Abstract
This paper delineates the changing environment from a benevolent to a conditionality-oriented. It uses the case study of Portugal and the implementation of the austerity programme to show how a semi-peripheral country of the European Union (EU) reacted to this changed environment. The first section shows how the EU has become more divided due to the growing cleavage between rich and poor member states. This is followed by the section on the making of the growing tensions between the European partners and the International Monetary Fund. Subsequently, the semi-peripheral economy of Portugal is analysed, before the policy responses of the Portuguese government are presented.