DEFENSE SECRETARY HAGEL THANKS PORTUGAL FOR SUPPORTING NATO'S BALTIC AIR POLICING

U.S. Defense Secretary Chuck Hagel, center left, meets with Portuguese Defense Minister Jose Pedro Aguiar-Branco, center right, at the Pentagon, March 31, 2014. The two leaders met to discuss defense-related topics. DOD photo by Glenn Fawcett  

 FROM:  U.S. DEFENSE DEPARTMENT
Defense Secretary Welcomes Portuguese Minister to Pentagon
American Forces Press Service

WASHINGTON, March 31, 2014 – Defense Secretary Chuck Hagel today welcomed Portuguese Minister of Defense Jose Pedro Aguiar-Branco to the Pentagon, and expressed to the minister his appreciation for Portugal’s many contributions to international security, Pentagon Press Secretary Navy Rear Adm. John Kirby said in a Defense Department news release.

The secretary specifically thanked Portugal for supporting NATO’s Baltic Air Policing rotation later this year, and Portugal’s support in combating piracy and maritime crime in the Gulf of Aden and off Somalia, Kirby said in the release.
Kirby said Hagel also thanked Aguiar-Branco for Portugal’s hospitality towards U.S. airmen at Lajes Field.

The two leaders “discussed the situation in Ukraine and reaffirmed both nations’ steadfast commitment to our collective defense obligations,” Kirby said.
Both men, he said, agreed on the need for Russia to begin discussions with the Ukrainian government, as diplomacy remains the only acceptable means of resolving this crisis.

“Secretary Hagel looks forward to seeing Minister Aguiar-Branco at the NATO Summit in Wales, this September,” Kirby said in the release.

SECRETARY OF STATE KERRY MAKES REMARKS WITH PORTUGUESE FOREIGN MINISTER MACHETE

FROM:  STATE DEPARTMENT 
Remarks With Portuguese Foreign Minister Rui Machete Before Their Meeting
Remarks
John Kerry
Secretary of State
Treaty Room
Washington, DC
January 29, 2014


SECRETARY KERRY: Good afternoon, everybody. It’s my great privilege to welcome the Foreign Minister of Portugal Rui Machete. We are very old friends – that is to say, Portugal and the United States. We are --
FOREIGN MINISTER MACHETE: We are young.

SECRETARY KERRY: I am young. Together, we are young. But coming from Massachusetts, I have a very, very long history with the American Portuguese community. We have very, very strong ties with Portugal and a great affection for the relationship in those ties. And Portugal obviously has the longest historical links with the United States, and they have been a strong and important ally to us in many, many ways. Most recently, we have been joined by our friends from Portugal in the efforts in Afghanistan, and we’re very grateful to them for their commitment and for their willingness to really take risks and to be part of this significant effort.

In addition, Portugal has been working very, very hard to address significant economic challenges, and we applaud the work that they have done, the reforms and efforts they have put in place. We’re very hopeful that the TTIP, the Transatlantic Trade and Partnership Investment Act[1], will have an opportunity to be able to really make a difference. And we’re trying to close the gap on those negotiations and hope that they will be completed in the near term.

So, my pleasure to welcome you. We have a number of things to discuss. But I think the foreign minister knows I am married to a woman of Portuguese descent, and I hear Portuguese in my house every single day, so Muito Obrigado, thank you for coming, and happy to have you with us.

FOREIGN MINISTER MACHETE: You can speak Portuguese. (Laughter.)

I am particularly pleased and honored to have this opportunity in my – when I pay my first visit, official visit, to the United States to meet with Secretary of State John Kerry. We have some links. One of them is the fact that you are married with a magnificent woman and beautiful woman of Portuguese descent. And as the Secretary of State has said, we are allies many – along many, many years. We have been founders of NATO, and since then, we have cooperated in matters of defense. We have more than half a million Portuguese or people of Portuguese descent working in the United States. This is another link, a very important link that can contribute to this reinforcement of our friendship.

We have, too, strong bilateral relations that now are growing and that have surpassed the five billion euros, which is a bit more in dollars. And we have in common the certain preoccupations about the defense of the values of the West and about the defense (inaudible) of the West. And we hope that we can review the major issues that you have now to face in order to exchange views and to reinforce our cooperation, which is something that we consider very much and is very, very important in our relationship with the United States.

And I think that the United States can continue to count with Portugal as a reliable, reliant friend, along this world – that it is not flat, but it is (inaudible). Thank you very much.

