Did Portugal participate in WW2?

Despite the authoritarian character of the regime, Portugal did not experience the same levels of international isolation as Spain did following World War II. Unlike Spain, Portugal under Salazar was accepted into the Marshall Plan (1947–1948) in return for the aid it gave to the Allies during the final stages of the war. Furthermore, also unlike Spain, it was one of the 12 founding members of the North Atlantic Treaty Organisation (NATO) in 1949, a reflection of Portugal's role as an ally against communism during the Cold War in spite of its status as the only non-democratic founder. In 1950, Portugal joined the European Payments Union and participated in the founding of the European Free Trade Association (EFTA) in 1960 and the Organisation for Economic Co-operation and Development in 1961. It joined the General Agreement on Tariffs and Trade in 1962, and finally, Portugal signed a free trade agreement with the European Economic Community in 1972, still under the auspices of the "Estado Novo".

António de Oliveira Salazar

António de Oliveira Salazar (; ; 28 April 1889 – 27 July 1970) was a Portuguese statesman who served as Prime Minister of Portugal from 1932 to 1968. He was responsible for the "Estado Novo" ("New State"), the corporatist authoritarian government that ruled Portugal until 1974.

A trained economist, Salazar entered public life with the support of President Óscar Carmona after the Portuguese "coup d'état" of 28 May 1926, initially as finance minister and later as prime minister. Opposed to democracy, communism, socialism, anarchism and liberalism, the ideology of Portugal was conservative and nationalist in nature. Salazar distanced himself from fascist dictatorships, which he considered a pagan Caesarist political system that recognised neither legal nor moral limits. Salazar viewed German Nazism as espousing pagan elements that he considered repugnant.
Salazar also promoted Catholicism, but argued that the role of the Church was social, not political, and negotiated the Concordat of 1940. One of the mottos of the Salazar regime was ""Deus, Pátria e Familia"" (meaning "God, Fatherland, and Family").

With the "Estado Novo" enabling him to exercise vast political powers, Salazar used censorship and a secret police to quell opposition, especially that related to the Communist movement. He supported Francisco Franco in the Spanish Civil War, and played a key role in keeping Portugal and Spain neutral during World War II. During his rule, despite the authoritarian regime, Portugal took part in the founding of important international organizations. Portugal was one of the 12 founding members of the North Atlantic Treaty Organisation (NATO) in 1949, joined the European Payments Union in 1950, and was one of the founding members of the European Free Trade Association (EFTA) in 1960, and a founding member of the Organisation for Economic Co-operation and Development in 1961. Under his rule Portugal also joined the General Agreement on Tariffs and Trade in 1962, and began the Portuguese Colonial War. The doctrine of Pluricontinentalism was the basis of his territorial policy, a conception of the Portuguese Empire as a unified state that spanned multiple continents.

The "Estado Novo" collapsed during the Carnation Revolution of 1974, four years after Salazar's death. Evaluations of his regime have varied, with supporters praising its outcomes and critics denouncing its methods. However, there is a general consensus that Salazar was one of the most influential figures in Portuguese history. In recent decades, "new sources and methods are being employed by Portuguese historians in an attempt to come to grips with the dictatorship which lasted 48 years."

Salazar was born in Vimieiro, near Santa Comba Dão (Viseu District), to a family of modest income on April 28, 1889. His father, a small landowner, had started as an agricultural labourer and became the manager for the Perestrelos, a family of rural landowners of the region of Santa Comba Dão who possessed lands and other assets scattered between Viseu and Coimbra. He was the only male child of two fifth cousins, António de Oliveira (1839–1932) and his wife Maria do Resgate Salazar (1845–1926). His four older sisters were Maria do Resgate Salazar de Oliveira, an elementary school teacher; Elisa Salazar de Oliveira; Maria Leopoldina Salazar de Oliveira; and Laura Salazar de Oliveira, who in 1887 married Abel Pais de Sousa, brother of Mário Pais de Sousa, who served as Salazar's Interior Minister.

Salazar attended the primary school in his small village and later went to another primary school in Viseu. At age 11, he won a free place at Viseu's seminary, where he studied for eight years, from 1900 to 1908. Salazar considered becoming a priest, but like many who entered the seminary very young, he decided not to proceed to the priesthood after receiving holy orders. He went to Coimbra in 1910 during the first years of the Portuguese First Republic to study law at the University of Coimbra. During these student years in Coimbra, he developed a particular interest in finance and graduated in law with distinction, specialising in finance and economic policy. He graduated in 1914, with 19 points out of 20, a rare achievement which earned him instant fame, and in the meantime, became an assistant professor of economic policy at the Law School. In 1917, he became the regent of economic policy and finance by appointment of the professor José Alberto dos Reis. In the following year, Salazar was awarded his doctorate.

Salazar was twenty-one years old at the time of the revolution of 5 October 1910, which overthrew the Portuguese monarchy and instituted the First Portuguese Republic. The political institutions of the First Republic lasted until 1926, when it was replaced by a military dictatorship. This was first known as the "Ditadura Militar" (Military Dictatorship) and then, from 1928, as the "Ditadura Nacional" (National Dictatorship).

The era of the First Republic has been described as one of "continual anarchy, government corruption, rioting and pillage, assassinations, arbitrary imprisonment and religious persecution". It witnessed the inauguration of eight presidents, 44 cabinet re-organisations and 21 revolutions. The first government of the Republic lasted less than 10 weeks and the longest-ruling government lasted little over a year. Revolution in Portugal became a byword in Europe. The cost of living increased twenty-fivefold, while the currency fell to a part of its gold value. Portugal's public finances and the economy in general entered a critical phase, having been under imminent threat of default since at least the 1890s. The gaps between the rich and the poor continued to widen. The regime led Portugal to enter World War I in 1916, a move that only aggravated the perilous state of affairs in the country. Concurrently, the Catholic Church was hounded by the anti-clerical Freemasons of the Republic and political assassination and terrorism became commonplace. Between 1920 and 1925, according to official police figures, 325 bombs burst in the streets of Lisbon. The British diplomat Sir George Rendel said that he could not describe the "political background as anything but deplorable... very different from the orderly, prosperous and well-managed country that it later became under the government of Senhor Salazar". Salazar would keep in mind the political chaos of this time when he later ruled Portugal.

The public discontent led to the 28 May 1926 coup d'état, which was welcomed by most civilian classes. At the time, the prevailing view in Portugal was that political parties were elements of division and that parliamentarianism was in crisis. This led to general support, or at least tolerance, of an authoritarian regime. The new Portuguese anti-parliamentarism was a reaction to previous experience with the system. Liberalism and Parliamentarism may have worked in Great Britain and the United States, but the Portuguese argued that liberalism was inappropriate in their nation and culture.

As a young man, Salazar's involvement in politics stemmed from his Catholic views, which were aroused by the new anti-clerical stance of the First Republic. He became a member of the non-politically affiliated Catholic movement "Centro Académico de Democracia Cristã" (Academic Centre for Christian Democracy). Salazar rejected the monarchists because he felt that they were opposed to the social doctrines espoused by Pope Leo XIII to which he was very sympathetic. He was a frequent contributor to journals concerned with social studies, especially the weekly "O Imparcial", which was directed by his friend (and later Cardinal Patriarch of Lisbon) Manuel Gonçalves Cerejeira. Local press described him as "one of the most powerful minds of the new generation."

In 1921, Salazar was persuaded to stand as a candidate for election to parliament, though he did so reluctantly. He appeared once in the chamber and never returned, struck by the disorder he witnessed and a feeling of futility. Salazar was convinced that liberal individualism had led to fragmentation of society and a perversion of the democratic process.
After the "coup d'état" of 28 May 1926, Salazar briefly joined the government of José Mendes Cabeçadas as Minister of Finance. On 11 June, a small group of officers drove from Lisbon to Santa Comba Dão to persuade him to be Minister of Finance. Salazar spent five days in Lisbon. The conditions he proposed to control spending were refused, he quickly resigned, and in two hours he was on a train back to Coimbra University, explaining that because of the frequent disputes and general disorder in the government, he could not do his work properly.

Portugal's overriding problem in 1926 was its enormous public debt. Several times between 1926 and 1928, Salazar turned down appointment to the finance ministry. He pleaded ill-health, devotion to his aged parents and a preference for the academic cloisters. In 1927, under the ministry of Sinel de Cordes, the public deficit kept on growing. The government tried to obtain loans from Baring Brothers under the auspices of the League of Nations, but the conditions were considered unacceptable. With Portugal under the threat of an imminent financial collapse, Salazar finally agreed to become its 81st Finance Minister on 26 April 1928 after the republican and Freemason Óscar Carmona was elected president. However, before accepting the position, he personally secured from Carmona a categorical assurance that as finance minister he would have a free hand to veto expenditure in all government departments, not just his own. Salazar was the financial czar virtually from the day he took office.

Within one year, armed with special powers, Salazar balanced the budget and stabilised Portugal's currency. Restoring order to the national accounts, enforcing austerity and red-penciling waste, Salazar produced the first of many budgetary surpluses, an unparalleled novelty in Portugal.

In July 1929, Salazar again presented his resignation. His friend Mário de Figueiredo, Minister of Justice, passed new legislation that facilitated the organisation of religious processions. The new law outraged the republicans, triggered a cabinet crisis, and Figueiredo threatened to resign. Salazar advised Figueiredo against resigning, but told his friend he would join him in his decision. Figueiredo did resign, and Salazar – at that time hospitalised due to a broken leg – followed suit on 3 July. Carmona went personally to the hospital on the 4th and asked Salazar to change his mind. Prime Minister José Vicente de Freitas, who took issue with Carmona's policies, left the cabinet. Salazar remained in the cabinet as Minister of Finance, but with additional powers.

Salazar stayed on as finance minister while military prime ministers came and went. From his first successful year in office, he gradually came to embody the financial and political solution to the turmoil of the military dictatorship, which had not produced a clear leader. Finally, on 5 July 1932, President Carmona appointed Salazar as the 100th prime minister of Portugal, after which he began to operate closer to the mainstream of political sentiment in his country. The authoritarian government consisted of a right-wing coalition, and he was able to co-opt the moderates of each political current with the aid of censorship and repression directed against those outside of it. Those perceived to be genuine fascists were jailed or exiled. Conservative Catholics were Salazar's earliest and most loyal supporters, whereas conservative republicans who could not be co-opted became his most dangerous opponents during the early period. They attempted several coups, but never presented a united front, consequently these attempts were easily repressed. Never a true monarchist, Salazar nevertheless gained most of the monarchists' support, as Manuel II of Portugal, the exiled and deposed last king of Portugal, always endorsed Salazar. Later, in 1932, it was due to Salazar's actions that the deposed king was given a state funeral. The National Syndicalists were torn between supporting the regime and denouncing it as bourgeois. They were granted enough symbolic concessions for Salazar to win over the moderates, but the rest were repressed by the political police. They were silenced shortly after 1933 as Salazar attempted to prevent the rise of National Socialism in Portugal.

