This Europe: Once mighty empire struggles to find its voice in Europe

At last month's Nato summit in Prague, after each head of government had delivered a brief speech, an embarrassing oversight was discovered: Portugal had been forgotten. The Prime Minister, Jose, Manuel Durao Barroso took the gaffe well, but it was instructive.

Indeed, from a power whose empire once stretched from Brazil to the Far East, Portugal feels shrunken and laggardly today – a country of 10 million people still trying to shake off unwanted labels: lowest average monthly wage in the European Union, lowest level of education, lowest industrial productivity.

Since joining the EU in 1986, Portugal has received more than €25.3bn (£16.8bn) in aid to build up its infrastructure. The standard of living has shot up from 56 per cent of the EU average to 74 per cent.

Lisbon, the graceful 850-year-old capital, has the glass-paned office buildings, fashionable stores and modern airport of any European city.

But the party is now well and truly over.

The EU is about to expand from 15 member states to 25, some bigger and more in need of aid than Portugal.

"We're blowing our chance," said Joao Pedroto, a partner in a Lisbon tourism company. "We've got to change our attitude and start putting some hard work in."

Easier said than done. The Prime Minister recently proposed ending the practice of four-day weekends whenever a public holiday falls on a Thursday or Tuesday. He might as well have tried banning grilled sardines and sangria on lazy summer evenings. The welfare system is decrepit and labour practices are outmoded. In the countryside, donkeys and mules can still be seen doing the hard work instead of tractors. The average monthly wage of €740 is a third of Germany's.

Michael Porter, a Harvard Business School professor contracted by the government in 1994 to map out a future for the fragile Portuguese economy, recently returned to judge how the project had worked out. His gloomy assessment: "Portugal has wasted the past eight years."

Portugal's Europeanness often feels only skin-deep. "We're still much closer, in the way we are to Africa and Latin America than to Germany, for instance, or the Nordic countries," says Clara Ferreira Alves, a Portuguese writer and columnist.

The suspicion of domination by Portugal's historic rival Spain – five times bigger and four times more populous – is evident in Lisbon's giant new Spanish department store, El Corte Inglés, which has irked Lisbonites by issuing tickets in Spanish for its 14-screen cinema complex.

Spain did after all try to annex Portugal in the 12th, 17th and 19th centuries.

In this fight with what they see as a globalised dog-eat-dog world, the Portuguese are realising that their "brandos costumes" – gentle ways – make them too obliging for their own good.