SECRETARY KERRY: Thank you, Minister. Thank you very much. Appreciate it. Thank you, sir. Thank you.

QUESTION: Mr. Secretary, what did you think of the State of the Union last night?

SECRETARY KERRY: Beg your pardon?

QUESTION: What did you think of the State of the Union?

SECRETARY KERRY: I thought it was excellent. The President did a great job. Thank you.

FOREIGN MINISTER MACHETE: Thank you.

U.S. SECRETARY OF DEFENSE ARRIVES IN PORTUGAL

Defense Secretary Leon E. Panetta departs Joint Base Andrews, Md., Jan. 14, 2013. Panetta is on a six-day trip to Europe to visit with foreign counterparts and troops. DOD photo by Erin A. Kirk-Cuomo

 
FROM: U.S. DEPARTMENT OF DEFENSE
Panetta Arrives in Portugal, First Stop on Europe Tour
By Karen Parrish
American Forces Press Service

LISBON, Portugal, Jan. 14, 2013 - Defense Secretary Leon E. Panetta landed here today on the first leg of what he said is likely his last international trip as secretary.

While here, the secretary is scheduled to meet separately with Foreign Minister Paulo Portas and Defense Minister José Pedro Aguiar-Branco, with whom he is scheduled to hold a joint news conference.

Panetta also will visit Naval Striking and Support Forces NATO, known as STRIKFORNATO. Alliance officials said the organization is NATO's premier maritime battle staff and the alliance's primary link for integrating U.S. maritime forces into NATO operations.

During the flight here, Panetta told reporters traveling with him that Portugal is a key NATO ally and an important strategic partner in the Mediterranean and beyond.

"I am told that I'm the first [U.S. defense] secretary to visit Portugal in at least 30 years," he said.

The U.S. and Portuguese militaries have a history of close cooperation, particularly in the Azores, he said. The Azores are a group of nine volcanic islands, belonging to Portugal but strategically located some 900 miles west of Lisbon in the mid-Atlantic.

Panetta acknowledged DOD will reduce operations at Lajes Field, an air base that houses Portuguese and U.S. Air Force elements and a regional air passenger terminal,
located on Terceira Island in the Azores.

The number of U.S. and Portuguese service members based there will drop by at least half from the current 1,100 population, DOD officials said Dec. 13. Aircraft operations support also will be reduced, and the United States will return about 300 of the 400 buildings on the base to the Portuguese government, officials said.

U.S. forces have been in the Azores since 1943, when World War II saw troops at Lajes first protecting allied shipping lanes and later hunting German submarines.

Panetta said while DOD will reduce operations at Lajes because of budget constraints, his goal is to tell Portuguese leaders how the United States intends to broaden and transform the U.S.-Portugal defense relationship through increased military-to-military engagement and exercises, and to try to focus on the challenges of mutual interest, such as maritime security.

Later this week, Panetta will travel to Madrid, Rome and London.

SECRETARY OF STATE PANETTA VISITS 'MOST CAPABLE PARTNERS'

U.S. Defense Secretary Leon E. Panetta briefs the press on a flight to Lisbon, Portugal, Jan. 14, 2013. Panetta is on a six-day trip to Europe to visit with defense counterparts and troops. DOD photo by Erin A. Kirk-Cuomo

FROM: U.S. DEPARTMENT OF DEFENSE
Panetta Begins Trip to Visit 'Most Capable Partners'
By Karen Parrish
American Forces Press Service

ABOARD A MILITARY AIRCRAFT, Jan. 14, 2013 - Defense Secretary Leon E. Panetta boarded this Air Force jet at Joint Base Andrews, Md., today, bound for Portugal, Spain, Italy and Great Britain on what he termed "likely my last international trip as secretary of defense."

Panetta told reporters traveling with him that as "a son of Europe" –- he often speaks of his parents, who immigrated to the United States from Italy -- it is appropriate that his final international trip, the 18th he has made as secretary, will include visits to some of America's "most capable and closest military partners."

"I have visited more than 30 countries, including ... [traveling to] the war zone a number of times," he said. "But I've made it a priority, as part of our defense strategy, ... to emphasize the importance of strengthening our alliances and partnerships throughout the world."

The goal for his final trip is in line with that strategy, the secretary said, as he will:

-- Emphasize the importance of NATO and bilateral alliances;

-- Reflect on the accomplishments Portugal, Spain, Italy and Great Britain have helped to achieve as members of NATO's International Security Assistance Force in Afghanistan; and

-- Lay the groundwork for the future as nations around the world face both national security and budget challenges.