Salazar's rise to power was facilitated by the public image he cultivated as an honest and effective finance minister, the strong support of President Carmona and shrewd political positioning. In July 1940, the American "Life" magazine featured an article on Portugal, and, referring to its recent chaotic history, asserted that "anyone who saw Portugal 15 years ago might well have said it deserved to die. It was atrociously governed, bankrupt, squalid, ridden with disease and poverty. It was such a mess that the League of Nations coined a word to describe the absolute low in national welfare: "Portuguesé". Then the Army overthrew the Republic which had brought the country to this sorry pass". "Life" added that ruling Portugal was difficult and explained how Salazar "found a country in chaos and poverty" and then reformed it.

Salazar based his political philosophy around a close interpretation of the Catholic social doctrine, much like the contemporary regime of Engelbert Dollfuss in Austria. The economic system, known as corporatism, was based on similar interpretations of the papal encyclicals "Rerum novarum" (Leo XIII, 1891) and "Quadragesimo anno" (Pius XI, 1931), which were meant to prevent class struggle and transform economic concerns secondary to social values. "Rerum novarum" argued that labor associations were part of the natural order, like the family. The right of men to organise into trade unions and to engage in labor activities was thus inherent and could not be denied by employers or the state. "Quadragesimo anno" provided the blue print for the erection of the corporatist system.

A new constitution was drafted by a group of lawyers, businessmen, clerics and university professors, with Salazar the leading spirit and Marcelo Caetano also playing a major role. The constitution created the "Estado Novo" ("New State"), in theory a corporatist state representing interest groups rather than individuals. He wanted a system in which the people would be represented through corporations, rather than through divisive parties, and where national interest was given priority over sectional claims. Salazar thought that the party system had failed irrevocably in Portugal. The legislature, called the National Assembly, was restricted to members of the National Union, a single party. It could initiate legislation, but only concerning matters that did not require government expenditures. The parallel Corporative Chamber included representatives of municipalities, religious, cultural and professional groups and of the official workers' syndicates that replaced free trade unions.

According to Howard Wiarda, "the men who came to power in the Estado Novo were genuinely concerned with the poverty and backwardness of their nation, divorcing themselves from Anglo-American political influences while developing a new indigenous political model and alleviating the miserable living conditions of both rural and urban poor.

The new constitution introduced by Salazar established an anti-parliamentarian and authoritarian government that would last until 1974. The president was to be elected by popular vote for a period of seven years. On paper, the new document vested sweeping, almost dictatorial powers in the hands of the president, including the power to appoint and dismiss the prime minister. The president was elevated to a position of preeminence as the "balance wheel", the defender and ultimate arbiter of national politics. President Carmona, however, had allowed Salazar more or less a free hand since appointing him prime minister and continued to do so; Carmona and his successors would largely be figureheads as he wielded the true power. Wiarda argues that Salazar achieved his position of power not just because of constitutional stipulations, but also because of his character: domineering, absolutist, ambitious, hardworking and intellectually brilliant.

The corporatist constitution was approved in the national Portuguese constitutional referendum of 19 March 1933. A draft had been published one year before, and the public was invited to state any objections in the press. These tended to stay in the realm of generalities and only a handful of people, less than 6,000, voted against the new constitution. The new constitution was approved with 99.5% of the vote, but with 488,840 abstentions (in a registered electorate of 1,330,258) counting as "yes". Hugh Kay points out that the large number of abstentions might be attributable to the fact that voters were presented with a package deal to which they had to say "yes" or "no" with no opportunity to accept one clause and reject another. In this referendum, women were allowed to vote for the first time in Portugal. Their right to vote had not been obtained during the First Republic, despite feminist efforts, and even in the referendum vote, secondary education was a requirement for female voters, whereas males only needed to be able to read and write.
The year 1933 marked a watershed in Portuguese history. Under Salazar's supervision, Teotónio Pereira, the Sub-Secretary of State of Corporations and Social Welfare, reporting directly to Salazar, enacted extensive legislation that shaped the corporatist structure and initiated a comprehensive social welfare system. This system was equally anti-capitalist and anti-socialist. The corporatisation of the working class was accompanied by strict legislation regulating business. Workers' organisations were subordinated to state control, but granted a legitimacy that they had never before enjoyed and were made beneficiaries of a variety of new social programs. Nevertheless, it is important to note that even in the enthusiastic early years, corporatist agencies were not at the centre of power and therefore corporatism was not the true base of the whole system.

In 1934, Salazar exiled Francisco Rolão Preto as a part of a purge of the leadership of the Portuguese National Syndicalists, also known as the "camisas azuis" ("Blue Shirts"). Salazar denounced the National Syndicalists as "inspired by certain foreign models" (meaning German Nazism) and condemned their "exaltation of youth, the cult of force through direct action, the principle of the superiority of state political power in social life, [and] the propensity for organising masses behind a single leader" as fundamental differences between fascism and the Catholic corporatism of the "Estado Novo". Salazar's own party, the National Union, was formed as a subservient umbrella organisation to support the regime itself, and therefore did not have its own philosophy. At the time, many European countries feared the destructive potential of communism. Salazar not only forbade Marxist parties, but also revolutionary fascist-syndicalist parties. One overriding criticism of his regime is that stability was bought and maintained at the expense of suppression of human rights and liberties.

The "Estado Novo" has been described by the American socialist author David L. Raby as a far-right leaning regime of para-fascist inspiration, although general labeling of Portugal as fascist declined after the defeat of Nazi Germany and Fascist Italy in World War II. The corporatist state had some similarities to Benito Mussolini's Italian fascism, but considerable differences in its moral approach to governing. Although Salazar admired Mussolini and was influenced by his Labour Charter of 1927, he distanced himself from fascist dictatorship, which he considered a pagan Caesarist political system that recognised neither legal nor moral limits. Salazar also viewed German Nazism as espousing pagan elements that he considered repugnant. Just before World War II, Salazar made this declaration: "We are opposed to all forms of Internationalism, Communism, Socialism, Syndicalism and everything that may divide or minimise, or break up the family. We are against class warfare, irreligion and disloyalty to one's country; against serfdom, a materialistic conception of life, and might over right."

Historian Robert Paxton observes that one of the main problems in defining fascism it that it was widely mimicked. He says, "In fascism's heyday, in the 1930s, many regimes that were not functionally fascist borrowed elements of fascist decor in order to lend themselves an aura of force, vitality, and mass mobilization." He goes on to observe that Salazar "crushed Portuguese fascism after he had copied some of its techniques of popular mobilization."

Salazar relied on secret police to enforce the policies he wished to implement. The "Polícia de Vigilância e de Defesa do Estado (PVDE)" ("State Defence and Surveillance Police") was established in 1933. It was replaced in 1945 by the remodeled "Polícia Internacional e de Defesa do Estado (PIDE)" ("International and State Defence Police"), which lasted until 1969 (and from that year to 1974 under Marcelo Caetano, it was the "Direcção Geral de Segurança (DGS)" ("General Security Directorate"). The secret police existed not only to protect national security in a modern sense, but also to suppress the regime's political opponents, especially those associated with the international communist movement or the Soviet Union, which was seen by the regime as a menace to Portugal.

The Spanish Civil War, which began in July 1936, was the ostensible reason for the radicalisation of the regime. Internally, the regime had to face a monarchist revolt in 1935, a threatened leftist coup in 1936 and several bombs and conspiracies in 1936 and 1937, including an attempt to assassinate Salazar in 1937. At the same time, Spanish Republican agents were active in Lisbon and Spanish troops were deployed on Portugal's vulnerable border, severely threatening Portuguese sovereignty.

At the beginning of the Spanish Civil War, Salazar took up additional portfolios as minister of war and minister of foreign affairs, while retaining direction of the ministry of finance, thus concentrating even more power in his hands.

Salazar supported Francisco Franco and the Nationalists in their war against the Second Republic forces, as well as the anarchists and the communists. The Nationalists lacked access to seaports early on, so Salazar's Portugal helped them receive armaments shipments from abroad, including ordnance when certain Nationalist forces virtually ran out of ammunition. Consequently, the Nationalists called Lisbon "the port of Castile". Later, Franco spoke of Salazar in glowing terms in an interview in the "Le Figaro" newspaper: "The most complete statesman, the one most worthy of respect, that I have known is Salazar. I regard him as an extraordinary personality for his intelligence, his political sense and his humility. His only defect is probably his modesty."

On 8 September 1936, a naval revolt took place in Lisbon. The crews of two naval Portuguese vessels, The NRP Afonso de Albuquerque and the Dão, mutinied. The sailors, who were affiliated with the Communist Party, confined their officers and attempted to sail the ships out of Lisbon to join the Spanish Republican forces fighting in Spain. Salazar ordered the ships to be destroyed by gunfire. The following day, loyalty oaths become mandatory for all of members of the civil service and censorship was severely tightened. Every government functionary was forced to declare that he repudiated communism. The anti-communist crusade aimed to root out communism, but also democratic opposition. The convicted sailors from the 1936 naval revolt were the first to be sent to the Tarrafal prison camp established by Salazar in the Cape Verde Islands to house political prisoners. It was labeled the "slow death camp" where dozens of political prisoners (mostly communists, but also adherents of other ideologies), were imprisoned under inhumane unhealthy conditions in exceedingly hot weather and died.

In January 1938, Salazar appointed Teotónio Pereira as special liaison of the Portuguese government to Franco's government, where he achieved great prestige and influence. In April 1938, Pereira officially become a full-rank Portuguese ambassador to Spain, and he remained in this post throughout World War II.

Just a few days before the end of the Spanish Civil War, on 17 March 1939, Portugal and Spain signed the Iberian Pact, a non-aggression treaty that marked the beginning of a new phase in Iberian relations. Meetings between Franco and Salazar played a fundamental role in this new political arrangement. The pact proved to be a decisive instrument in keeping the Iberian Peninsula out of Hitler's continental system.

The radicalism of the regime naturally drew opposition. Emídio Santana, founder of the "Sindicato Nacional dos Metalúrgicos" ("Metallurgists National Union") and an anarcho-syndicalist who was involved in clandestine activities against the dictatorship, attempted to assassinate Salazar on 4 July 1937. Salazar was on his way to Mass at a private chapel in a friend's house on Barbosa du Bocage Avenue in Lisbon. As he stepped out of his Buick limousine, a bomb hidden in an iron case exploded only away. The blast left Salazar untouched, but his chauffeur was rendered deaf. A year later, the bishops of the country argued in a collective letter that it was an "act of God" that had preserved Salazar's life. The official car was replaced by an armoured Chrysler Imperial. Sought by the "PIDE", Emídio Santana fled to Britain, where he was arrested by British police and returned to Portugal. He was then sentenced to 16 years in prison.

Salazar had lived through the hard times of World War I, in which Portugal participated during the period of the First Republic; World War II followed its course while he was in power. Salazar was widely praised for keeping Portugal neutral during the Second World War. From the war's very beginning in 1939, Salazar was convinced that Britain would suffer injury, but remain undefeated, that the United States would step into the conflict and that the Allies would win. The American journalist Henry J. Taylor commented: "I found not another continental European leader who then agreed with him".

