PIIGS refers to Portugal, Italy, Ireland, Greece, and Spain, countries with weak economies and high debt. The acronym is disliked by officials but used by financial publications. The PIIGS’ sovereign debt crisis triggered talks about financial policy reform in the EU.
PIIGS or PIGS is an acronym that refers to a group of European Union members that have historically been known to have weak economies with similar areas of weakness, a problem that became especially evident in 2009. During the worldwide economic crisis that began in 2008 , Portugal , Italy, Ireland, Greece and Spain began to emerge as countries of great concern in the European Union, due to the large amount of debt they owed. By 2010, it was clear that corrective action was needed and that several of these nations might not be able to independently recover.
Several officials from PIIGS countries have spoken out very strongly about the acronym, arguing that it is ridiculous and really does not build confidence. However, many columnists and financial publications continued to refer to these troubled countries as PIIGS when discussing the economic crisis in Europe. The acronym is convenient and suitable for punishment, meaning it will likely be hard to shake for PIIGS members, despite their general dislike of it.
In late 2009, it became apparent that several of the PIIGS were in serious sovereign debt trouble. So-called sovereign debt is debt issued in the form of bond obligations issued by a government in another nation’s currency. Countries use sovereign debt to raise funds when their own currencies are not strong or stable enough to support a bond issue. The concern with sovereign debt is that the issuing country may not be able to pay it back.
As a result of the risk, it is typical to offer higher yields, which in turn can increase the risk of default because debt costs more to service. In the PIIGS, sometimes referred to as “Europe’s weakest links”, debt quickly surpassed gross domestic product (GDP) and raised concerns about the ability to service debt. Since governments cannot go bankrupt, several of the PIIGS have tried austerity measures and turned to stronger EU members such as Germany for assistance.
The problem with the PIIGS is that the speculators got in on the action, compounding their debt problems and making the situation that much more complicated. Many members of the European Union were also reluctant to rescue these struggling nations, even when it became apparent that assistance would be needed. The sovereign debt crisis triggered a series of talks about reforming financial policy in the European Union to avoid similar problems in the future.
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