Panetta noted the countries he will visit have all maintained a strong commitment to the NATO mission in Afghanistan. "Because of that commitment, we've been able to make significant progress in the effort to ... build an Afghanistan that can secure and govern itself," he added.

As President Barack Obama announced last week, the secretary said, Afghan forces will assume the lead for security responsibility across their country this spring, with ISAF forces moving into a supporting role.

"That's a significant milestone that is the result of the efforts by the United States, by ISAF and by the Afghans themselves," he said. The secretary added that U.S. leaders had "a successful series of consultations" with Afghan President Hamid Karzai about the future U.S. commitment to Afghanistan's security during that leader's visit to Washington last week. Panetta said he looks forward to updating counterparts on those discussions.

The secretary said he also will discuss with allies innovative approaches to common budget challenges, and that he'll speak with counterparts about key bilateral security issues.

"As always, I will also use this opportunity to visit the troops, and have a chance to thank U.S. men and women in uniform for the sacrifices they're making," he said.

The secretary said that after more than 10 years of war and with the budget constraints the United States and its allies and partner nations face, the United States nevertheless continues to complete its mission in the war in Afghanistan and continues to confront the terrorism threat.

Terrorist activity -- particularly from al-Qaida factions -- in Pakistan, Somalia, Yemen and Mali is a threat common to all the nations he will visit, Panetta noted. North Korea and Iran, turmoil in the Middle East and the cyber threat also are issues of common interest, he added.

No one nation can confront these threats alone, the secretary said.

"The only way we're going to be able to do it is by strengthening and reaffirming and building new partnerships and new alliances in the world," he said. "The model for that is NATO, ... really the oldest alliance we have." That alliance's responses to Afghanistan and Libya, he added, demonstrate its continued importance to global stability.

The 74-year-old secretary said he also hopes to communicate some of his feelings about the alliance to the younger citizens of the countries he will visit this week.

"NATO goes back to 1949," he said. "I think the reality is ... that there are generations that have been born since the fall of the Berlin Wall that may not fully appreciate how important NATO is as an alliance [for] the future."

Panetta said he will focus in his discussions, and in a speech he will deliver in London later this week, in part on "how important it is to be able to pass the baton to [younger generations] when it comes to the strength of these transatlantic alliances and partnerships that we have."

He added, "The purpose of my trip is to make clear that we are going to need this alliance -- today, tomorrow, and in the 21st century."

U.S. STATE DEPARTMENT PROFILE OF PORTUGAL

Map From:  U.S. State Department
FROM:  U.S. STATE DEPARTMENT
PROFILE Geography
Area: 92,391 sq. km.; includes continental Portugal, the Azores (2,333 sq. km.) and Madeira Islands (828 sq. km.); slightly smaller than the State of Indiana; located in Europe's southwest corner bordered by Spain (North and East, 1,214 km.) and the Atlantic Ocean (West and South, 1,793 km.).
Major cities: Lisbon (capital, metropolitan area pop. 2.1 million); Porto (metropolitan area pop. 1.9 million).
Terrain: Mountainous in the north; rolling plains in the central and southern regions.
Climate: Maritime temperate (Atlantic-Mediterranean); average annual temperature is 61°F. Temperatures may drop into the low 30s (°F) at night during the coldest months, with daytime highs in the 50s and 60s. The remainder of the year is normally sunny with minimal rainfall. Days are pleasant, with temperatures seldom exceeding 95°F, except in the southern interior of the country; afternoons and evenings are breezy, with nighttime temperatures in the 60s and low 70s; May-October (dry and warm), November-April (cool with rain and wind in the north, mild in the south).

People
Nationality: Noun and adjective--Portuguese (singular and plural).
Population (2011 est.): 10.6 million. Ages 0 to 14 years--1.6 million (male 830,611; female 789,194). Ages 15 to 24 years--1.2 million (male 609,177; female 585,072). Ages 25 to 64 years--5.9 million (male 2,917,633; female 3,013,120). Ages 65 years and over--1.9 million (male 787,967; female 1,099,715).
Population density: 114 per sq. km. (44 per sq. mi.).
Annual population growth rate (2008 est.): 0.8%.
Ethnic groups: Homogeneous Mediterranean stock with small minority groups from Africa (Angola, Cape Verde, Mozambique), South America (Brazil), and Eastern Europe (Ukraine, Romania).
Religion: Roman Catholic 92%, Protestant 4%, atheists 3%, others 1%.
Language: Portuguese.
Education: Years compulsory--12. Literacy (2008)--94.9%.
Health (2010): Birth rate--9.5/1,000 (1.07 male/female). Death rate--10.0/1,000. Infant mortality rate--2.5/1,000. Life expectancy--79.2 years.
Work force (2010): 5.57 million. Government and services (59.8%); industry and manufacturing (28.5%); agriculture and fishing (11.7%).

