Why Europe’s PIGS Can’t Fly? and why PIGS in Europe have too much debt?

I have a new addiction: PIGS research and studies. Yes, that’s a new stream in European studies (according to me). Now these fabulous European tourist destinations are known simply as the PIGS– short for Portugal, Italy, Greece and Spain. This is a term used by financial journalists to refer to four countries of southern Europe: Portugal, Italy, Greece, and Spain. According to Wikipedia:

These Eurozone countries had mixed economic performance in the few years before 2008. They were perceived as lacking fiscal discipline and often ran large current account deficits, leading to concerns about the stability of the euro currency. Additionally, they tend to suffer from high unemployment. More recently Ireland and Great Britain are sometimes added as additional “I.” and “G.” (PIIGGS).

First there were the “BRICS” -Brazil, Russia, India, China. A term coined by Jim O’Neill at Goldman Sachs, has become a common term used by economists, politicians, bankers and business leaders. But for Pigs, analysts at Barclays Capital have been told not to use it in research notes, but to spell out the troubled countries instead. And the same goes at the Financial Times.

But interestingly enough as one acronym dies, another is born. Financial markets are already coining the term STUPID for countries with the most deficits. The new acronym stands for Spain, Turkey, United Kingdom, Portugal, Italy and Dubai.

Asian Journal quote:

“WHAT is it about PIGS that draws human attention? Last year, there was Obama’s reference to Sarah Palin as ‘putting lipstick on a pig.’ Notwithstanding the unkind metaphor, I voted for Sarah because not only did she have more sense and guts than Obama, she is a babe and I refer not to the PIG with the same name. Then, the swine flu broke out creating mass human hysteria. Certainly, PIGS can wear lipstick and PIGS can have the flu. But how can PIGS have too much debt? It’s actually PIIGS not PIGS: Portugal, Italy, Ireland, Greece and Spain. All of these European countries have one thing in common.  They all have accumulated too much debt and will not be able to repay their loans.”

some interesting charts:

source: www.sutton-associates.net/blog/

As Telegrapgh says,

“If Greece goes under that’s a problem for the eurozone. If Spain goes under it’s a disaster.”

Jose Luis Zapatero, Spain’s premier, assures us there isn’t a problem:

“Spanish public debt (52pc of GDP) is 20pc lower than Europe’s average; our treasury spends 5pc of revenues on debt costs, less than France and Germany.”

Which is very interesting as burningourmoney.blogspot.com says. Because on that basis, Spain looks like a paragon of fiscal virtue compared to Britain.

“We’ve looked at the following comparison chart before, but this time we’ve added Spain. It shows the OECD’s latest estimate of structural fiscal deficits (ie the bit of the government deficit that will not disappear automatically when the recession ends). And as we can see, when it comes to borrowing, the UK is by far the worst of the bunch, worse even than the PIGS”:

As blogger goes on, it is true that Portugal, Italy, and Greece are all currently worse than us in terms of debt outstanding, but “we’re catching up fast (meaning Britain). And as Zapatero says, Spain’s outstanding debt is actually lower than other countries, including us. According to the OECD, Spain’s gross government debt is currently 67% of GDP (2010), whereas ours is 83%.”

Bill Gross talks about “the Ring of Fire”.

“These red zone countries are ones with the potential for public debt to exceed 90% of GDP within a few years’ time, which would slow GDP by 1% or more. The yellow and green areas are considered to be the most conservative and potentially most solvent, with the potential for higher growth.”

What has to happen?

1. Increased taxes
2. Cuts in services
3. Cuts in entitlements
4. Higher interest rates

As they say unless and until these medicines are applied, you can rest assured, these PIGS will not fly.


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