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Over the past 20 years, Portugal has gone through a boom, slump, sudden stop, and now a timid recovery. Unemployment has decreased but remains high, and output is still far below potential. Private and public debts are high, and productivity growth remains low. The authors argue that the main focus of Portugal's macroeconomic policy should be twofold. The first is the treatment of nonperforming loans, which would allow for an increase in demand in the short run and an increase in supply in the medium run. They argue that, to the extent that such treatment requires recapitalization, it may make sense to finance it through an increased fiscal deficit, even in the face of high public debt. The second is product market reforms, and reforms aimed at increasing microflexibility in the labor market. They also argue that at this point, some policies would be undesirable, among them faster fiscal consolidation, measures aimed at decreasing nominal wages and prices, and euro exit.