Government
Type: Republic.
Constitution: Effective April 25, 1976; revised 1982, 1989, 1992, 1997, 2001, 2004, and 2005.
Branches: Executive--president (head of state), Council of State (presidential advisory body), prime minister (head of government), Council of Ministers. Legislative--unicameral Assembly of the Republic (230 deputies): PS=74, PSD=108, PCP=14, CDS/PP=24, BE=8, PEV=2. Judicial--Supreme Court, District Courts, Appeals Courts, Constitutional Tribunal.
Major political parties: Socialist Party (PS); Social Democratic Party (PSD); Portuguese Communist Party (PCP); Popular Party (CDS/PP); Left Bloc (BE); Green Party (PEV).
Administrative subdivisions: 18 districts (Lisbon, Leiria, Santarem, Setubal, Beja, Faro, Evora, Portalegre, Castelo Branco, Guarda, Coimbra, Aveiro, Viseu, Braganca, Vila Real, Porto, Braga, Viana do Castelo); 2 autonomous island regions (the Azores and Madeira).

Economy
GDP (2010 est.): €160.3 billion (approx. $208 billion).
Annual growth rate (2010 est.): 0.91%.
Per capita GDP (2010 est.): €18,453 (approx. $23,965).
Avg. inflation rate (2010 est.): 1.2%.
Services (75.4% gross value added): Wholesale and retail trade; hotels and tourism; restaurants; transport, storage and communication; real estate; banking and finance; repair; government, civil, and public sectors.
Industry (22.3% gross value added): Textiles, clothing, footwear, wood and cork, paper, chemicals, auto-parts manufacturing, base metals, dairy products, wine and other foods, porcelain and ceramics; glassware, technology; telecommunications.
Agriculture (2.3% gross value added): Livestock, crops, fish.
Trade (2010): Exports--€36.8 billion (approx. $28.3 billion): machinery and tools 14.9%; textile materials, clothing and footwear 13.7%; vehicles and other transport materials 12.4%; wood, cork, paper and wood pulp 9.2%; other 49.8%. Imports--€55 billion (approx. $42.3 billion): machinery and tools 16.3%; oil products 14.7%; vehicles and other transport material 14.1%; chemical products 10%; agricultural products 9.5%; other 35%. Export partners--Spain (26.6%); Germany (13.9%); France (11.8%); United Kingdom (5.5%); Angola (5.2%); Netherlands (3.8%); Italy (3.8%); United States (3.6%); Belgium (2.9%); Brazil (1.2%); other (22%). EU 27 (74%). Import partners--Spain (31.2%); Germany (13.9%); France (7.3%); Italy (5.7%); Netherlands (5.1%); United Kingdom (3.8%); Belgium (2.9%); China (2.8%); Nigeria (2.4%); Brazil (1.8%); other (23.1%). EU 27 (75.6%).
U.S. trade with Portugal (2010): Exports--$1 billion: transportation equipment (21.9%); computer and electronic products (15.2%); agricultural products (7.7%); machinery (7.5%); all others (47.7%). Imports--$2.1 billion: mineral fuels, oils (28.5%); transportation equipment (10.2%); wood products (7.9%); paper (6.6%); all others (46.8%).
Foreign direct investment (FDI, 2010): Incoming FDI by industry--wholesale and retail 39.3%; manufacturing 24.4%; financial and insurance activities 18.2%; information and communication activities 5.6%; consultancy, scientific, and technical activities 3.1%; real estate 1.2%; construction 1%; electricity, gas, water 0.6%; other 6.6%. Incoming FDI by country in euros (total €35 billion; approx. $26.9 billion)--Germany 18.3%; France 16.7%; United Kingdom 13.8%; Spain 13.6%; Netherlands 10.3%; Luxembourg 7%; Brazil 5.5%; Switzerland 5.2%; Belgium 2.4%; Ireland 1.8%; other 5.4%. Portuguese FDI abroad by country in euros (total €6.8 billion; approx. $5.2 billion)--Luxembourg 18.5%; Brazil 17.1%; Spain 13.5%; Netherlands 12.1%; Angola 3.3%; Poland 3.2%; United States 2.7%; United Kingdom 1.9%; Romania 1.5%; France 1.3%; other 24.9%.
Exchange rate: (2009) U.S. $1 = 0.74 EUR (€); (2010) U.S. $1 =0.77 EUR.

