PA OPINION: The ‘PIIGS’ are alright

Everyone is getting in a panic about ‘Grexit’, but it’s the return of the term ‘PIIGS’ that really grates.

PA OPINION: The ‘PIIGS’ are alright


Aside from being something of an irritating and perhaps insulting acronym, there’s the danger of taking the contagion argument too far.

For Enzo Puntillo, investment director at GAM, while Greece’s debt crisis is clearly serious, its fellow ‘PIIGS’ have “very minor symptoms” in comparison.

He points out these countries have all made significant adjustments in recent years to reduce fiscal and current account deficits.

“The differences between the Italian and Greek economies remain striking and we believe it is very unlikely that Italy will be a victim of contagion,” he says.  

“The debt in Italy is held predominantly by the domestic private sector, compared to Greek debt, which is held mainly by foreign lenders. Italy’s levels of household wealth are among the highest globally, stronger even than Germany.

“Defaulting on debt held by its own people is not an option for Italy, any move in that direction would be political suicide. Italy also has a very strong export market, including in luxury, machinery, vehicles and pharmaceuticals; this is a major advantage over Greece.”

Portugal, Ireland and Spain are also in a far healthier state now than when the PIIGS term was first coined some years ago.

Having agreed to bailout conditions in 2011, the Portuguese Government is promising to continue reforms.

After officially announced the end of austerity late last year, the Irish Government has been praised for the way it has steered the economy out of trouble. Last year economic growth in the country was 4.8%, with 3.7% expected this year.

On Friday, the Spanish Government raised its economic forecast to 3.3% GDP growth this year and 3% in 2016. Debt is expected to fall from 98.9% of GDP this year to 93.2% by 2018.


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