their income, which the previous government had approved to reduce Portugals high deficit under the terms of an international bailout of 78 billion euros, or $90 billion. Mr. Costa formed an unusual alliance with Communist and radical-left parties, which had been shut out of power since the end of Portugals dictatorship in 1974. They united with the goal of beating back some of the toughest aspects of austerity, while balancing the books to meet eurozone rules.

The government raised public sector salaries, the minimum wage and pensions and even restored the amount of vacation days to prebailout levels over objections from creditors like Germany and the International Monetary Fund. Incentives to stimulate business included development subsidies, tax credits and funding for small and midsize companies.
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European officials are now admitting that Portugal may have found a better response to the crisis. Recently, they rewarded Lisbon by elevating the countrys finance minister, Mrio Centeno, who helped engineer the changes, to president of the Eurogroup, the influential collective of eurozone finance ministers.

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So I get what this article means, but it is important to note this:

The government raised public sector salaries, the minimum wage and pensions and even restored the amount of vacation days to prebailout levels over objections from creditors like Germany and the International Monetary Fund. Incentives to stimulate business included development subsidies, tax credits and funding for small and midsize companies.

Mr. Costa made up for the givebacks with cuts in infrastructure and other spending, whittling the annual budget deficit to less than 1 percent of its gross domestic product, compared with 4.4 percent when he took office. The government is on track to achieve a surplus by 2020, a year ahead of schedule, ending a quarter-century of deficits.

In a technical sense, they are actually adhering to fiscal austerity better than they were previously. Fiscal austerity as pursued in the U.K. specifically popularized the idea that austerity measures mean cuts to social services, but it really means deficit reduction and can be achieved by cuts and tax increases (I assume both happened here)
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I think this is important for the sort of argument I expect you to be implying by posting this, because

https://www.reuters.com/article/us-portugal-economy/portugal-government-targets-budget-surplus-in-2020-irks-allies-idUSKBN1HK2RE

The Portuguese government on Friday narrowed this years budget deficit target despite criticism by its hard left allies and said the once bailed-out country should post its first budget surplus in 2020, significantly alleviating its huge debt burden.

Basically I take this article to strengthen the case that neoliberalism works, of course that is partially about my priors
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So they rejected austerity by adhering to fiscal austerity.
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