THE year 2011 was a bad one for Portugal: the country was forced to seek an international bail-out and its economy shrank by 1.8%. It was perhaps not the most fortuitous moment for the country’s footwear industry to launch an international marketing campaign under the slogan “Portuguese shoes: the sexiest industry in Europe”. But Paulo Gonçalves, head of Apiccaps, the Portuguese footwear-manufacturers’ association, says they had to do something. “We were making excellent shoes, but most of the world didn’t know.”

In the next three years unemployment soared, hundreds of thousands emigrated and protestors marched in the streets as Portugal underwent a gruelling economic adjustment programme. But the shoemakers prospered. The industry, which employs about 35,000 people in its northern heartland, has seen exports grow by 54% over the past five years. In a country with double-digit unemployment, shoemakers have created 8,000 jobs in the past two years alone.

With exports accounting for 95% of its production, the footwear industry is a trailblazer for what Portugal’s three-year bail-out was meant to achieve: a rebalancing of the economy away from debt-fuelled domestic demand to export-led growth. Businesspeople say the country’s willingness to make sacrifices to complete its bail-out programme has enhanced their profile abroad. “We sense this in our dealings with international suppliers and customers,” says Mr Gonçalves. “The more Portugal is respected as a responsible country, the more we are seen as reliable companies.”

Such sentiments contributed to the victory of the ruling centre-right coalition, the PaF, in Portugal’s general election on October 4th. Pedro Passos Coelho become the first euro-zone prime minister to be re-elected after steering his country through a bail-out. Anti-austerity forces, both in Portugal and across Europe, were disappointed; they had expected anger at budget cuts to bring the PaF down.

But the PaF’s win was hardly a ringing victory for austerity. Its share of the vote fell from just over 50% in the 2011 elections to 38%, and it finds itself 12 seats short of a majority in parliament. The centre-left Socialists (PS) rose to 32%, while the radical anti-establishment Left Bloc doubled its share to over 10%, ahead of the Communist Party.

Deep ideological divisions render the left unable to form a government. But the PaF will have to negotiate with the PS to pass laws or a budget. António Costa, the Socialists’ leader, says he wants austerity measures eased, protection for welfare-state benefits, and more public investment in science.

A minority centre-right government with PS support could function reasonably well, says Federico Santi of the Eurasia Group, a consultancy. “In spite of Mr Costa’s vocal anti-austerity stance, the PS remains a fundamentally moderate and decidedly pro-European party,” he notes. But political divisions that could delay economic reforms worry exporters like Mr Gonçalves, who says his “chief concern now is that the country continues along the same path it started out on” in 2011.

The shoe industry began its transformation well before the euro crisis, as a response to foreign-owned manufacturers leaving Portugal for Asia and eastern Europe in search of lower labour costs. Portuguese firms responded by abandoning the mass market and focusing on high-quality shoes using home-grown design, technology and marketing skills. In the world of high-fashion shoes, “Made in Portugal” is now second only to “Made in Italy” in terms of prestige. Cutting-edge Portuguese brands like Luis Onofre (pictured), Hard Hearted Harlot and Fly London now ship individually-made pairs to some customers, including British royalty and celebrities like Madonna and David Beckham.

All this is part of a wider Portuguese export success story. In July 2012 Portugal’s balance of payments turned positive for the first time since the central bank began tracking the indicator in 1996. Exports now account for more than 40% of national output, compared with 28% in 2008. Stephan Morais, executive director of Caixa Capital, a risk fund manager, says reforms made during the bail-out have helped exporters by cutting costs and easing regulation. The European Central Bank’s quantitative easing programme has also cut firms’ borrowing costs.

Portugal’s growth is still fragile. After three years of contraction, the economy expanded by just under 1% in 2014 and it is expected to grow by about 1.6% this year and next. Mr Passos Coelho has pushed through economic reforms, but more are needed. Companies complain of domestic barriers to competition, including high energy costs and an inflexible labour market. Bankruptcy law needs reforming. The International Monetary Fund warned even before the election that Mr Coelho was allowing the pace of reform to slacken. A weak minority government is unlikely to speed things up. The centre-right’s victory has proved that with a little growth, pro-austerity governments can survive. But if Portugal wants more industries to replicate the success of its plucky cobblers, it will need a government that can do more than just survive.