HISTORY
Portugal is one of the oldest states in Europe. It traces its modern history to A.D. 1140 when, following a 9-year rebellion against the King of Leon-Castile, Afonso Henriques, the Count of Portugal, became the country's first king, Afonso I. Afonso and his successors expanded their territory southward, capturing Lisbon from the Moors in 1147. The approximate present-day boundaries were secured in 1249 by Afonso III.

By 1337, Portuguese explorers had reached the Canary Islands. Inspired by Prince Henry the Navigator (1394-1460), explorers such as Vasco da Gama, Bartolomeu Dias, and Pedro Alvares Cabral made explorations from Brazil to India and Japan. Portugal eventually became a massive colonial empire with vast territories in Africa (Angola, Mozambique, Cape Verde, Guinea Bissau, Sao Tome) and Latin America (Brazil), and outposts in the Far East (East Timor, Macau, Goa).

Dynastic disputes led in 1580 to the succession of Philip II of Spain to the Portuguese throne. A revolt ended Spanish hegemony in 1640, and the House of Braganca was established as Portugal's ruling family, lasting until the establishment of the Portuguese Republic in 1910.

During the next 16 years, intense political rivalries and economic instability undermined newly established democratic institutions. Responding to pressing economic problems, a military government, which had taken power in 1926, named a prominent university economist, Antonio Salazar, as finance minister in 1928 and prime minister in 1932. For the next 42 years, Salazar and his successor, Marcelo Caetano (appointed prime minister in 1968), ruled Portugal as an authoritarian "corporate" state. Unlike most other European countries, Portugal remained neutral in World War II. It was a charter member of NATO, joining in 1949.

In the early 1960s, wars against independence movements in Portugal's African territories began to drain labor and wealth from Portugal. Professional dissatisfaction within the military, coupled with a growing sense of the futility of the African conflicts, led to the formation of the clandestine "Armed Forces Movement" in 1973.

The downfall of the Portuguese corporate state came on April 25, 1974, when the Armed Forces Movement seized power in a nearly bloodless coup and established a provisional military government.

GOVERNMENT AND POLITICAL CONDITIONS
Portugal moved from authoritarian rule to parliamentary democracy following the 1974 military coup against Marcelo Caetano, whose rule embodied a continuation of the long-running dictatorship of Antonio Salazar. After a period of instability and communist agitation, Portugal ratified a new constitution in 1976. Subsequent revisions of the constitution placed the military under strict civilian control; trimmed the powers of the president; and laid the groundwork for a stable, pluralistic liberal democracy, as well as privatization of nationalized firms and the government-owned media. Portugal joined the European Union (EU) in 1986 and has moved toward greater political and economic integration with Europe ever since.

The four main branches of the national government are the presidency, the prime minister and Council of Ministers (the government), the Assembly of the Republic (the parliament), and the judiciary. The president, elected to a 5-year term by direct, universal suffrage, also is commander in chief of the armed forces. Presidential powers include confirming the prime minister and Council of Ministers; dismissing the prime minister; dissolving the assembly to call early elections; vetoing legislation, which may be overridden by the assembly; and declaring a state of war or siege. The Council of State, a presidential advisory body, is composed of six senior civilian officers, former presidents elected under the 1976 constitution, five members chosen by the assembly, and five selected by the president.

The government is headed by the prime minister, who is nominated by the assembly for confirmation by the president. The prime minister then names the Council of Ministers. A new government is required to present its governing platform to the assembly for approval.

The Assembly of the Republic is a unicameral body composed of 230 deputies. Elected by universal suffrage according to a system of proportional representation, deputies serve terms of office of 4 years, unless the president dissolves the assembly and calls for new elections. The national Supreme Court is the court of last appeal. Military, administrative, and fiscal courts are designated as separate court categories. A nine-member Constitutional Tribunal reviews the constitutionality of legislation.

The Azores and Madeira Islands have constitutionally mandated autonomous status. A regional autonomy statute promulgated in 1980 established the Government of the Autonomous Region of the Azores; the Government of the Autonomous Region of Madeira operates under a provisional autonomy statute in effect since 1976. Continental Portugal is divided into 18 districts, each headed by a governor appointed by the Minister of Internal Administration.

