This study examines the role of monetary and fiscal policies in Portuguese economic regime change, which culminated in the entry of the escudo into the ERM (Exchange Rate Mechanism) of the EMS (European Monetary System) in 1992. It measures trends in nominal and real convergence and attributes the current divergence to the resilience of the fiscal constitution. In addition, it discusses the structural changes achieved during the period of convergence and those still needed for Portugal to avoid suffering the 'euro hold-up'. It illustrates the limits of external pressure and the constraints imposed by the historical fiscal model. Indeed, the Portuguese experience shows that the euro, by itself, cannot change the fiscal constitution. Different policy areas need specific reform efforts; otherwise they stall and affect each other in a negative way.