In 1934, several years before the war began, Salazar clarified in an official speech that Portuguese nationalism did not include "the pagan ideal and anti-human to deify a race or empire", and again, in 1937, Salazar published a book wherein he criticised the Nuremberg Laws passed in 1935 in Germany, considering it regrettable that German nationalism was "wrinkled by racial characteristics so well marked," which had imposed "the legal point of view, the distinction between citizens and the subject – and this at the risk of dangerous consequences."

Salazar thought regarding World War II, "a German victory spelt disaster for the rule of law and for peripheral, agricultural, countries such as Portugal." Salazar's dislike of the Nazi regime in Germany and its imperial ambitions was tempered only by his view of the German Reich as a bastion against the spread of communism rather than an allied nation. He had favoured the Spanish nationalist cause out of fear of a communist invasion of Portugal, yet he was uneasy at the prospect of a Spanish government bolstered by strong ties with the Axis powers. Salazar's policy of neutrality for Portugal in World War II thus included a strategic component. The country still held overseas territories that Portugal could not defend from military attack. Siding with the Axis would have brought Portugal into conflict with Britain, likely resulting in the loss of its colonies, while siding with the Allies risked the security of the home country on the mainland. As the price to pay for remaining neutral, Portugal continued to export tungsten and other commodities to both the Axis (via Switzerland, partly) and the Allied countries.
On 1 September 1939, at the start of World War II, the Portuguese Government announced that the 600-year-old Anglo-Portuguese Alliance remained intact, but that since the British did not seek Portuguese assistance, Portugal was free to remain neutral in the war and would do so. In an aide-mémoire of 5 September 1939, the British Government confirmed the understanding.

British strategists regarded Portuguese non-belligerency as "essential to keep Spain from entering the war on the side of the Axis". Britain recognised Salazar's important role on 15 May 1940, when Douglas Veale, Registrar of the University of Oxford, informed him that the University's Hebdomadal Council had "unanimously decided at its meeting last Monday, to invite you [Salazar] to accept the Honorary Degree of Doctor of Civil Law". The same "Life" magazine article of July 1940 that praised Salazar's work on behalf of the Portuguese nation commented, "this year, for [the] first time in centuries, Portugal is important to America. It is the funnel through which to pour all the exchanges – of people and messages and diplomacy – between America and Europe. The war, by cutting the lines of intercourse to Northern Europe, has made Portugal what [one might say] geography intended – not a faraway corner of Europe but its front door." In September 1940, Winston Churchill wrote to Salazar to congratulate him for his policy of keeping Portugal out of the war, avowing that "as so often before during the many centuries of the Anglo-Portuguese alliance, British and Portuguese interests are identical on this vital question." Sir Samuel Hoare, the British Ambassador in Madrid from 1940 to 1944, recognised Salazar's crucial role in keeping Iberia neutral during World War II, and lauded him for it. Hoare averred that "Salazar detested Hitler and all his works" and that his corporative state was fundamentally different from a Nazi or fascist state, with Salazar never leaving a doubt of his desire for a Nazi defeat. Historian Carlton Hayes, a pioneering specialist on the study of nationalism, was the American Ambassador in Spain during the war. He met Salazar in person and also praised him, expressing a similar opinion to Hoare's in his book "Wartime Mission in Spain". In November 1943, the British Ambassador in Lisbon, Sir Ronald Campbell, wrote, paraphrasing Salazar, that "strict neutrality was the price the allies paid for strategic benefits accruing from Portugal's neutrality and that if her neutrality instead of being strict had been more benevolent in our favour Spain would inevitably have thrown herself body and soul into the arms of Germany. If this had happened the Peninsula would have been occupied and then North Africa, with the result that the whole course of the war would have been altered to the advantage of the Axis."
Sir Ronald Campbell saw Salazar as fundamentally loyal to the Anglo-Portuguese Alliance. When in May 1943, in the Third Washington Conference, codenamed Trident, the conferees agreed on the occupation of the Azores (Operation Alacrity) the British Ambassador reacted to the US State Department's suggestion as "particularly ill-timed and incomprehensible at the present juncture." He recalled that at the outset of the war, Salazar had remained neutral with British approval and stated that "he [Salazar] would answer the call if it were made on grounds of dire necessity". The British Ambassador was correct, and when in August 1943 the British requested military base facilities in the Azores, invoking the alliance, Salazar responded favourably and quickly: Portugal allowed these bases, letting the British use the Azorean ports of Horta (on the island of Faial) and Ponta Delgada (on the island of São Miguel), and the airfields of Lajes Field (on Terceira Island) and Santana Field (on São Miguel Island). From November 1943, when the British gained use of the Azores, to June 1945, 8,689 US aircraft departed from Lajes, including 1,200 B-17 and B-24 bomber aircraft ferried across the Atlantic. Cargo aircraft carried vital personnel and equipment to North Africa, to the United Kingdom and – after the Allies gained a foothold in Western Europe – to Orly Field near Paris. Flights returning from Europe carried wounded servicemen. Medical personnel at Lajes handled approximately 30,000 air evacuations "en route" to the United States for medical care and rehabilitation. Use of Lajes Field reduced flying time between Brazil and West Africa from 70 hours to 40, a considerable reduction that enabled aircraft to make almost twice as many crossings, clearly demonstrating the geographic value of the Azores during the war. The British diplomat Sir George Rendell stated that the Portuguese Republican Government of Bernardino Machado was "far more difficult to deal with as an ally during the First War than the infinitely better Government of Salazar was as a neutral in the Second."

The principal reason for the neutrality of Portugal in World War II was strategic, and within the compass of the overall objectives of the Anglo-Portuguese Alliance. This modest, but complex role allowed Portugal to rescue a large number of war refugees.

Portugal's official nationalism was not grounded in race or biology. Salazar argued that Portuguese nationalism did not glorify a single race because such a notion was pagan and anti-human. In 1937, he published a book entitled "Como se Levanta um Estado" ("How to Raise a State"), in which he criticised the philosophical ideals behind Nazi Germany's Nuremberg laws. In 1938, he sent a telegram to the Portuguese Embassy in Berlin, ordering that it should be made clear to the German Reich that Portuguese law did not allow any distinction based on race, and that therefore, Portuguese Jewish citizens could not be discriminated against. In the previous year, Adolfo Benarus, Honorary Chairman of COMASSIS and a leader of the Lisbon's Jewish Community, published a book in which he applauded the lack of anti-Semitism in Portugal. In 2011, Avraham Milgram, Yad Vashem historian, said that modern anti-Semitism failed "to establish even a toehold in Portugal", while it grew virulently elsewhere in early 20th-century Europe.

On 26 June 1940, four days after France's capitulation to Germany, Salazar authorised the Hebrew Immigrant Aid Society (HIAS-HICEM) in Paris to transfer its main office to Lisbon. According to the Lisbon Jewish community, Salazar held Moisés Bensabat Amzalak, the leader of the Lisbon Jewish community, in high esteem, and allowed Amzalak to play an important role in getting Salazar's permission for the transfer.
In July 1940, the civilian population of Gibraltar was evacuated due to imminent attacks expected from Nazi Germany. At that time, Portuguese Madeira agreed to host about 2,500 Gibraltarian refugees, mostly women and children, who arrived at Funchal between 21 July and 13 August 1940 and remained there until the end of the war.

Portugal, particularly Lisbon, was one of the last European exit points to the US, and a large number of refugees found shelter in Portugal. The Portuguese consul general in Bordeaux, Aristides de Sousa Mendes, helped several, and his actions were not unique by any means. Issuing visas in contravention of instructions was widespread at Portuguese consulates all over Europe, although some cases were supported by Salazar. The Portuguese Ambassador in Budapest, Carlos Sampaio Garrido helped an estimated 1,000 Hungarian Jews in 1944. Along with Carlos de Liz-Texeira Branquinho, they rented houses and apartments to shelter and protect refugees from deportation and murder. On 28 April 1944, the Hungarian Gestapo raided the ambassador's home and arrested his guests. The ambassador, who physically resisted the police, was also arrested, but managed to have his guests released on the grounds of extraterritoriality of diplomatic legations. In 2010, Garrido was recognised as Righteous Among the Nations by Yad Vashem. Other Portuguese who deserve credit for saving Jews during the war include Professor Francisco Paula Leite Pinto and Moisés Bensabat Amzalak. A devoted Jew, and a supporter of Salazar, Amzalak headed the Lisbon Jewish community for 52 years, from 1926 until 1978.

Large numbers of political dissidents, including Abwehr personnel, sought refuge in Portugal after the plot of 20 July 1944 to assassinate Adolf Hitler. Until late 1942, immigration was very restricted. In cases in which refugees were suspected to desire not simply to pass through Portugal in transit to their destination, but rather intended to remain in the country, the consulates needed to get a previous authorization from Lisbon. This was frequently the case with foreigners of indefinite or contested nationality, stateless individuals, Russians, and Jews expelled from their countries of origin. Other refugees on their way to the Americas were allowed to use the country as an escape route. The list of famous people that used Portugal as an escape route in this way is quite extensive and includes names such as Menachem Mendel Schneerson, Peggy Guggenheim, Max Ernst, Marc Chagall, Arthur Koestler, Calouste Gulbenkian, Otto von Habsburg, etc. The novel "The Night In Lisbon" by Erich Maria Remarque is a fictionalised description of the experience of European political refugees seeking escape from Nazism via Portugal in this era and the plot focuses heavily on the difficulty many had of obtaining the documents and money they needed to leave.

The number of refugees who escaped through Portugal during the war has been estimated to range from a few hundred thousand to one million, large numbers considering the size of the country's population of about 6 million at that time. After the war, Portugal kept on welcoming and supporting refugees. In an operation organised by Caritas Portugal from 1947 to 1952, 5,500 Austrian children, most of them orphans, were transported by train from Vienna to Lisbon and then sent to the foster care of Portuguese families.

Among the many refugees accepted into Portugal for political and religious asylum, Miklós Horthy, the war-time leader of Hungary, who had participated alongside the Germans, was granted asylum status. In 1950, the Horthy family managed to find a home in Portugal, thanks to Miklós Jr.'s contacts with Portuguese diplomats in Switzerland. Horthy and members of his family were relocated to the seaside town of Estoril, in the house address Rua Dom Afonso Henriques, 1937 2765.573 Estoril.

In spite of the Salazar regime's use of censorship and inhumane imprisonment of political prisoners in order to suppress dissent, "Life" magazine in July 1940 spoke of him with approbation, describing him as a "a benevolent ruler" and adding that "unambitious, Salazar took the dictatorship by Army request and holds it by popular will. (...) The Salazar dictatorship is easygoing and paternalistic, with wide freedom of speech allowed to its enemies. (...) Friends of democracy may deplore Salazar the dictator but they cannot deny that under the Republic Portugal made an unholy mess of itself and Salazar pulled it out." A reporter from the National Geographic Magazine was surprised with the liberties he enjoyed while in Lisbon, a level of freedom that, according to the reporter, was not available in any other European capital.

