Portugal was doing all right – better than France, even – until they ran into 2010 financial stability problems that forced the government to start ‘cutting’. Portugal started to contract in Q4 2010, applied for funding in April 2011, and contracted thereafter. Economic Intelligence Unit sees Portugal contracting throughout 2012 (no link). The Euro area prescription for austerity is tantamount to economic collapse amid a fixed exchange rate and meager global growth prospects.
The EA policy plan for fiscal austerity is setting a precedent, all right, a precedent for policy failure.
"Policy failure" here means ensuring continued widespread misery for many poor and middle class people. I'm sure there's a healthy dose of evil in what's going on, but I'm actually increasingly convinced that 'stupid' is a leading cause of our problems.