Current Administration
Socialist Party (PS) Prime Minister Jose Socrates resigned in March 2011 after his minority government’s austerity plan was rejected by the parliament. Rising unemployment and unsustainable public sector deficits led his caretaker government to seek a May 2011 EU/International Monetary Fund bailout agreement. Social Democratic Party (PSD) Prime Minister Pedro Passos Coelho’s government took office following June 5, 2011 parliamentary elections. Since then, the new government has been largely preoccupied with the implementation of broad austerity measures pursuant to the agreement.

Social Democrat Anibal Cavaco Silva, a center-right candidate and former prime minister (1985-1995), won the Portuguese presidential election on January 22, 2006 with 50.6% of the vote, becoming Portugal’s first center-right head of state in 3 decades. He was re-elected on January 23, 2011 with 53% of the vote and was sworn in on March 9, 2011.

Principal Government Officials
President of the Portuguese Republic--Anibal Cavaco Silva
Prime Minister--Pedro Passos Coelho

Minister of State and Finance--Vitor Gaspar
Minister of State and Foreign Affairs--Paulo Portas
Minister of National Defense--Jose Pedro Aguiar Branco
Minister of Internal Administration--Miguel Macedo
Minister of Justice--Paula Teixeira da Cruz
Minister of Parliamentary Affairs--Miguel Relvas
Minister of Economy and Labor--Alvaro Santos Pereira
Minister of Agriculture, Oceans, Environment and Territorial Administration--Assuncao Cristas
Minister of Health--Paulo Macedo
Minister of Education and Science--Nuno Crato
Minister of Solidarity and Social Security--Pedro Mota Soares

President of the Government of the Autonomous Region of the Azores--Carlos Cesar
President of the Government of the Autonomous Region of Madeira--Alberto Joao Jardim
Ambassador to the United States--Nuno Brito

Portugal maintains an embassy in the United States at 2012 Massachusetts Avenue, NW, Washington, DC 20036; tel. 1-202-350-5400; fax 1-202-462-3726 and consulates general in New York City, Boston, San Francisco, and Newark, NJ; consulates in Providence, RI and New Bedford, MA; and honorary consulates in Honolulu, Los Angeles, Houston, New Orleans, Chicago, Philadelphia, Miami, San Juan, and Waterbury, CT. The Portuguese National Tourist Office in the United States is located at 590 Fifth Avenue, New York, NY 10036 (tel: 1-212-354-4403).

ECONOMY
The Portuguese economy experienced boosts when Portugal joined the European Union in 1986 and the European Monetary Union (EMU) in 1999. In recent years, however, it suffered from sluggish to negative growth, a ballooning budget deficit, and low productivity and competitiveness, which, exacerbated by the onset of the euro zone debt crisis, led to record-high spreads on sovereign debt and downgrades in credit ratings. On May 3, 2011, Portugal’s Socialist caretaker government reached agreement with the European Commission, European Central Bank, and International Monetary Fund (IMF)--"the troika"--on a €78 billion (approx. $111 billion), 3-year bailout package that required Portugal to implement comprehensive austerity measures, including privatization of state-owned enterprises and measures to reform its labor market and justice sector. The package was approved by EU and euro zone finance ministers in mid-May. The new PSD-led government of Prime Minister Coelho took office in June 2011. The troika has given the Portuguese Government high marks for its implementation of the agreement, while identifying gaps and areas for improvement. Although workers have organized protests and strikes to oppose austerity measures, demonstrations have been relatively nonviolent. Nevertheless, Portugal’s economic future depends heavily on wider euro zone developments.

Before the economic crisis, Portugal's membership in the EU had contributed to stable economic growth, largely through increased trade fostered by Portugal’s low labor costs and an influx of EU funds for infrastructure improvements. Portugal's subsequent entry into the EMU brought exchange rate stability, lower inflation, and lower interest rates. Falling interest rates, in turn, lowered the cost of public debt and helped the country achieve its fiscal targets. Until 2001, average annual growth rates consistently exceeded those of the EU average. However, a dramatic increase in private sector loans led to a serious external imbalance, with large capital account deficits that year. De-leveraging by Portuguese banks to meet the June 2011 EU requirement to increase core tier-one capital ratios above 9% has caused bank lending to tighten.

