[rjtavares]

> During the transition, some debt accumulation would be tolerable. Levels up to 120% were, prior to Reinhardt Rogoff considered acceptable.

I may be rusty on my Keynesian Economics professor's lessons, but shouldn't you reduce government deficits in expansion times, so that you can safely let the stabilizers kick in if you enter a recession?

> As such, the view that the timing of the financial crisis was particularly unfortunate for Portugal is, in my view, entirely correct.

Of course it was unfortunate, because the country (both public and private sector) were incredibly leveraged. Which is completely different than saying that it was the cause.

Pleases note that the banking system is Portugal didn't suffer as much as the Spanish or Irish, e.g. In fact, the banks that were nationalized in Portugal were the result of deliberate fraud (Ponzi-like schemes), not just irresponsible behavior.

EDIT: btw, here's Portuguese per capita GDP in constant terms between 2000 and 2007 to dispel the success argument - http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&#...

[sergiosgc]

> I may be rusty on my Keynesian Economics professor's lessons, but shouldn't you reduce government deficits in expansion times, so that you can safely let the stabilizers kick in if you enter a recession?

Exactly my point. There was no expansion in the '00 decade, so debt growth was ok.

> Of course it was unfortunate, because the country (both public and private sector) were incredibly leveraged. Which is completely different than saying that it was the cause.

But the cause is also not a high debt level. Portugal was caught in a fragile state when a much wider crisis exploded.

Your chart is not the right one to observe the economy conversion success. This one is: http://i.imgur.com/ltAX8fe.png (it's the same data, viewed as YoY variation)