In 1975, radical economic transformations were accomplished through a series of decrees that nationalized the domestically owned parts of major sectors of the national economy. These decrees affected the leading banks, insurance companies (representing 99% of insurance companies' capital), petroleum refineries, the transportation sector, the steel industry, and eventually Portugal's leading privately owned industrial monopoly, Companhia União Fabril. At the same time, large-scale agrarian reform measures led to expropriation of many of the country's privately owned large landholdings; other holdings were seized illegally by peasants. In an attempt to stimulate agricultural production, the government decreed a 30% reduction in the price of fertilizer to farm workers and small and medium farmers. When the nationalization and agrarian reform measures met with only limited success, partly because of liquidity problems, an emergency austerity plan was approved by the Council of Ministers in October 1975. The program included wage and import controls and the reduction of subsidies on consumer goods.
As a result of Portugal's entry into the EC (now EU), the highly protected, unresponsive, and inefficient economy is being transformed. State intervention is being reduced, and the physical infrastructure is being modernized. Privatization began in 1989, with the share of gross domestic product (GDP) for non-financial public enterprises reduced from 17.9% in 1985 to 10.7% in 1991. In 1992, $3.6 billion was raised as banks, insurance companies, and a 25% interest in Petrogal—the state oil company—were sold. The government estimated that privatized companies would represent half of stock market capitalization by the end of 1994.
In 1996 and 1997, a series of important investments and acquisitions were made by companies such as Sonae and Jernimo Martins, Portugal's leading retail distributors; Cimpor, a cement producer; and Portugal Telecom and Electricidade de Portugal, the last of which was privatized. The big banks were developing new overseas operations as well. The best indicator of Portugal's economic progress was Portugal's acceptance into the European Monetary Union in 1999.
During the 1990s and into the 2000s, the economy grew at rates well above EU averages; however, growth slowed in 2002–03, and fell below the euro-area average for the first time in close to a decade. In 2002, the external current account deficit remained one of the largest (in relation to GDP) among industrialized countries. The unemployment rate also increased sharply. Nonetheless, an inflow of capital funds has financed infrastructure projects.