In October 1945, Salazar announced a liberalisation program designed to restore civil rights that had been suppressed during the Spanish Civil War and World War II in hopes of improving the image of his regime in Western circles. The measures included parliamentary elections, a general political amnesty, restoration of freedom of the press, curtailment of legal repression and a commitment to introduce the right of "habeas corpus". The regime started to organise itself around a broad coalition, the Movement of Democratic Unity (MUD), which ranged from ultra-Catholics and fringe elements of the extreme right to the Portuguese Communist Party. Initially, the MUD was controlled by the moderate opposition, but it soon became strongly influenced by the Communist Party, which controlled its youth wing. In the leadership were several communists, among them Octávio Pato, Salgado Zenha, Mário Soares, Júlio Pomar and Mário Sacramento. This influence led the MUD to be outlawed by the government in 1948 after several waves of suppression. Restrictions that had been temporarily lifted were then gradually reinstated.
As the Cold War started, Salazar's "Estado Novo" remained unmistakably authoritarian. Salazar had been able to hold onto power by virtue of the public's recollection of the chaos that had characterised Portuguese life before 1926. However, by the 1950s, a new generation emerged that had no collective memory of the previous state. The clearest sign of this came in the Portuguese presidential election of 1958. Most neutral observers believed that the candidate of the democratic opposition, Humberto Delgado, would have defeated the candidate of the Salazar regime, Américo Tomás, had the election been conducted fairly. Well aware that the president's power to sack the prime minister was theoretically the only check on Salazar's power, Delgado stated that one of his first acts would be to dismiss Salazar if he were elected. Delgado was able to rally support from a wide range of opposition viewpoints. Among his supporters were some controversial figures, namely the press campaign manager Francisco Rolão Preto, a former Nazi sympathiser and former leader of the Blue Shirts, who had been exiled by Salazar in the 1930s. An official announcement in 1958 stated that Delgado received one-fourth of the votes, in total approximately a million. The following year, the 70-year-old Salazar, alarmed by the episode, changed the selection of the president to a vote by the two parliamentary bodies, both under his control. Delgado was expelled from the Portuguese military and took refuge in the Brazilian embassy before going into exile. Much of his banishment was spent in Brazil and later in Algeria, as a guest of Ahmed Ben Bella. Later, in 1965, he was lured into an ambush by the "PIDE" (the regime's secret police) near the border town of Olivenza. Delgado and his Brazilian secretary Arajaryr Moreira de Campos were killed while trying to enter Portugal clandestinely. An official statement claimed that Delgado was shot and killed in self-defence, despite Delgado being unarmed; his secretary was strangled.

In 1968, Salazar suffered a brain hemorrhage when he fell in a bath. As he became incapacitated, President Tomás, after hearing from various experts, appointed Marcelo Caetano in his place with some reluctance. Despite the injury, Salazar lived for another two years. When he unexpectedly recovered lucidity, his intimates did not tell him he had been removed from power, instead allowing him to "rule" in privacy until his death in July 1970.

During the last years of the monarchy and of the First Republic in Portugal, an attempt was made to obtain firmer control over the claimed African possessions. One reason the government dragged itself into World War I was the defence of the African empire, considered a part of the national identity.
Salazar briefly served as minister of colonies before assuming the premiership, and in that capacity he prepared the Colonial Act of 1930, which centralised the administration of the overseas territories in his own system and proclaimed the need to bring indigenous peoples into western civilisation and the Portuguese nation. Assimilation was the main objective, except for the Atlantic colony of Cape Verde (which was seen as an extension of Portugal) and the Asian colonies of India and Macau (which were seen as having their own forms of "civilization"). As it had been before Salazar's tenure in the office, a clear legal distinction continued to be made between indigenous peoples and other citizens – the latter mostly Europeans, some Creole elites and a few black Africans. A special statute was given to native communities to accommodate their tribal traditions. In theory, it established a framework that would allow natives to be gradually assimilated into Portuguese culture and citizenship, while in reality the percentage of assimilated African population never reached one per cent.

In 1945, Portugal still had an extensive colonial empire that encompassed Cape Verde, São Tomé e Príncipe, Angola (including Cabinda), Portuguese Guinea, and Mozambique in Africa; Portuguese India in South Asia; and Macau and Timor in the Far East. Salazar wanted Portugal to be relevant internationally, and the country's overseas colonies made that possible.

In 1947, Captain Henrique Galvão, a Portuguese parliamentarian, submitted a report disclosing the situation of forced labor and precarious health services in the Portuguese colonies of Africa. The natives, it said, were simply regarded as beasts of burden. Galvão's courageous report eventually led to his downfall, and in 1952, he was arrested for subversive activities. Although the "Estatuto do Indigenato" ('Indigenous Statute') set standards for indigenes to obtain Portuguese citizenship until it was abolished in 1961, the conditions of the native populations of the colonies were still harsh, and they suffered inferior legal status under its policies. Under the Colonial Act, African Natives could be forced to work. By requiring all African men to pay a tax in Portuguese currency, the government created a situation in which a large percentage of men in any given year could only earn the specie needed to pay the tax by going to work for a colonial employer. In practice, this enabled settlers to use forced labor on a massive scale, frequently leading to horrific abuses.

Following the Second World War, the colonial system was subject to growing dissatisfaction, and in the early 1950s the United Kingdom launched a process of decolonization. Belgium and France followed suit. Unlike the other European colonial powers, Salazar attempted to resist this tide and maintain the integrity of the empire.

In order to justify Portugal's colonial policies and Portugal's alleged civilising mission, Salazar ended up adopting Gilberto Freyre's theories of Lusotropicalism, which maintained that the Portuguese had a special talent for adapting to environments, cultures and the peoples who lived in the tropics in order to build harmonious multiracial societies. Such a view has long been criticised, notably by Charles R. Boxer, a prominent historian of colonial empires.

In general, the defense of the Portuguese colonial empire was consensual in Portuguese society. Most of Salazar's political opponents (with the exception of the Portuguese Communist Party) also strongly favoured colonialist policies. This was the case with João Lopes Soares (father of Mário Soares), who had been minister of colonies, General Norton de Matos, the leader of the opposition supported by Mário Soares and António Sérgio, a prominent Salazar opponent.

Salazar's reluctance to travel abroad, his increasing determination not to grant independence to the colonies and his refusal to grasp the impossibility of his regime outliving him marked the final years of his tenure. "Proudly alone" was the motto of his final decade. For the Portuguese ruling regime, the overseas empire was a matter of national identity.

In the 1960s, armed revolutionary movements and scattered guerrilla activity reached Mozambique, Angola, and Portuguese Guinea. Except in Portuguese Guinea, the Portuguese army and naval forces were able to suppress most of these insurgencies effectively through a well-planned counter-insurgency campaign using light infantry, militia, and special operations forces. However, despite the early military successes, Colonel Francisco da Costa Gomes quickly pointed out that there could be no permanent military solution for Portugal's colonial problem. In 1961, General Júlio Botelho Moniz, after being nominated Minister of Defense, tried to convince President Américo Tomás in a constitutional "coup d'état" to remove an aged Salazar from the premiership. Botelho Moniz ended up being removed from his government position. His political ally Francisco da Costa Gomes was nonetheless allowed to publish a letter in the newspaper "Diario Popular" reiterating his view that a military solution in Africa was unlikely.

In the 1960s, most of the world ostracised the Portuguese government because of its colonial policy, especially the newly independent African nations. Domestically, factions within Portugal's elite, including business, military, intellectuals and the church started to challenge Salazar and his policies. Later, despite tentative overtures towards an opening of the regime, Marcelo Caetano balked at ending the colonial war, notwithstanding the condemnation of most of the international community. The Carnation Revolution brought retreat from the colonies and acceptance of their independence, the subsequent power vacuum leading to the inception of newly independent communist states in 1975, notably the People's Republic of Angola and the People's Republic of Mozambique, which promptly began to expel all of their white Portuguese citizens. As a result, over a million Portuguese became destitute refugees – the "retornados".

Of the colonies remaining to Portugal at the end of World War II, Goa was the first to be lost (in 1961). A brief conflict drew a mixture of worldwide praise and condemnation for Portugal. In India, the action was seen as a liberation of territory historically Indian by reason of its geographical position, while Portugal viewed it as an aggression against its national soil and its own citizens.

After India gained independence on 15 August 1947, the British and French vacated their colonial possessions in the new country. Subsequently, Prime Minister Jawaharlal Nehru initiated proceedings to find a diplomatic solution to the Goa problem. The Portuguese had been in Goa since 1510, while an independent India had only just been established. Nehru argued that the Goans were Indians by every standard and that Goa was a colony ruthlessly administered by a racist and fascist colonial regime, "just a pimple on the face of India", in his famous phrase. Salazar maintained that in spite of Goa's location and the nature of Portugal's political system, it was a province of Portugal as integral to his nation as the Algarve. Salazar further asserted that Goans nowhere considered or called themselves Indians, but rather deemed themselves to be Portuguese of Goa and that Goans were represented in the Portuguese legislature; indeed, some had risen to the highest levels of government and the administration of Portuguese universities. The Goans had Portuguese citizenship with full rights, thus access to all governmental posts and the ability to earn their living in any part of the Portuguese territories.

Throughout the debate between Salazar and Nehru, Goans seem to have been apathetic regarding either position, and there were no signs in Goa of discontentment with the Portuguese regime. Reports from "Times" correspondents suggested that not only were the residents of Goa unexcited by the prospect of Indian sovereignty, but that even the diaspora was less energised than the Indian government was prone to suggest.

With an Indian military operation imminent, Salazar ordered Governor General Manuel Vassalo e Silva to fight to the last man and adopt a scorched earth policy.
Eventually, India launched Operation Vijay in December 1961 to evict Portugal from Goa, Daman and Diu. 31 Portuguese soldiers were killed in action, and the Portuguese Navy frigate NRP "Alfonso de Albuquerque" was destroyed, before General Vassalo e Silva surrendered. Salazar forced the general into exile for disobeying his order to fight to the last man and surrendering to the Indian Army.

Statements deploring India's resort to force in Goa, Daman, and Diu were made by governmental leaders and official spokesmen in many countries, including the United Kingdom, the United States, Canada, Australia, New Zealand, Pakistan, France, the Netherlands, Spain, and Western Germany. On the other hand, full support for the Indian action was expressed by the Soviet Union and all Soviet-bloc countries, Yugoslavia, the Arab States, Ghana, Ceylon, and Indonesia. Adlai Stevenson, the American Ambassador to the United Nations, stated "we are confronted by the shocking news that the Indian Minister of Defence Krishna Menon, so well known in these halls for his advice on peace and his tireless enjoinders to everyone else to seek the way of compromise, was on the borders of Goa inspecting his troops at the zero hour of invasion." Stevenson further accused India of violation of one of the most basic principles of the U.N. Charter, stated in Article 2. On the other hand, Valerian Zorin, the Soviet Ambassador to the United Nations, maintained that the Goan question was wholly within India's domestic jurisdiction and could not be considered by the Security Council.

Salazar was a close friend of Rhodesian Prime Minister Ian Smith. After Rhodesia proclaimed its Unilateral Declaration of Independence from Britain in 1965, Portugal supported it economically and militarily through neighbouring Portuguese Mozambique until 1975, even though it never officially recognised the new Rhodesian state, which was governed by a white minority elite. In 1975, the Mozambican Liberation Front took over the rule of Mozambique following negotiations with the new Portuguese regime installed by the Carnation Revolution. Ian Smith later wrote in his biography "" that had Salazar lasted longer than he did, the Rhodesian government would have survived to the present day, ruled by a black majority government under the name of Zimbabwe Rhodesia.

