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11.1. Introduction 11.1. Introduction
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11.2. The Escudo—an Inconvertible Currency 11.2. The Escudo—an Inconvertible Currency
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11.3. Reversal without Crisis 11.3. Reversal without Crisis
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11.4. Conclusion 11.4. Conclusion
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11 Crises? What Crises? Escudo from ECU to EMU
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Published:February 2001
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Abstract
The national economy of Portugal was exposed to financial and political crises that proved to be recurrent, and an inflationary environment when Portugal became a member of the European Community in 1985. When Cavaco Silva became prime minister, he was able to secure a huge part of parliament in the general elections that occurred in 1987 and 1991. A multi-annual fiscal adjustment strategy (MAFAS) was employed since his government implemented certain reforms. While this measure could be associated with the ECU, the financial and political stability brought on by such measures continued through the efforts of the socialist party which articulated a commitment towards the Economic and Monetary Union (EMU). The escudo exchange rates and interest rates reflected the sustained convergence that was expected through the 1992 Treaty on European Union. This chapter looks into how multilateral measures for surveillance imposed by the ‘code of conduct’ of the Exchange Rate Mechanism of the European Monetary System (ERM) improved national credibility.
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