Ten years ago, Lehman Brothers crashed into bankruptcy. It was the worst U.S. economic disaster since the Great Depression and sent the world’s financial system reeling close to collapse. From Wall Street to Lisbon, there was panic among policymakers and people in business on both sides of the Atlantic. Did we learn the lesson?

Shocked employees were carrying boxes of personal possessions, while others headed to Lehman Brothers’ cafeteria to use up remaining credit on their canteen cards. The picture was taken by The Guardian, on September 15, 2008. A decade on, the world still remembers the biggest corporate failure in history because of its global impact. Portugal was not an exception.

The first signs of this huge crisis were seen in 2017. However, the bankruptcy of Lehman Brothers triggered the financial meltdown, with government interventions, especially in the United States and Europe. Central banks were forced to take on new responsibilities, pumping trillions of dollars to shore up the banking system.

According to the Washington Post, the U.S. stock market plummeted, wiping out nearly $8 trillion in value between late 2007 and 2009. Unemployment climbed, peaking at 10 per cent in October 2009. Americans lost $9.8 trillion in wealth as their home values plummeted and their retirement accounts vaporized. The impact on Wall Street was tremendous.

In Europe, the year 2009 was also catastrophic. Several eurozone member states, such as Greece, Portugal, Ireland, Spain and Cyprus, were unable to repay or refinance their government debt or to bail out over-indebted banks under their national supervision. The assistance was provided by other eurozone countries, the European Central Bank, or the International Monetary Fund (IMF).

The crisis in Portugal hit the country hard: falling GDP, high unemployment rate, rising government debt, high bond yields and an assistance program of 78 billion euros. IMF contributed with around 26 billion.

Turning point

Portugal’s economy only surpassed the pre-crisis figures in the third quarter of 2018. According to INE – Statistics Portugal, Portuguese GDP reached 182,9 billion euros, comparing to 182,4 billion in the third quarter of 2008 – a record then.

The unemployment rose to 17,7% in the first quarter of 2013. Now, the latest data shows an optimistic 6,6% rate.

In a recent article, The New York Times highlights that Portugal reversed cuts to wages, pensions and social security, and offered incentives to businesses. If you visit the top destinations, there are new hotels, restaurants and shops, fuelled by a tourism surge that has helped cut the unemployment.

Portugal is now a sexy country. There is more foreign investment, especially in construction and technology-related fields. Bosch, Google and Mercedes-Benz recently opened offices. A digital revolution is going on, employing young talents. Traditional Portuguese industries, such as textiles and paper mills, are putting money into innovation. Exports boomed.

“What happened in Portugal shows that too much austerity deepens a recession, and creates a vicious circle,” Prime Minister António Costa said in an interview. “We devised an alternative to austerity, focusing on higher growth, and more and better jobs.”

A long way to consolidate growth is here. The entrepreneurial investments will surpass the levels pre-crisis only in 2019. The salaries are still less competitive comparing to other countries from Western Europe. Some sectors call for deep reforms. Time will tell if Portugal is back on track.