The Government of Portugal managed to keep the budget deficit under 3% in accordance with the euro zone's Stability and Growth Pact during 2002-2004. However, in 2005 Portugal’s budget deficit surged to a high of 5.9%. Subsequently, the government undertook efforts to bring the budget situation under control. In 2006, the government reduced the deficit to 4.1%, mainly through revenue-generating measures, including increased collection enforcement and higher taxes. The 2007 budget further reduced the deficit to 3.1% of GDP, through spending cuts and structural reforms. In 2009, however, the budget deficit soared to 10.1% of GDP as a result of a more than 11% drop in tax revenue. Portugal’s public debt reached 93% of GDP in 2010, with a projected increase to 97.3% of GDP in 2011.

Helped in part by a wider EU recovery, the Portuguese economy grew by 2.74% in 2007, up from 1.4% the previous year. But a slowing regional economy saw the Portuguese economy contract by 0.35% in 2008 and by 2.1% in 2009. Although GDP grew 0.91% in 2010, it contracted 1.6% in 2011 and is projected to contract 3.2% in 2012 as a result of higher taxes and public wage cuts introduced under the government’s austerity program.

Unemployment is expected to rise in coming years and reach 12.5% in 2011, 13.8% in 2012, and 14.2% in 2013, up from 7.6% in 2008, 9.5% in 2009, and 10.8% in 2010.

The service sector, which includes public service, wholesale and retail trade, tourism, real estate, and banking and finance, is now Portugal's largest employer, having overtaken the traditionally predominant manufacturing and agriculture sectors since the country joined the EU in 1986. EU expansion into Eastern Europe has negated Portugal's historically competitive advantage of relatively low labor costs, particularly in the manufacturing and agriculture sectors. Since 2009, governments have been working to change Portugal's economic development model from one based on public consumption and public investment to one focused on exports, private investment, and development of the high-tech sector.

Due to weak economic growth, Portugal has lost ground relative to the rest of the EU since 2002. Portugal's 2010 per capita GDP stood at 80 Purchasing Power Standards (PPS) compared to the EU-27 average of 100 PPS, leaving the country in last place among its Western European counterparts after accounting for price differences (but ahead of EU’s newest members). Now among the weaker economies in the EU, and the third euro zone member (after Greece and Ireland) to request a bailout, Portugal aims to reduce its budget deficit to 5.9% (from 9.1% in 2010) of GDP in 2011, 4.5% in 2012, and 3% in 2013. In accordance with the terms of its bailout agreement, Portugal has until 2014 to bring its budget deficit back below the mandated 3% euro zone limit. In 2010, the government implemented a series of austerity measures, including cutting public sector wages, reducing attrition replacement hiring, decreasing pension benefits for early government retirement, and increasing taxes. The government’s 2012 budget, considered the most demanding in 30 years, includes salary cuts for public sector employees, benefit cuts, and tax hikes. The government seeks to impose fiscal discipline and further reduce its deficit over the next 3 years through structural reform measures, as agreed upon with the EU and IMF.

FOREIGN RELATIONS
Portugal has been a significant beneficiary of European Union funding and is a strong proponent of European integration.

Portugal has consistently supported EU expansion, including entry talks with Turkey. Of Portugal’s three foreign policy priorities (EU, transatlantic ties, Lusophone states), the EU is the most important. EU policies and regulations increasingly direct Portuguese law and policy, and Portuguese foreign policy is increasingly influenced by a need for EU consensus. Portugal is a member of the "Schengen" passport-free zone.

Portugal joined the United Nations in 1955 and holds a non-permanent Security Council seat for 2011-2012, having previously served on the Council in 1979-80 and 1997-98. Portugal is an active participant in UN organizations, and is seeking a seat on the Human Rights Council for 2014-2017. Portuguese forces participate in many UN operations, including Congo, Guinea, Lebanon, and Timor-Leste.

Portugal is a founding member of NATO; it is an active member of the alliance, and Portuguese forces participate in NATO operations in Afghanistan and Kosovo. Portugal hosted the 2010 NATO Summit.

Portugal is a key member of the Community of Portuguese-Speaking Countries (CPLP), an organization headquartered in Lisbon intended to unite Lusophone nations and discuss promoting the Portuguese language as well as political and economic linkages. Portugal is also a member of the Community of Democracies (CD) and has participated in a series of Ibero-American summits. Portugal was a strong advocate of independence for Timor-Leste, a former Portuguese colony, and has provided troops and money to Timor-Leste in close cooperation with the United States, Asian allies, and the United Nations.

U.S.-PORTUGUESE RELATIONS
Bilateral ties date from the earliest years of the United States. Following the Revolutionary War, Portugal was among the first countries to recognize the United States. On February 21, 1791, President George Washington opened formal diplomatic relations, naming Col. David Humphreys as U.S. minister. The oldest continuously-operating U.S. Consulate in the world, since 1795, is in Ponta Delgada on the island of Sao Miguel in the Azores.

