Jose Diogo, who spent two years in Lisbon working as a technical advisor at a meat company, was one who fled at the beginning of Portugal's debt crisis in 2009, and has no regrets.

"I lived in Lisbon and decided to go back home to the interior to grab the opportunity of exploring the land my father owned," Diogo said on the porch at his stone farm house, looking out over apple orchards and grazing fields for his 30 cows.

Far from discouraging people like Diogo, the government is trying to get others to follow in his footsteps.

In February it launched an initiative to map the country's unused land and terrain that does not have a known owner, with the aim of making it available to be rented to those who want to work it.

The government has also approved a land exchange scheme by which private owners of unused land will win tax benefits if they make their properties available to be rented by farmers. Around 1.5 million hectares are expected to be made available through the scheme.

"In tough times, this is a way for people to generate some income, both those who put the land out for rental and those who exploit it," said Agriculture Minister Assuncao Cristas.

One of the key objectives of the land exchange is to increase the average size of plots, making them more profitable and reducing production costs.

"Portugal is at a turning point in its relation with the land," Cristas said in a telephone interview with Reuters. "There are many people committed to go back to it and invest."

The policy marks a bit of a reversal. After Portugal joined the European Union in 1985, economic growth was driven by the services and industry sectors of the two largest cities, Lisbon and Porto.

The 1974 overthrow of Portugal's military dictatorship, which glorified agricultural life, triggered a Soviet-inspired collectivization process that dismantled large landowners' estates but undermined productivity.

Although the policies were eventually reversed, Portugal's farming plots remained relatively small in size and its agriculture sector chronically inefficient.

However, despite the country's mismanagement, relatively small geographical size and a total population of just 11 million, Portugal has managed to remain a key player in certain industries.

Portugal is the world's largest cork producer and the seventh largest wine exporter. Farming, including forestry and production of everything from olives to oranges, strawberries and cherries, account for 10 percent of gross domestic product -- with a strong component coming from food processing.

The sector has grown since the crisis. Food exports jumped 17 percent in the last quarter of 2011 to 1.2 billion euros and are already the country's second fastest-growing export.

Demand for government assistance is growing as well. Last year, the government announced that farmers submitted 900 million euros of applications for 50 million euros offered under a European-backed rural development program, PRODER.

The government announced more incentives in March 2012, offering an extra 63 million euros to support the projects.

INTERIOR LIFESTYLE

It's not just life on the farm that is enjoying a resurgence.

In Portugal's poorest and most remote region -- Tras-os-Montes (Behind-the-Mountains) -- a group of former city dwellers have bigger ambitions.

Frederico Lucas came from Lisbon to launch the New Settlers, a consultancy company which aims to attract people in the cities who want to set up businesses to the interior.

Financed by the local town hall and utility company EDP (EDP.LS), New Settlers headhunts possible candidates for resettlement, gives advice on their business plan, helps families to resettle and plug into the local economy, and helps cut bureaucratic red tape.

The city and EDP, which has a direct stake in the development of Tras-os-Montes, where most of its hydroelectric dams are located, pays the consultancy a set fee of 3,600 euros for each family they resettle.

Lucas said that since they started bringing in families at the end of last year, he has struggled to keep up with demand. A total of 1,000 families have applied, 32 have moved inland and 30 more families will resettle by year-end.

"Applications jumped after the government announced it was slashing two months of salaries in October for the public sector workers," he said. "That's when we received more than half of the applications."

Lucas blames the country's crisis on years of easy money that failed to reach any productive use, including billions of euros in European Union funds that was poured into building infrastructure like highways, libraries, schools, hospitals and pavilions, many of which are in the interior and barely used.

"This infrastructure is now built and, although the money often went to the wrong things, we must now activate them," he said in his office integrated into the library of the town of Alfandega da Fe, an example of such a public investments.

Among those who have resettled is Patricia Guimaraes, who moved with her husband Luis at the end of last year to Alfandega da Fe from the city of Braga to create 'Monte Mel' (Honey Hill), a company that helps small farm producers coordinate and sells their products online.

"Here we are close to the growers and have fresh produce all around, it is just so much more practical than if we were in the city," said Patricia.

Luis, who works for Deloitte as an IT assistant, said moving to the interior worked for everyone.

"The cities of Lisbon and Porto are worn out and although people often think first about migrating outside the country, perhaps we have alternatives at home," he said.

Lisbon and Porto, Portugal's densest urban areas, lost 3 and 10 percent of their population, or 15,000 and 26,000 people, respectively, to the periphery and countryside in the last decade. Lower living costs are the main driver.

Average rent in Alfandega da Fe district stands at around 300 euros versus 800 euros in Lisbon.

AUSTERITY GARDENS

For those who are not looking for a complete lifestyle change, a scheme offered by Lisbon's town hall renting small farming plots around the city's periphery last year has attracted hundreds of applications.

In a country where unemployment is at all-time highs of 14 percent, the minimum wage is 485 euros and the minimum retirement pension is 254 euros, cultivating a vegetable patch has its attractions.

Joao Fernandes, 72, said he easily saves up to 150 euros a month on his plot in Quinta da Granja, a green haven in Lisbon that has miraculously survived next to one of Europe's largest shopping centers and the towering 65,000-seat Benfica Luz stadium.

"Instead of buying stuff, I have here what I need," said Fernandes, a former cook, as he passed on gardening advice to a neighbor grower.

For an annual fee of 50-80 euros, plus the cost of seeds, tools and fertilizers, one can rent 150 sq meters of land, wood-fenced all around. Wood shed and water supply are included.

"I plant beans, tomatoes, peas, potatoes and cabbage. It is all for personal consumption, for myself, my wife and my two sons," he said.

The town is putting the finishing touches to what it says will be one of Europe's largest urban vegetable gardens, six hectares of land plots in a valley in Chelas, one of the most poverty-stricken areas on the outskirts of the capital.

The Chelas plots will be ready by year-end.

Lisbon councilman Jose Sa Fernandes, the head of the project, says the plots help heal citizens' souls as well as helping them financially.

"The crisis spurs us to give it more attention. With more unemployed and growing difficulties, demand is rising," Sa Fernandes said. "In the pre-depressive state we are all in, this project helps us overcome our angst."

(Editing by Sonya Hepinstall)

• A Permanent Economic Emergency