Although the militants of the First Republic had chosen education as one of their banner causes, the evidence shows that the more democratic First Republic was less successful than the authoritarian "Estado Novo" in expanding elementary education. Under the First Republic, literacy levels in children aged 7 to 14 registered a modest increase from 26 per cent in 1911 to 33 per cent in 1930. Under the "Estado Novo", literacy levels in children aged 7 to 14 increased to 56 per cent in 1940, 77 per cent in 1950 and 97 per cent in 1960.

In the 1960s, Portugal made public education available for all children between the ages of six and twelve and founded universities in the overseas provinces of Angola and Mozambique (the University of Luanda and the University of Lourenço Marques). In 1971, it recognised the Portuguese Catholic University, and by 1973 founded several state-run universities across mainland Portugal (the Minho University, the New University of Lisbon, the University of Évora, and the University of Aveiro). In addition, the long-established universities of Lisbon and Coimbra were greatly expanded and modernised. New buildings and campuses were constructed, such as the "Cidade Universitária" (Lisbon) and the "Alta Universitária" (Coimbra).

The last two decades of the Estado Novo, from the 1960s to the 1974 Carnation Revolution were marked by strong investment in secondary and university education, which experienced one of the fastest growth rates of Portuguese education in history.

After the politically unstable and financially chaotic years of the Portuguese First Republic, financial stability was Salazar's highest priority. His first incursions into Portuguese politics as a member of the cabinet were during the "Ditadura Nacional", when Portugal's public finances and the economy in general were in a critical state, with an imminent threat of default since at least the 1890s. After Salazar became prime minister, he levied numerous taxes to balance the Portuguese budget and pay external debts. Salazar's first years were marked by the Great Depression and the Second World War. The first era of his rule was thus an economic program based on the policies of autarky and interventionism, which were popular in the 1930s as a response to the Great Depression. Under Salazar, the Portuguese budget went from insolvency to showing a substantial surplus every year from 1928. Portugal's credit worthiness rose in foreign markets and the external floating debt was completely paid. However, Portugal remained largely underdeveloped, its population relatively poor and with low education attainment when compared to the rest of Europe.
Conservative Portuguese scholars such as Jaime Nogueira Pinto and Rui Ramos claim that Salazar's early reforms and policies allowed political and financial stability, therefore social order and economic growth. On the other hand, historians such as the leftist politician Fernando Rosas claim that Salazar's policies from the 1930s to the 1950s led to economic and social stagnation and rampant emigration that turned Portugal into one of the poorest countries in Europe.

From the 1950s, the picture changed, and even leftist historians recognise "that industrial growth throughout the 1950s and 1960s was generally quite positive and, given Portugal's basic problems, could probably have only been improved slightly by a more creatively liberal regime".

Throughout the 1950s, Salazar maintained the same import substitution approach to economic policy that had ensured Portugal's neutral status during World War II. From 1950 until Salazar's death, Portugal saw its GDP per capita increase at an annual average rate of 5.7 per cent. The rise of new technocrats in the early 1960s with a background in economics and technical-industrial expertise led to a new period of economic fostering, with Portugal as an attractive country for international investment. Industrial development and economic growth would continue throughout the 1960s. During Salazar's tenure, Portugal participated in the founding of the European Free Trade Association (EFTA) in 1960 and the Organisation for Economic Co-operation and Development (OECD) in 1961. In the early 1960s, Portugal also added its membership in the General Agreement on Tariffs and Trade (GATT), the International Monetary Fund (IMF), and the World Bank. This marked the initiation of Salazar's more outward-looking economic policy. Portuguese foreign trade increased by 52 per cent in exports and 40 per cent in imports. The economic growth and levels of capital formation from 1960 to 1973 were characterised by an unparalleled robust annual growth rates of GDP (6.9 per cent), industrial production (9 per cent), private consumption (6.5 per cent) and gross fixed capital formation (7.8 per cent).

Despite the effects of an expensive war effort in African territories against guerrilla groups, Portuguese economic growth from 1960 to 1973 under the "Estado Novo" created an opportunity for real integration with the developed economies of Western Europe. In 1960, Portugal's per capita GDP was only 38 per cent of the European Community (EC-12) average; by the end of Salazar's rule in 1968, it had risen to 48 per cent; and in 1973, under the leadership of Marcelo Caetano, Portugal's per capita GDP had reached 56.4 per cent of the EC-12 average.

For forty years, Portugal was governed by a man that had been educated at a seminary, had received minor orders, and had considered becoming a priest. Before accepting the office of minister of finance, Salazar had been associated with several Catholic movements and had developed a very close friendship with Manuel Gonçalves Cerejeira, who in 1929 would become Cardinal-Patriarch of Lisbon. During their university years at Coimbra they shared a house, an old convent known as "Os Grilos".

In July 1929, with Salazar acting as minister of finance, the government revoked a law that had facilitated the organisation of religious processions. Salazar presented his written resignation to the prime minister saying, "Your Excellency knows that I never asked for anything that might improve the legal status of Catholics". He carefully avoided adding more problems to an already troubled nation, but he could not accept the "violation of rights already conceded by law or by former government to Catholics or the Church in Portugal".
Despite his identification with the Catholic lobby before coming to power and the fact that he based his political philosophy around a close interpretation of the Catholic social doctrine, he did nothing directly for religion in the initial phase of his rule. He wanted to avoid the divisiveness of the First Republic, and he knew that a significant part of the political elite was still anti-clerical. Church and State remained apart. No attempt was made to establish a theocratic policy. The Church's lost property was never restored.

In 1932, Salazar declared the Catholic political party ("Centro Católico") to be unnecessary, since all political parties were to be suppressed, and he "invited" its members to join his own political organization, the National Union. The role of the Church should be social and not political, he argued. In reaction, Cardinal-Patriarch Cerejeira founded "Acção Católica" in 1933 and continued to agitate for political power until 1934, when Pope Pius XI told Cerejeira that he should focus on social, not political, issues. In the 1933 Constitution, Article 45 provided for freedom of public and private worship for all religions, together with the right to establish Church organizations and associations in accordance with the norms of law and order.

Salazar based his political theory on the doctrines of the popes and throughout the 1930s achieved great prestige in the Catholic world. In 1936, the episcopate expressed its full support for the regime in a Carta Pastoral, reaffirmed the following year by the head of the Portuguese Catholic Church. Pope Pius XII said, "I bless him with all my heart, and I cherish the most ardent desire that he be able to complete successfully his work of national restoration, both spiritual and material". In 1938, Fordham University, a university founded by the Catholic Diocese of New York, granted Salazar the Honorary Doctorate of Law. Salazar wanted to reinstate the Church to its proper place, but also wanted the Church to know its place and keep it. He made it clear when he declared, "The State will abstain from dealing in politics with the Church and feels sure that the Church will refrain from any political action."

In May 1940, a Concordat between the Portuguese state and the Vatican was signed. There were difficulties in the negotiations that preceded its signing; the Church remained eager to re-establish its influence, whereas Salazar was equally determined to prevent any religious intervention within the political sphere, the exclusive preserve of the State. The legislation of the parliamentary republic was not fundamentally altered: religious teaching in schools remained voluntary, while civil marriages and civil divorce were retained and religious oaths were not re-established. The Bishops were to be appointed by the Holy See, but final nomination required the government's approval. The clergy were subject to military service, but in the form of pastoral care to the armed forces and, in time of war, also to the medical units. The Church could establish and maintain private schools, but they would be subject to state supervision. The Catholic religion and morality were to be taught in public schools unless parents had requested the contrary. Catholics who celebrated canonical marriages were not allowed to obtain a civil divorce. The law stated that "It is understood that by the very fact of the celebration of a canonical marriage, the spouses renounce the legal right to ask for a divorce." Despite this prohibition, nearly 91 per cent of all marriages in the country were canonical marriages by 1961.

Pinto and Rezola argue that a key strategy Salazar used to stabilise his regime was to come to terms with the Catholic Church through the Concordat. Anti-clericalism would be discouraged and the Church would have an honored and central position in Portuguese life. The Church agreed to stay out of politics, but it did operate numerous social groups for adults and youth. The Church role became a major pillar of the New State's "limited pluralism."
Despite this landmark agreement, Church-state relations and inter-Church relations in Portugal were not without some tensions through the 1940s. Some prominent oppositionist priests, such as Abel Varzim and Joaquim Alves Correia, openly supported the MUD in 1945 and the granting of more social rights to the workers. Abel Varzim, who had been a supporter of the regime, attacked Salazar and his claims of the Catholicism of the corporatist state, arguing that the regime was not true to Catholic social teaching as the people suffered in poverty. Varzim's newspaper, "O Trabalhador" ("The Worker"), was closed in 1948. In his personal diary he wrote: "o estado-salazar é quem manda na igreja" ("In Portugal the Salazar-State rules the church"). Joaquim Alves Correia was forced into exile in the United States, where he died in 1951. The opposition candidate in the 1958 presidential election, Humberto Delgado, a Roman Catholic and a dissident of the regime, quoted Pope Pius XII to show how the social policies of the regime were against the social teachings of the Church. That same year, in July 1958, Salazar suffered a severe blow from the bishop of Porto, Dom António Ferreira Gomes, who wrote a critical letter to the Council President criticizing the restrictions on human rights and denouncing the harshness of Portugal's poverty. It was time, he said, for the Church to come out of the catacombs and speak its mind. Salazar was furious. The bishop was not formally exiled, but he decided to leave the country, and it appears that Lisbon made it clear to Rome that the bishop's presence in Portugal would not be appropriate.

After the Second Vatican Council, a large number of Catholics became active in the democratic opposition. The outbreak of the colonial wars in Angola, Guinea and Mozambique – in March 1961, January 1963 and September 1964 respectively – exacerbated the divisions within the Catholic sector along progressive and traditionalist lines. The pope's decision to travel to Bombay in December 1964 to take part in the Eucharistic Congress represented for the Portuguese head of government – who saw in India little more than the illegal occupier of Goa since December 1961 – no less than a direct affront to the nation as a whole. On 21 October 1964, the Minister of Foreign Affairs, Franco Nogueira, officially defined the visit as an "agravo gratuito".

Directly linked with the pope's visit to India, a second event of significant importance preceded the pope's visit to Portugal: the attribution of the Golden Rose to the Fátima sanctuary on 13 May 1965. Paul VI officially announced his intention to take part in the Fiftieth Anniversary celebrations of the first reported Fátima apparition – also the twenty-fifth of the consecration of the world to the Immaculate Heart of Mary by Pius XII – during his General Audience of 3 May 1967. From the very start, he made every effort to remove any political significance from his visit. It was effectively limited to a single day in Fátima, not Lisbon, and the pope made use of Monte Real Air Base instead of Lisbon airport, which would have given a far more official nature to the pilgrimage.

Religions other than the Catholic faith had little or no expression in Portugal. Throughout the period of Salazar's "Estado Novo" there was no question of discrimination against the Jewish and Protestant minorities, and the ecumenical movement flourished.

