5 Escudos (Alexandre Herculano) – Portugal

In 1977, Portugal was navigating the turbulent aftermath of the 1974 Carnation Revolution, which had ended decades of dictatorship. The new democratic government inherited an economy in severe distress, characterized by high inflation, large public deficits, and a significant balance of payments crisis. A key aspect of this was the currency situation: the Portuguese escudo was under intense pressure, its value eroding rapidly due to loss of confidence, capital flight, and the costly nationalizations and social spending of the revolutionary period.

The government, led by Prime Minister Mário Soares, turned to the International Monetary Fund (IMF) for assistance. In 1977, Portugal entered into a standby agreement with the IMF, which mandated a strict stabilization program. The conditions included a sharp devaluation of the escudo to boost exports, the implementation of austerity measures to curb inflation and the budget deficit, and tight controls on credit and money supply. This marked a decisive, albeit painful, shift away from the expansive socialist policies of the immediate post-revolution years toward economic orthodoxy.

Consequently, 1977 was a pivotal year of transition and contraction. The escudo devaluation, while aimed at correcting external imbalances, immediately increased the cost of imports and contributed to a decline in living standards. The IMF program successfully stabilized the currency in the short term and restored some international credibility, but it came at a significant social cost, sparking public protests and political tension. This period laid the groundwork for Portugal’s eventual economic restructuring and its path toward European Community integration in the following decade.