In the context of the European “sovereign debt crisis” of 2010 and 2011 during which they were granted bailout packages by international institutions (the EU, the IMF and the ECB), Greece and Portugal engaged in massive measures of fiscal consolidation involving cuts in public sector wages, pensions and other welfare benefits, as well as significant labour market restructuring. Despite fairly similar conditions, policy responses in these two countries diverged in a number of respects: Greece had to implement much harsher cuts and wide-ranging reforms than Portugal; public protests were more hostile in Greece than in Portugal; a political agreement on austerity between the main political parties was possible early on in Portugal, whereas it was substantially protracted in Greece. We argue that this divergence can be explained by differences in domestic politics prior to the crisis. First, a nascent culture of social concertation had emerged since the 1990s in Portugal but not in Greece. Portuguese trade unions yielded much less protest about austerity measures than in Greece, where they have kept a clearly more adversarial orientation. Second, public sector expansion in Greece was used to a more important extent than Portugal as a tool to reward the clienteles of the parties in power, thereby making the extent of necessary cuts more important. Third, the Portuguese minority government needed to build a broad parliamentary support by negotiating with the opposition, whereas the Greek government was confronted with a clearer majority/opposition conflict which reinforced mass popular protest. As a whole, we argue that domestic patterns of party politics and actor strategies matter to understand the capacity of governments to carry out highly unpopular austerity measures.