The Portuguese literary historian António José Saraiva, a communist and a fierce lifelong political opponent of Salazar, claimed that one who reads Salazar's "Speeches and Notes" is overwhelmed by the clarity and conciseness of style, the most perfect and captivating doctrinal prose that exists in Portuguese, underscored by a powerful emotional rhythm. According to Saraiva, Salazar's prose deserves a prominent place in the history of Portuguese literature, and only political barriers have deprived it of the place. Saraiva says it is written with the clarity of the great prose of the 17th century, cleansed of all the distractions and sloppiness that often obscures the prose of the Portuguese scholars.

Salazar had books published, namely "Como se Levanta um Estado" ("How to Raise a State"), in which he criticised the philosophical ideals behind the Nuremberg laws, and "Como se Reergue um Estado" ("How to Re-erect a State").

In 1968, Salazar suffered a cerebral hemorrhage. Most sources maintain that it occurred when he fell from a chair in his summer house. In February 2009 though, there were anonymous witnesses who admitted, after some investigation into Salazar's best-kept secrets, that he had fallen in a bath instead of from a chair. As he was expected to die shortly after his fall, President Américo Tomás replaced him with Marcelo Caetano. Despite the injury, Salazar lived for a further two years. When he unexpectedly recovered lucidity, his intimates did not tell him he had been removed from power, instead allowing him to "rule" in privacy until his death in July 1970.

Tens of thousands paid their last respects at the funeral, at the Requiem that took place at the Jerónimos Monastery, and at the passage of the special train that carried the coffin to his hometown of Vimieiro near Santa Comba Dão, where he was buried according to his wishes in his native soil, in a plain ordinary grave. As a symbolic display of his views of Portugal and the colonial empire, there is well-known footage of several members of the Mocidade Portuguesa, of both African and European ethnicity, paying homage at his funeral.

Due to Salazar's long rule, a detached evaluation of him is difficult. He is considered either a saviour of interwar Portugal and an exponent of Christian philosophy in politics, or, on the contrary, a fascist-leaning dictator who obstructed his country's democratic evolution.

Historian Tom Gallagher in 1983 criticised Salazar's excessive promises, writing that "Salazar was being deceitful when he told António Ferro in 1938, 'I estimate that within five years every child in this country will have the opportunity to read and write.' His true policy had been revealed six years earlier when he stated categorically, 'I consider more urgent the creation of elites than the necessity to teach people how to read'." However in a 2018 retrospective Gallagher argues that Salazar focused Portugal on the conservative values of family, local community and the Catholic faith. He rejected the secularism and anticlericalism of the French Revolution, which had a stronghold in the cities but was weak in rural areas. Negative traits that were seen in the governments of other parts of Europe were not prevalent. He never claimed the superiority of a pure Portuguese stock. There was no policy of antisemitism and he helped Jews escape the Nazis. Catholicism was emphasised but the bishops and the pope had to keep their place in the system he quietly controlled without fanfare or charisma. Nationalism was used as a major justification for building a huge global empire that long outlasted those of France, Britain and the others. Salazar also succeeded in using national pride to overwhelm localism and the bitter factionalism that had long troubled the nation before 1930. His coalition brought together monarchists, moderate republicans, businessmen, churchmen, landowners and the military. Each of these groups understood that only with him in charge could their privileges be guaranteed. He believed in stability not democracy, but Portugal remained poor as Europe flourished in the 1960s and 1970s. He spent large sums on soldiers to fight for control of the many colonies; it was a losing battle and by this time the old man was himself losing prestige and stature. He always rejected goals such as modernity and progress and liberalism in favour of tradition, stability and conservatism, and the themes are still echoed into the 21st century by his admirers.

Historian Neill Lochery claims Salazar was one of the most gifted men of his generation and hugely dedicated to his job and country. According to American scholar J. Wiarda, despite certain problems and continued poverty in many sectors, the consensus among historians and economists is that Salazar in the 1930s brought remarkable improvements in the economic sphere, public works, social services and governmental honesty, efficiency and stability. In July 1940, "Life" magazine called Salazar "a benevolent ruler", described him as "by far the world's best dictator, he [Salazar] is also the greatest Portuguese since Prince Henry the Navigator", and added that "the dictator has built the nation". "Life" declared that "most of what is good in modern Portugal can be credited to Dr. Antonio de Oliveira Salazar (...) The dictator is everything that most Portuguese are not – calm, silent, ascetic, puritanical, a glutton for work, cool to women. He found a country in chaos and poverty. He has balanced the budget, built roads and schools, torn down slums, cut the death rate and enormously raised Portuguese self-esteem."

Sir Samuel Hoare, the British Ambassador in Spain, recognised Salazar's crucial role in keeping the Iberian peninsula neutral during World War II, and lauded him. Hoare asserted that, in his 30 years of political life, he had met most of the leading statesmen of Europe, and regarded Salazar highly among those. Salazar was to him a learned and impressive thinker – part professor, part priest, part recluse of unshakable beliefs. He regarded him as ascetic, concentrated on serving his country, with an encyclopedic knowledge of Europe and indifferent to ostentation, luxury or personal gains. Hoare strongly believed in Salazar as "being a man of one idea – the good of his country", not wanting to endanger the work of national regeneration to which he had devoted the whole of his public life.

Historian Carlton Hayes, a pioneering specialist on the study of nationalism, was the American Ambassador in Spain during World War II. He met Salazar in person and agreed with Ambassador Hoare. Hayes wrote that Salazar 'didn't look like a regular dictator. Rather, he appeared a modest, quiet, and highly intelligent gentleman and scholar...literally dragged from a professorial chair of political economy in the venerable University of Coimbra a dozen years previously in order to straighten out Portugal's finances, and that his almost miraculous success in this respect had led to the thrusting upon him of other major functions, including those of Foreign Minister and constitution-maker.' Hayes appreciated Portugal's endeavours to form a truly neutral peninsular bloc with Spain, an immeasurable contribution – at a time when the British and the United States had much less influence – towards counteracting the propaganda and appeals of the Axis.

Belgian diplomat André de Staercke, dean of NATO's ambassadors, who served for almost 24 years on the alliance council, developed a close and long friendship with Salazar. In his memoirs, Staercke dedicates a full chapter to Salazar and ranks Salazar, together with Churchill and Paul-Henri Spaak as one of the three greatest political leaders he has met in his life.

The Portuguese literary historian, António José Saraiva, a communist and a fierce lifelong political opponent of Salazar, claimed that "Salazar was, undoubtedly, one of the most remarkable men in the history of Portugal and possessed a quality that remarkable men do not always have: the right intention."

Spanish dictator Francisco Franco spoke effusively of Salazar in an interview published by France's "Le Figaro" newspaper: "The most complete statesman, the one most worthy of respect, that I have known is Salazar. I regard him as an extraordinary personality for his intelligence, his political sense and his humility. His only defect is probably his modesty." This was, however, in response to Salazar helping his cause, which, in turn, was meant to prevent Portugal from communism and the chaos of the First Republic.

The Portuguese historian, scholar, and editor, A. H. de Oliveira Marques, wrote of Salazar: "He considered himself the guide of the nation, believed that there were things which only he could do ('unfortunately there are a lot of things that seemingly only I can do' – official note published in September 1935) and convinced more and more of his countrymen of that too... He became more and more of a dictator, more and more inclined to deify himself and to trust others less."

In November 1965, "Time" magazine said of Salazar: "Every four years, Premier Antonio de Oliveira Salazar preserves Portugal's image as a democracy by blowing the dust off a few selected "opposition" leaders and relaxing police controls just enough for a few weeks to permit them to run for Portugal's 130-seat National Assembly. There are a few cracks in the facade. The assembly functions only as a rubber stamp. The opposition candidates are usually feeble old men left over from a regime that was discredited and overthrown four decades ago, and Salazar decides what they can and cannot talk about..."

The Portuguese poet, writer, and literary critic Fernando Pessoa wrote that Salazar was "capable of governing within the limits of his area of expertise, which is financial science, but not (capable of governing) with the lack of limits of government in general", adding that "What is wrong, here, is not that Sr. Oliveira Salazar is Minister of Finance, which I accept is right, but that he is minister of everything, which is more questionable."

The American author and political scientist, Paul H. Lewis, wrote of Salazar: "Though he never took Holy Orders he continued to live the solitary, ascetic life of a priest – never marrying, and devoting all his time, first to his academic career as an economist at Coimbra University, and later to running the government. He was cold, intellectual, and dedicated – a man of "painful reserve: an almost Manichean fastidiousness, implying, perhaps a distaste for sex, and always a total involvement with his job."

In 2006 and 2007 two public opinion television shows aroused controversy. Salazar was elected the "Greatest Portuguese Ever" with 41 per cent of votes on the show "Os Grandes Portugueses" ("The Greatest Portuguese") from the RTP1 channel. He was presented by the scholar Jaime Nogueira Pinto, who described being confronted with some "reactions of perplexity, surprise, aggressiveness and even hostility" after having accepted the task. Salazar was also declared "Worst Portuguese Ever" in a public poll by the satirical debate program "Eixo do Mal" ("Axis of Evil") on the channel SIC Notícias. However, the official poll results for both of the two rounds hosted by this latter program show that the public had actually voted Mário Soares, a major opponent of Salazar and his regime, as "Worst Portuguese Ever". This led to viewers expressing concerns about the reliability and seriousness of the show, with the controversy extending to the poll on the show "The Greatest Portuguese", which Mário Soares called "total nonsense from start to end". Years previously, a survey from the channel SIC had also rated Salazar as 'The Greatest Portuguese Figure of the 20th Century'.

Salazar saw no prospects for his regime beyond his death. Nonetheless, the "Estado Novo" persisted under the direction of Marcelo Caetano, Salazar's longtime aide as well as a well-reputed scholar of the University of Lisbon Law School, statesman and distinguished member of the regime who co-wrote the Constitution of 1933. The "Estado Novo" would eventually fall on 25 April 1974 with the Carnation Revolution.

Salazar was made member of the following Portuguese Orders.

He also received several other similar distinctions from countries including France, Germany, Belgium, Poland, Romania and Spain.

Salazar was conferred with the following academic distinctions.

The bridge across the Tagus connecting Lisbon to Almada was named Bridge Salazar upon completion. Built by the "Estado Novo" 6 months ahead of schedule and under budget, it was the 5th longest suspension bridge in the world and the longest outside of the US. It was then renamed '25 April Bridge'. Stadium Salazar, a noteworthy multi-purpose stadium built in Mozambique during the "Estado Novo", was named after Salazar. With 1975's new government it began to degrade. It was renamed Stadium of Machava. Many places across the country (streets, avenues, squares) were named after Salazar. They were renamed since 1974, especially in district capitals. Around 20 localities still reference Salazar today. There are also some azulejos with quotes of Salazar.

In popular culture, Salazar's Cake ("Bolo de Salazar") is the name given to a cake that Salazar used to eat sometimes. It is cheap and simple, perhaps with similarities to sponge cake. Kitchen cake spatulas are sometimes referred to as 'Salazar' in Portugal for their effectiveness in not leaving any residue behind.

