5 Euro – Portugal

In 2021, Portugal's currency situation was fundamentally defined by its membership in the Eurozone, using the euro (€) as its official currency. This provided macroeconomic stability, shielding the country from the exchange rate volatility and speculative pressures that had historically plagued the Portuguese escudo. Monetary policy was set by the European Central Bank (ECB), which maintained an ultra-accommodative stance throughout the year with historically low interest rates and continued asset-purchase programs. This environment was crucial for Portugal, as it kept government borrowing costs low, supporting the economy's recovery from the COVID-19 pandemic.

The year was marked by a significant economic rebound, with GDP growth projected at over 4%, following the severe 8.4% contraction in 2020. However, the currency framework within the Eurozone meant Portugal had no independent monetary tools to directly address domestic inflation, which began to rise in the latter half of 2021 due to global supply chain disruptions and rising energy prices. The country's economic recovery was heavily supported by €13.9 billion in grants from the European Union's Recovery and Resilience Facility (RRF), a stimulus made possible by the collective fiscal response of the Eurozone to the pandemic.

Despite the stability of the euro, underlying challenges persisted related to national competitiveness and public debt. Portugal entered 2021 with a public debt-to-GDP ratio exceeding 130%, one of the highest in the EU. The low interest rate environment provided by the ECB was essential for debt sustainability. Furthermore, the fixed exchange rate within the Eurozone meant that improving competitiveness required internal devaluation—structural reforms and productivity gains rather than currency adjustment. Thus, while the euro provided a stable backdrop, Portugal's economic health in 2021 depended heavily on the effective use of EU funds, prudent fiscal management, and the continuation of favorable ECB policies to navigate the post-pandemic landscape.