Due to the economic recession which started in 2008, several members of the European Union became historically known as PIIGS. These states include Portugal, Italy, Ireland, Greece and Spain and if combined together, they form the acronym PIIGS. The reason why these countries were grouped together is the substantial instability of their economies, which was an evident problem in 2009.
The reason why the five countries gained popularity is a serious concern within the EU, with regard to their national debts, especially for Greece. The latter country was involved in a controversial affair after allegedly falsifying its public financial data. In the year 2010, it was evident that the five states were in need of corrective action in order to regain their former financial stability.
Because of the dirty farm animal associated with the acronym, several country leaders from the financially troubled countries have voiced out disagreement with the use of the term. However, there are quite a number of reporters and columnists who still refer to it when talking about the widespread economic crisis within the European Union. Although some prominent politicians have criticized the practice, the use of the word is very hard to shake off.
Looking back at economic developments, several members of PIIGS were in serious financial trouble in view of sovereign debt: the debt obtained from other nations using the lenderís currency. The reason why countries request sovereign funds is to raise funding when their own currencies are weak and unstable. The problem with this type of debt is the risk of defaulting.
Sovereign debt is a form of external debt and can be a huge risk when the borrowing country has a weak economy. Although some countries like the United States have larger external debt than the PIIGS, this debt can be regarded low risk as long as the country shows signs of a strong and vibrant economy. The problem with the external debt of PIIGS members is that their economies were considered the EUís weakest links.
In the European Union, the economy of Portugal ranks 17th in size. Although the debt of the country is less than that of the United States, its level of indebtedness has risen to nearly 20 percent in the past years. In addition, its unemployment stands at the alarming 10.4 percent.
While the Italian economy ranks fourth within the EU, in 2009, it went down by about 4.8 percent. The debt to GDP ratio of the country stands at 115.5 percent and its unemployment rate exceeds 7.5 percent.
Although Ireland used to be on the 15th place in terms of economic size, its indicators suddenly dropped down by 7.5 percent in 2009. In the past 3 years, its debt has tripled from 25.4 percent while unemployment rate reached 13.3 percent. Thus, the country joined the team of PIIGS nations.
Greece is the most controversial case of all. Although its economy ranks 13th in terms of economic size, its debt-to-GDP ratio is at the startling 125 percent. Since 2010, the government of Greece has started making budget cuts equaling 10 percent of its GDP.
Finally, Spain is the fifth largest economy in the European Union, with the lowest debt-to-GDP ratio of all PIIGS countries. However, its gross domestic product is at the low 66.3 percent, while unemployment stands at 20 percent. At present, the authorities in the country are about to implement some tough fiscal restrains.