A wine brand called "Terras de Salazar" ("Lands of Salazar") was approved in 2011 by the national institute. It never reached the market due to the owner's economic troubles. In 2012, the City Council of Salazar's hometown Santa Comba Dão announced a brand called Memories of Salazar for a range of regional products, notably wine. It was rejected by the same institute for offensiveness and the possibility of public disorder. The mayor claimed the refusal was ridiculous and will not give up or drop the name Salazar from future brand name proposals. He is considering submitting Vineyards of Salazar, as "memories" of the regime could be one reason to add to the refusal.

The brand "Salazar – O Obreiro da Pátria" ("Salazar – Fatherland's Workman") is registered and runs the website www.oliveirasalazar.org, an archive of various documents related to Salazar.

Salazar originated the HCESAR keyboard layout, introduced by means of a decree of 17. July 1937.

In Portuguese

Upon the start of World War II in 1939, the Portuguese Government announced on 1 September that the 600-year-old Anglo-Portuguese Alliance remained intact, but that since the British did not seek Portuguese assistance, Portugal was free to remain neutral in the war and would do so. In an aide-mémoire of 5 September 1939, the British Government confirmed the understanding. As Hitler's occupation swept across Europe, neutral Portugal became one of the Continent's last escape routes. Portugal managed to remain neutral throughout the war despite extraordinary pressures from both sides, notably over the strategically located Azores islands and over the wolfram (tungsten) trade.

Portugal during World War II

At the outbreak of World War II, Portugal was ruled by António de Oliveira Salazar, the man who in 1933 had founded the "Estado Novo" ("New State"), the corporatist authoritarian government that ruled Portugal until 1974. Salazar's dislike of the Nazi regime in Germany and its imperial ambitions was tempered only by his view of the German Reich as a bastion against the spread of communism. He had favoured the Spanish nationalist cause, fearing a communist invasion of Portugal, yet he was uneasy at the prospect of a Spanish government bolstered by strong ties with the Axis. Salazar's policy of neutrality for Portugal in World War II thus included a strategic component. The country still held overseas territories that, because of their poor economic development, could not adequately defend themselves from military attack. Upon the start of the war in 1939, the Portuguese Government announced on 1 September, that the 600-year-old Anglo-Portuguese Alliance remained intact, but that since the British did not seek Portuguese assistance, Portugal was free to remain neutral in the war and would do so. In an aide-mémoire of 5 September 1939, the British Government confirmed the understanding.

On May 15, 1940, Salazar's important role in the war was recognized by the British: Douglas Veale, Registrar of the University of Oxford, informed Salazar that the University's Hebdomadal Council had "unanimously decided at its meeting last Monday, to invite you [Salazar] to accept the Honorary Degree of Doctor of Civil Law".

Salazar's decision to stick with the Anglo-Portuguese Alliance allowed the Portuguese Island of Madeira to come to the aid of the Allies and in July 1940 around 2,500 evacuees from Gibraltar were shipped to Madeira. At the same time "Life" magazine, in a long article titled: "Portugal: The War Has Made It Europe's Front", called Salazar "a benevolent ruler", described him as "by far the world's best dictator, he [Salazar] is also the greatest Portuguese since Prince Henry the Navigator", and added that "the dictator has built the nation". "Life" declared that "most of what is good in modern Portugal can be credited to Dr. Antonio de Oliveira Salazar (...) The dictator is everything that most Portuguese are not – calm, silent, ascetic, puritanical, a glutton for work, cool to women. He found a country in chaos and poverty. He has balanced the budget, built roads and schools, torn down slums, cut the death rate and enormously raised Portuguese self-esteem."

In September 1940, Winston Churchill wrote to Salazar congratulating him on his ability to keep Portugal out of the war, asserting that "as so often before during the many centuries of the Anglo-Portuguese alliance, British and Portuguese interests are identical on this vital question."

Despite Portuguese neutrality, in December 1941, Portuguese Timor was occupied by Australian and Dutch forces, which were expecting a Japanese invasion. Salazar's reaction was violent. He protested, saying that the Allies had violated Portuguese sovereignty and jeopardized Portuguese neutrality. A strong Portuguese garrison force (about 800 men) was then sent from East Africa to take over the defense of east Timor but did not arrive on time; on 20 February 1942 the Japanese began landing troops in Timor.

Portugal managed to remain neutral despite extraordinary pressures from both sides. Both the Allies and the Axis sought to control the strategically located Azores islands during World War II. Dictator Salazar was especially worried about a possible German invasion through Spain and did not want to provoke Hitler; nor did he want to give Spain an excuse to take side with the Axis and invade Portugal due to the strategic importance of the Canary Islands. Both Great Britain and the United States devised several plans to set up air bases in the Azores regardless of Portugal's disapproval. The plans were never put into operation.

In 1942 Lajes Field on the Azores was assigned the name Air Base No. 4 and the Portuguese government expanded the runway and sent troops and equipment to Lajes, including Gloster Gladiator fighters. Military activity in the Azores grew as the Gladiators' role progressed into flying cover for Allied convoys, reconnaissance missions and meteorological flights.

In August 1943, Portugal signed the Luso-British agreement, which leased bases in the Azores to the British. This was a key turning point in the Battle of the Atlantic, allowing the Allies to provide aerial coverage in the Mid-Atlantic gap; helping them to hunt U-boats and protect convoys. Churchill surprised members of parliament (MPs) when he said he would use a 14th-century treaty; many MPs had not known that Portugal and England had the oldest operational alliance in the world, the Anglo-Portuguese Treaty of 1373.

A few months later, on December 1, 1943, British and U.S. military representatives at RAF Lajes signed a joint agreement outlining the roles and responsibilities for the United States Army Air Forces (USAAF) and United States Navy (USN) at Lajes Field. The agreement established guidelines and limitations for the US to ferry and transport aircraft to Europe via Lajes Field. In return, the US agreed to assist the British in improving and extending existing facilities at Lajes. Air Transport Command transport planes began landing at Lajes Field immediately after the agreement was signed.

In 1944, Portugal signed an agreement with the United States allowing the use of military facilities in the Azores. American forces constructed a small and short-lived air base on Santa Maria Island.

By the end of June 1944 more than 1,900 American aircraft had passed through Lajes Air Base. Using Lajes, the flying time relative to the usual transatlantic route between Brazil and West Africa was cut nearly in half from 70 to 40 hours.

Lajes also served as one of two main stopover and refuelling bases for the first transatlantic crossing of non-rigid airships (blimps) in 1944. The US Navy sent six Goodyear-built K-ships from Naval Air Station South Weymouth in Massachusetts to their first stopover base at Naval Station Argentia Newfoundland and then on to Lajes Field in the Azores before flying to their final destination at Port Lyautey, French Morocco. From their base with Fleet Air Wing 15 at Port Lyautey, the blimps of USN Blimp Squadron ZP-14 (Blimpron 14) conducted nighttime anti-submarine warfare (ASW), surveillance of German U-boats around the Straits of Gibraltar using magnetic anomaly detection (MAD). In 1945, two ZP-14 replacement blimps were sent from Weeksville, North Carolina to the Bermudas and Lajes Air Base before going on to Port Lyautey.

In 1945, a new air base was constructed in the Azores on the island of Terceira and is currently known as Lajes Field. This base is in an area called Lajes, a broad, flat sea terrace that had been a farm. Lajes Field is a plateau rising out of the sea on the northeast corner of the island. This Air Force base is a joint American and Portuguese venture. Lajes Field continues to support United States and Portuguese military operations. During the Cold War, the United States Navy P-3 Orion anti-submarine squadrons patrolled the North Atlantic for Soviet submarines and surface spy vessels.

Portugal allowed Great Britain to trade and receive credit backed by the pound, allowing the British to obtain vital goods at a time when it was short on gold and escudos and all other neutrals were prepared to trade their currencies only against gold. By 1945 the British owed Portugal over $322 million under this arrangement.

Another delicate issue was the wolfram (or tungsten) trade. After the invasion of the Soviet Union, Germany became dependent on Portugal and Spain for its wolfram supplies. Wolfram was of particular value in producing war munitions. To maintain its neutrality, Portugal set up a strict export quota system in 1942. This concept of neutrality through equal division of products supplied to belligerents was different from that of the Northern neutrals who worked on the basis of "normal pre-war supplies". But in January 1944, the Allies began to pressure Salazar to embargo all wolfram sales to Germany. Portugal resisted, defending its right as a neutral to sell to anyone and fearing that any reduction in its exports would prompt Germany to attack Portuguese shipping. Salazar's fears were not groundless as, despite Portuguese neutrality, the steamer Ganda was torpedoed and sunk by the Germans in June 1941. On 12 October 1941 the neutral ship "Corte Real" was stopped for inspection by "U-83" 80 miles west of Lisbon. The U-boat opened fire with the deck gun, setting the ship on fire and finally sinking her with two torpedoes. On 14 Dec 1941 the unescorted and neutral "Cassequel" was hit in the stern by one of two torpedoes from U-boat-108 about 160 miles southwest of Cape St. Vincent, Portugal, and sank immediately. The "Serpa Pinto" was also stopped and boarded in 1944 (May 26) in the mid-Atlantic by the German submarine "U-541", but the ship was ultimately allowed to proceed after the German naval authorities declined to approve its sinking. On June 5, 1944, before the Normandy invasion, following the threats of economic sanctions by the Allies, the Portuguese government opted for a complete embargo on wolfram exports to both the Allies and the Axis, thereby putting 100,000 Portuguese labourers out of work.

Just a few days before the end of the Spanish Civil War, on 17 March 1939, Portugal and Spain signed the Iberian Pact, a non-aggression treaty that marked the beginning of a new phase in Iberian relations. Meetings between Franco and Salazar played a fundamental role in this new political arrangement. An additional protocol to the pact was signed on 29 July 1940, after the fall of France. The pact proved to be a decisive instrument in keeping the Iberian Peninsula out of Hitler's continental system.

In November 1943, Sir Ronald Campbell, the British ambassador in Lisbon, wrote:strict neutrality was the price the allies paid for strategic benefits accruing from Portugal's neutrality and that if her neutrality instead of being strict had been more benevolent in allies' favour Spain would inevitably have thrown herself body and soul into the arms of Germany. If this had happened the peninsula would have been occupied and then North Africa, with the result that the whole course of the war would have been altered to the advantage of the Axis.The British diplomat Sir George Rendell stated that the Portuguese Republican Government of Bernardino Machado was "far more difficult to deal with as an ally during the First War than the infinitely better Government of Salazar was as a neutral in the Second."

A similar opinion is shared by Carlton Hayes, the American Ambassador in Spain during World War II, who writes in his book "Wartime Mission in Spain": [Salazar] didn't look like a regular dictator. Rather, he appeared a modest, quiet, and highly intelligent gentleman and scholar...literally dragged from a professorial chair of political economy in the venerable University of Coimbra a dozen years previously in order to straighten out Portugal's finances, and that his almost miraculous success in this respect had led to the thrusting upon him of other major functions, including those of foreign minister and constitution-maker.Hayes is very appreciative of Portugal's constant endeavours to draw Spain with Portugal into a genuinely neutral peninsular bloc, an immeasurable contribution, at a time when the British and the United States had much less influence, toward counteracting the propaganda and pleas of the Axis.

