Hi Abyss Rover. Look up thread 'what really bugs you about Portugal' for a summary of expat moans
Before reading all my replies, I'd consider other options besides Portugal for relocation too: if you're a sailor, perhaps Croatia or Turkey; or just the Spanish mainland (southern Catalonia?) or the Midi-Pyrenees in France. I'm mostly here because of my career sent me here in 2006: if I had a free choice of countries, right now in 2012, I'd advise against it.
Plus sides for Portugal: inheritance tax regime; ridiculously low IMI (council tax rates) in the countryside; slow pace of life; climate (not as good in winter as Mallorca, but less scorching summers); laissez faire; beautiful villages and countryside (northern Mallorca is nice though); interesting cities nearby (Lisbon and Porto, but also Madrid, Seville, Salamanca, Caceres); farmers' markets; porco preto and cheap wine; interesting cosmopolitan communities in the prettier villages.
Euro crisis question: In one word: bleak. Unlike Spain, Portugal never even grew properly in the boom times, which suggests there'll be an inability to recover fast from its current problems. Like Greece its massive loss of reputation can only be remedied by EU largesse, and there's a problem with counting on such solidarity: the EU political climate for subsidising the poorest performers on the periphery is not good. At least Spain and Ireland saw major booms before 2008, and have built global brands and regional industrial dynamism (IT, aerospace, manufacturing)... so institutional investors might revisit them after the storm. As to growth, Portugal faces a real long-term credibility issue, and the 'men in Brussels' that Portugal has been so good at planting to fight for their corner (Barroso, Constancio etc.) are getting towards the end of their political careers. Eastern Europeans are now likely to be jockeying for cohesion funds to the detriment of Greece and Portugal - and good luck to them in overtaking Portugal and Greece (they can't perform any worse, can they?).
To be blunt, from a financial standpoint I wouldn't touch the country with a bargepole. As said I'm here because my career led me here, not for financial reasons. Portugal of course has massive potential, but this is not going to be realised as any growth is going to slower than elsewhere, and likely any profits will be skimmed by its rich elite. A diaspora country, the meritocratic talent has traditionally moved elsewhere and stayed there. Doing business here is for masochists. The population is dropping externally and is ageing internally, plus productive populations (graduates, hard working immigrants) are ditching the country. So if you plan a move, I'd advise ringfencing any assets... i.e. downshift your overall lifestyle (it's a low cash burn life in Portugal); rent a house instead of buying (or if buying get a low spread on maximum LTV); borrow or charter a boat; invest outside Portugal; and if your life is mobile and you're young (i.e. not too interested in the cool IHT regime), consider fiscal residency elsewhere.
Bureaucracy question: like in most countries, it's a real pain here, and you soon get to hear the phrase 'e muito complicado'. This rarely means 'it's very complicated' and usually means 'I can't be bothered' and occasionally 'no'. Smartphones have at least made the waiting times in government offices more bearable. If you don't have one, take a book. Or some watercolours and an easel.
The car example is particularly problematic and expensive: import taxes (unless you're bringing a UK car you've owned for a year and assembled utility bills etc.) can be 300% of the UK/Germany market value of the car; second hand cars in Portugal cost up to 400% of ebay.co.uk prices; tolls tend to double the petrol cost of motorway journeys (and these tolls now cover all motorways), and powerful cars are hugely overtaxed (e.g. an SUV might have a return toll bill upwards of 60 euros on the 1.5 hour drive from Lisbon to Badajoz). On the plus side, insurance is cheap, trains are relatively cheap, minor roads are pretty empty of traffic, if you live near the border you never need to buy fuel in Portugal, and Spanish roads on the 'Portuguese side' of Spain do not have tolls (yet).
Building: read 'a cottage in Portugal' about the travails of building in Portugal: still as relevant today as when it was written (also good insights into Portuguese culture in general, alongside the more serious Marion Kaplan and Barry Hatton books). While I think my experience is particularly bad, here are some examples of my building issues: needed to sack four firms of Portuguese builders (ended up only employing expats: smooth thereafter); new roof re-roofed three times; 11 months to get electricity (yet the mains was only 50 metres away); 2 years - yes 2 years! - to get mains water (9 metres away); needed to employ a Portuguese electrician to get a 'Certiel certificate' (3 times the cost of a good German electrician) yet electrics now iffy (German electrician coming to correct issues: it's cheaper to fly him in!). As to my treehugging ideas of eco-building, solar, heat pump systems etc. these were shelved due to ignorance and resistance of local tradespersons.
The only way I've found to get around bureaucracy and procrastination is to ditch politeness and become an ******* early on: the electricity only arrived after I refused to leave the EDP office until an appointment was made (angry queue forming behind me), water only when I arranged a 2-hour meeting with the mayor. It's uncomfortable for a Brit to behave like some kind of shouty Brian Blessed character, but sometimes it helps.
Mallorca versus Portugal: I'd stick with Robert Graves country
. It's tough to compare an island to a country, but... flights to/from Mallorca are some of the cheapest in Europe (you'll pay more, with longer flights, in Portugal); for yachting, the Med offers far, far more (warm water, touring destinations, infrastructure) than the Atlantic (good for surf, but cold and stormy); Portugal is on the whole less bling and more rustic (though I love NW Mallorca as much as the Alto Alentejo).
