PIGS
Portugal, Ireland, Greece, Spain
Much has been written about the EU debt bomb, cleverly called PIGS.
The inevitable “sovereign debt panic” finally struck last week, causing severe one-day drops in stock markets from New York to London to Toronto on Thursday.
Ostensibly, the epicentre of the crisis is Greece, in danger of defaulting on its debt payments to worldwide holders of its government bonds, or sovereign debt.
But the fear about state defaults quickly spread to Spain, Portugal and Ireland, fiscal train wrecks that together with Greece now go by the unfortunate acronym PIGS.
Even then, the scope of a potential second global financial crisis so soon after the credit crisis of 2008-09 goes far beyond the euro zone, the 16 nations sharing a common currency, the euro.
Last week’s dramatics could have been far worse. And they may yet manifest themselves in an ugly fashion in weeks to come if the euro-zone countries don’t rescue what Greek Prime Minister George Papandreou described last week as “the weakest link in the euro zone.”
Greece accounts for just 3 per cent of the euro-zone economy. The crisis in the cradle of Western civilization serves merely as proxy for government over-indebtedness everywhere.
Only a few months ago, a Dubai on the edge of default had to be bailed out by oil-rich neighbour Abu Dhabi. [hard to keep these guys straight, isn’t it? - Aggie] A debt-strapped Argentina recently tried and failed to pay debts by raiding its central-bank treasury.
Greece’s debt-to-GDP ratio is an eye-popping 95 per cent. But then, the U.S. isn’t far behind at 84 per cent. (The Canadian ratio is estimated at 35.5 per cent in the current fiscal year.) Greece’s deficit-to-GDP ratio is an alarming 13 per cent. But then, Britain isn’t far behind at 12.6 per cent.
And so on. Any thoughts? Maybe this is the End Of The Western World that the Iranians are drooling about? Then again, maybe it is just the usual nonsense.
Elections have consequences:
The U.S. looms largest. President Barack Obama just tabled a budget that projects a doubling in America’s national debt, to $28 trillion (U.S.), by decade’s end. That’s twice the size of the U.S. economy.
- Aggie