The number of refugees that escaped through Portugal during the war has estimates that range from one hundred thousand to one million; an impressive number considering the size of the country's population at that time (circa 6 million). "In 1940 Lisbon, happiness was staged so that God could believe it still existed," wrote the French writer Antoine de Saint-Exupéry. The Portuguese capital became a symbol of hope for many refugees. Even Ilsa and Rick, the star-crossed lovers in the film "Casablanca", sought a ticket to that "great embarkation point". Thousands flooded the city trying to obtain the documents necessary to escape to the United States or Palestine. Not all found their way.

On 26 June 1940, four days after France's capitulation to Germany, Salazar authorized the main Office of the Hebrew Immigrant Aid Society (HIAS-HICEM) in Paris to be transferred to Lisbon. According to the Lisbon Jewish community, Salazar held Moisés Bensabat Amzalak, the leader of the Lisbon Jewish community, in high esteem, allowing Amzalak to play an important role in getting Salazar's permission for the transfer.
In July 1940, the civilian population of Gibraltar was evacuated due to imminent attacks expected from Nazi Germany. At that time, Portuguese Madeira agreed to host about 2,500 Gibraltarian refugees, mostly women and children, who arrived at Funchal between 21 July and 13 August 1940 and who remained there until the end of the war. In 2010 a monument was commissioned in Gibraltar and shipped to Madeira where it was erected next to a small chapel at Santa Catarina park, Funchal. The monument was a gift and a symbol of ever-lasting appreciation from the people of Gibraltar to the people of Madeira.

The Portuguese consul general in Bordeaux, Aristides de Sousa Mendes, helped an undetermined number of refugees, and his actions were not unique by any means. Issuing visas in contravention of instructions was widespread at Portuguese consulates all over Europe, although some cases were directly supported by Salazar. The Portuguese Ambassador in Budapest, Carlos Sampaio Garrido, helped an estimated 1,000 Hungarian Jews in 1944. Along with Carlos de Liz-Texeira Branquinho, under Salazar's direct guidance, they rented houses and apartments to shelter and protect refugees from deportation and murder. On 28 April 1944, the Hungarian Gestapo raided the ambassador's home and arrested his guests. The ambassador, who physically resisted the police, was also arrested, but managed to have his guests released on the grounds of extraterritoriality of diplomatic legations. In 2010, Garrido was recognised as Righteous Among the Nations by Yad Vashem. Other Portuguese who deserve credit for saving Jews during the war include Professor Francisco Paula Leite Pinto and Moisés Bensabat Amzalak. A devoted Jew and a supporter of Salazar, Amzalak headed the Lisbon Jewish community for 52 years, from 1926 until 1978.

Historian Carlton Hayes, American Ambassador in Spain during the war, writes of a "prodigious number of refugees", who began pouring into Spain in November and December 1942. Most were Frenchmen, half starved, without money or clothes, and Hayes writes of the decisive intervention of the Ambassador Pedro Teotónio Pereira in favour of 16,000 refugees of French military refugees who were trying in 1943 to get from Spain to North Africa in order there to join the Allied forces. In that group were also included Polish, Dutch and Belgians, most of whom were soldiers or would-be soldiers. According to Hayes the Poles in particular were destined to perform brilliant feats in the later Italian campaign.

After Germany invaded the Soviet Union in Operation Barbarossa, recruits from France, Spain, Belgium (including Walloons), the territory of occupied Czechoslovakia, Hungary and the Balkans signed on. The foreigners who served in the Waffen-SS numbered "some 500,000", including those who were pressured into or conscripted.
An estimated number of 159 Portuguese volunteers fought for the Axis in the World War II, mainly in the Spanish Blue Division. They were mostly veteran volunteers of the Spanish civil war, the so-called Viriatos and were essentially adventurous mercenaries or Portuguese fascist nationalists fighting the communist and Bolshevik threat.

Portugal was also neutral during the Pacific War. Its colony of Macau was isolated following the Japanese conquest of nearby areas of China and the fall of Hong Kong in December 1941. This led to food shortages for the remainder of the war which contributed to high rates of death from disease.

While Japan did not invade Macau, its forces attacked a British merchant ship anchored off the colony in August 1943 and killed 20 members of its crew. The government of Macau was subsequently forced to accept the presence of Japanese "advisers", recognise Japanese authority in southern China and withdraw the colony's garrison from several bases. In addition, Macau's government traded some of the colony's defensive guns for food and agreed to sell supplies of aviation fuel to Japan in early 1945.

On 16 January 1945 US Navy aircraft attacked Macau as part of the South China Sea raid. The main targets were the aviation fuel stores, which the Allies had learned were to be sold, and a radio station in or near the fort of Dona Maria II. In addition, urban areas and the colony's harbour were damaged. American aircraft also accidentally attacked Macau on 25 February and 11 June 1945. Following the war the US Government paid compensation for the damage to Macau's harbour.

On December 17, 1941, following the Japanese attack on Pearl Harbor, Dutch and Australian troops disembarked at East Timor in disrespect of Portuguese sovereignty. Salazar denounced the allied operation as an invasion of a neutral territory. On February 20, 1942, alleging self-defence, Japan invaded the island of Timor.

From December 1942, German merchant ships which had sought refuge in the territory of Goa in Portuguese India in 1939 began providing regular intelligence on Allied shipping via radio to German U-boats of the Monsun Gruppe operating in the Indian Ocean. Once the British discovered this, the Special Operations Executive launched Operation Creek, using a group of part-time soldiers called the Calcutta Light Horse to infiltrate the harbor and sink the German ship "Ehrenfels" with limpet mines, ending the transmissions. Due to the violation of Portuguese neutrality, the operation was kept secret until 1978.

The Germans had planned an attack on Gibraltar, codenamed Operation Felix, which was never initiated. It included the potential invasion of Portugal if the British gained a foothold and considered the occupation of Madeira and of the Azores.

On November 12, 1940 Hitler issued Führer Directive No. 18, which outlined the plan to invade Portugal if British forces were to gain a footing there. "I also request that the problem of occupying Madeira and the Azores should be considered, together with the advantages and disadvantages which this would entail for our sea and air warfare. The results of these investigations are to be submitted to me as soon as possible," Hitler added.

In June 1941, Operation Isabella was a Nazi German plan to be put into effect after the collapse of the Soviet Union to secure bases in Spain and Portugal for the continuation of the strangulation of Great Britain. This concept was laid out by Hitler, but was never executed.

Operation Alacrity was the codename for a proposed Allied seizure of the Azores during World War II. The islands were of enormous strategic value with regard to the defeat of the German U-boats. Portugal was too weak to defend the Azores, its large colonial empire, or its homeland, and tried to stay neutral in the war. Salazar was especially worried about a possible German invasion through Spain and did not want to provoke Hitler; nor did he want to give Spain an excuse to take sides with the Axis and invade Portugal due to the strategic importance of the Canary Islands. Great Britain and the United States devised plans to set up air bases regardless of Portugal's disapproval. The plans were never put into operation. Instead in 1943 Britain requested, and Portugal agreed, to allow Britain to set up bases there. Operation Alacrity was preceded by War Plan Gray.

War Plan Gray was a plan for the United States to invade the Azores Islands in 1940–41. Gray is one of the many color-coded war plans created in the early 20th century. On 22 May 1941, President Franklin D. Roosevelt directed the U.S. Army and Navy to draft an official plan to occupy the Portuguese Azores. Approved by the Joint Board on 29 May, War Plan Gray called for a landing force of 28,000 troops, one half Marine and one half Army.

Several American reports called Lisbon "The Capital of Espionage". However, the PIDE (Portuguese secret police) always maintained a neutral stance towards foreign espionage activity, as long as there was no intervention in Portuguese internal policies. Writers such as Ian Fleming (the creator of James Bond) were based there, while other prominent people such as the Duke of Windsor and the Spanish royal family were exiled in Estoril. German spies attempted to buy information on trans-Atlantic shipping to help their submarines fight the Battle of the Atlantic. The Spaniard Juan Pujol García, better known as Codename Garbo, passed on misinformation to the Germans, hoping it would hasten the end of the Franco regime; he was recruited by the British as a double agent while in Lisbon. Conversely, William Colepaugh, an American traitor, was recruited as an agent by the Germans while his ship was in port in Lisbon – he was subsequently landed by U-boat in Maine before being captured.

In 1941 John Beevor, the head of Special Operations Executive (SOE) in Lisbon, established an underground network with the aim of carrying out sabotage tasks in the event of a German invasion of Portugal. The targets for immediate destruction were oil refineries, railroads, bridges and industrial and mining facilities. The Portuguese police discovered that Beevor's network included several "anti-Salazar" Portuguese members, which irked the Portuguese authorities. Salazar suspected that British flirtation with his opponents could be hiding an attempt to install in Lisbon a "democratic" alternative to his regime, one willing to bring the country under British patronage. Salazar informed the British Ambassador that he wanted heads to roll and ended up requesting Beevor's withdrawal. Despite the incident Capt. Agostinho Lourenço, the founder and first head of Portugal's security and immigration police, earned a reputation with British observers, recorded in a confidential print generated at the British Embassy, which suggested a "pro-British" bias on his part. Lourenço always kept a good relationship with the MI6 which allowed him later in 1956 to become the head of international police organization, Interpol.

In June 1943, a commercial airliner carrying the actor Leslie Howard was shot down over the Bay of Biscay by the Luftwaffe after taking off from Lisbon,

Salazar stood doggedly by his "juridical neutrality" to the end of the War. On the death of Hitler, he followed the protocol and ordered flags to be flown at half mast. Salazar also allowed German Ambassador Hoyningen-Huene to settle permanently in the Lisbon area, where he lived out part of his retirement. Portugal continued to welcome refugees after the war. Umberto II, King of Italy lived for 37 years in exile, in Cascais. The Count and Countess of Barcelona, the heir-apparent to the defunct Spanish throne D. Juan de Bourbon and his wife D. Maria de las Mercedes, were exiled in Estoril, Cascais on 2 of February 1946. Later, in April, they were joined by their children Pilar, Juan Carlos (the future King Juan Carlos of Spain), Margarita and Alfonso. Calouste Gulbenkian, the Armenian oil magnate known as "Mr. Five Percent", also chose Portugal as a place to settle. In an operation organised by Caritas Portugal from 1947 to 1952, 5,500 Austrian children, most of them orphans, were transported by train from Vienna to Lisbon and then placed in the foster care of Portuguese families.

Portugal survived the horrors of war not only physically intact but significantly wealthier. To commemorate the fact that it was spared the destruction of the war, in 1959 the "Cristo Rei" monument was built in Almada, overlooking Lisbon.

Despite the authoritarian character of the regime Portugal did not experience the same levels of international isolation as Spain did following World War II. Unlike Spain, Portugal under Salazar was accepted into the Marshall Plan (1947–1948) in return for the aid it gave to the Allies during the final stages of the war. Furthermore, also unlike Spain, it was one of the 12 founding members of the North Atlantic Treaty Organisation (NATO) in 1949, a reflection of Portugal's role as an ally against communism during the Cold War in spite of its status as the only non-democratic founder.