Contributing to the strong ties between the United States and Portugal are the sizable Portuguese communities in Massachusetts, Rhode Island, New Jersey, California, and Hawaii. The latest census estimates that 1.3 million individuals living in the United States are of Portuguese ancestry, with a large percentage coming from the Azores. There are about 20,000 Americans living in Portugal.

The United States-Portugal defense relationship is strong and enduring. The current U.S.-Portugal Agreement on Cooperation and Defense (ACD) was signed in 1995; however, a U.S. military forward presence at Lajes Field, in the Azores, extends back to World War II. U.S. Air Forces Europe's 65 Air Base Wing, in close cooperation with the Portuguese Air Force, ensures that Lajes Field remains an important logistic hub for U.S. Transportation Command, U.S. European Command, and NATO Allies. Access to Lajes Field is a key component of U.S. European Command’s engagement in Portugal. This access supports deployed U.S. forces throughout Europe, the Middle East, Asia, and Africa. U.S. missions supported by a presence at Lajes Field include counterterrorism, humanitarian, and combat operations in Afghanistan and Iraq. Portugal values the transatlantic alliance and advocates within the European Union and NATO for strong European ties with the United States, particularly on defense and security issues. The Portuguese Government is open to greater cooperation with U.S. Africa Command to synchronize engagement efforts, and to enhance bilateral and multilateral cooperation with the U.S. on the African continent. Portugal hosted a NATO Joint Command Lisbon until June 2011, when NATO command structure reforms agreed at the 2010 Lisbon NATO Summit took effect. Also as part of the restructuring agreement, Naval Striking and Support Forces NATO (STRIKFORNATO) will be transferred from Italy to Portugal. This is NATO’s premier maritime battle staff and the Alliance’s primary link for integrating U.S. maritime forces into NATO operations.

U.S.-Portuguese trade is relatively small, with the United States exporting $1 billion worth of goods in 2010 and importing an estimated $2.1 billion. While total Portuguese trade has increased dramatically over the last 10 years, the U.S. percentage of Portugal's exports and imports has been growing at a slower rate. The Portuguese Government is seeking to increase technology and service exports, as well as traditional products (textiles and footwear) to the United States and is encouraging greater bilateral investment. U.S. firms play significant roles in the pharmaceutical, computer, and retail sectors in Portugal, but their involvement in the automotive manufacturing sector has declined in recent years.

Pursuant to the 1995 ACD, a U.S.-Portugal Standing Bilateral Commission meets semi-annually to review all aspects of the bilateral relationship, including defense cooperation, science and technology cooperation, bilateral trade and investment, cooperation in the Azores, justice and home affairs, political and diplomatic cooperation, and consular issues.

SECRETARY OF DEFENSE PANETTA MET WITH PORTUGUESE DEFENSE MINISTER

The following excerpt is from a Department of Defense American Forces Press Service e-mail:

"Panetta, Portuguese Defense Minister Discuss Common Challenges

American Forces Press Service

WASHINGTON, Feb. 27, 2012 - Defense Secretary Leon E. Panetta met with Portuguese Defense Minister Jose Pedro Aguiar-Branco here today to discuss a range of common challenges, Pentagon Press Secretary George Little said.

"Secretary Panetta thanked Minister Aguiar-Branco for Portugal's steadfast support in Afghanistan and other NATO missions," Little added. "He also stressed Portugal's indispensible role as a strategic ally."

The military leaders discussed enhancing and deepening the U.S.-Portuguese defense relationship, and Panetta confirmed that the United States will remain at Lajes Field in the Azores. The secretary said the United States will consult with Portugal on the modalities of the continued U.S. force posture at Lajes, the Little said.

"Secretary Panetta thanked Minister Aguiar-Branco for the warm hospitality U.S. troops have enjoyed and will continue to enjoy on Portuguese soil," he added.

Looking forward, he said, Panetta and Aguiar-Branco will work together with other alliance defense leaders to prepare for the NATO Chicago summit in May, building on what was accomplished at the 2010 summit in the Portuguese capital of Lisbon.

Panetta and Aguiar-Branco directed their staffs to develop options for enhancing the U.S.-Portuguese defense relationship, Little said, and will follow up in April at a NATO meeting in Brussels. The defense leaders also agreed to have their staffs meet at bilateral political-military talks scheduled here for June, he said."