The European Response and its Effects on Greece and Portugal: Is This the Way Out of the ‘Intermediate’ Trap?

This chapter assesses the impact of the European response to the global financial crisisGlobal Financial Crisis and particularly the internal devaluationInternal devaluation and structural reforms on the economic structures in the ‘intermediate’ economies. Taking a comparative approach, this chapter delves deeper into the effects of the bailoutBailout programmes on the economic performance in GreeceGreece and PortugalPortugal after the crisis. It focuses on how the internal devaluationInternal devaluation affected the demand and supply-side patterns of growth in both countries. It argues that the chronic supply-side weaknesses and particularly the difficulty of creating ‘economies of scale’, the low added-value production, the inefficient workforce allocation, and the intense trade competition at both the European and international levels (i.e., the large-scale economies in Eastern EuropeEastern Europe and Asia) impeded the transition to an export-led growth modelGrowth Model (GM) in both countries.