STEVE INSKEEP, HOST:
Now we have the results of a test of economic policy. Europe has spent years recovering from the financial crisis, and some nations adopted austerity programs. But a year and a half ago, a socialist government in Portugal said the heck with, canceling austerity. And now the economy is growing. Lauren Frayer reports from Lisbon.
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UNIDENTIFIED PROTESTERS: (Chanting in Portuguese).
LAUREN FRAYER, BYLINE: That's what Portugal used to sound like after its 2011 bailout. Thousands of people took to the streets to protest austerity. Unemployment was nearing 20 percent. And Mario Mouraz, like so many Portuguese youth, went abroad in search of work.
MARIO MOURAZ: We have three main models that give an overview of what...
FRAYER: But today he's back, in the glistening lobby of a posh Lisbon hotel, selling software to the hotel manager in the middle of a tourist boom. Mouraz is part of two new trends, fresh entrepreneurship and an uptick in tourism, that have fueled Portugal's economic recovery.
MOURAZ: My friends and people I know that were leaving the country more or less at same time I did - in 2011, 2012 - a lot of them came back already or want to come back. So they come full of motivation with knowledge from other countries.
FRAYER: And they're finding jobs. Unemployment has sunk to around 10 percent.
FRAYER: At home north of Lisbon, Ana Santana's playing with her toddler. Santana is a police officer whose salary and benefits were cut under austerity. But after a left-wing socialist coalition took power in late 2015...
ANA SANTANA: (Speaking Portuguese).
FRAYER: "We got our Christmas bonuses back," she says. The government also restored four paid public holidays for civil servants.
JOAO TAVARES: (Speaking Portuguese).
FRAYER: Her husband, Joao Tavares, says he expects his temporary contract with the municipality to be made permanent any day now, another promise by the socialists. Leftists across Europe are applauding Portugal as vindication that austerity was not the only way. Under the socialists, Portugal's budget deficit has hit a 40-year low and wages are up.
MINISTER OF THE ECONOMY MANUEL CABRAL: Europe choose the line of austerity and had much worse results.
FRAYER: Economy minister Manuel Cabral says austerity slowed growth and job creation in Europe.
CABRAL: What we are showing is that with a policy that restricts income to the people in the moderate way, people get more confidence, and the investment returns.
FRAYER: Some economists are skeptical, though. Finance Professor Joao Duque says the government simply lucked out by being in office during double-digit growth in tourism.
JOAO DUQUE: So yeah, they are surfing the wave - which is good. OK. So far, so good. But things may get worse a bit more in the medium and long term. We have several weaknesses, several weaknesses.
FRAYER: Portugal doesn't export much - leather shoes, port wine. Public debt is still high, and most ratings agencies still classify Portuguese bonds as junk. Meanwhile, the police officer Ana Santana and her husband have moved into a larger apartment. With more job security, they're thinking about a second child.
SANTANA: (Speaking Portuguese).
FRAYER: Their quality of life has definitely improved, Santana says. But she hopes this isn't a bubble.
For NPR News, I'm Lauren Frayer in Lisbon.
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