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"PIIGS" we are informed in the currentWikipedia entry"is a pejorative acronym

used to refer to the economies of Portugal, Italy, Greece and Spain. Since 2008,

the term has included Ireland, either in place of Italy or with an additional I."

The reason why the five countries gained popularity is a serious concern within theEU, 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 ofthe word is very hard to shake off.

The Cause of the Trouble

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 lenders 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 EUs weakest

links.

Comparing the PIIGS Nations

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.

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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 tripledfrom 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, theauthorities in the country are about to implement some tough fiscal restrains.