Engine, brake or steering wheel? Social policy reform and the European vincolo esterno in Portugal in the 21st century

This paper examines the transformation of Portuguese social policies in the early decades of the 21st century under the European linkage. We find variation in policy direction, intensity, and scope over time. Since joining the EMU Portugal benefited from favourable financing conditions to reform social policies. There was catch-up recovery in volume, coverage, and composition of expenditure. The universalization of the coverage for old social risks was followed by a two-fold European-backed recalibration: cost containment in the largest expenditure items (pensions and healthcare); expansion to new social risks through non-contributory benefits and services, in addition to gender and work/life balance policies, though still far from the European average. The sovereign debt crisis brought a more intrusive external constraint in furtherance of a clear policy direction: internal devaluation seeking to boost exports by relying on cost-competition. The adjustment program triggered a sharp decline in public expenditure, liberalizing the labour market and retrenching social protection according to a logic of subtractive recalibration, without ever combatting the policy legacy of intertwined dualisms in labour market and social protection. Overall, years of policy convergence with social Europe were stopped. In the aftermath of the crisis, a social turn in European governance offered expanded resources to the minority socialist government supported by radical left parties to reverse Troika-era cuts and labour market reforms and renew the focus on new social risks and outsider strata, though never straying from the strictures of European budgetary rules.