War Finance (Portugal)

Portugal financed the extraordinary expenditures of the First World War in the same way as many other countries, i.e. running budgetary deficits, issuing debt, and printing money. By the end of the war, all nations were facing the same dilemma - they could either adopt a deflationary monetary policy or embark on a fairly aggressive policy of currency devaluation. Due to political weakness, successive Portuguese governments accepted the latter. This inflationary policy penalized mostly private savings and the share of the population relying on fixed incomes, but it also slowed down the contraction of the economy.