PIIGS or PIGS is an acronym which refers to a group of European Union members which have been historically noted for having weak economies with similar areas of weakness, a problem which became especially evident in 2009. During the worldwide economic crisis which began in 2008, Portugal, Italy, Ireland, Greece, and Spain began to emerge as nations of serious concern in the European Union due to the large amount of debt they were carrying. By 2010, it was evident that corrective action was required and that several of these nations might not be able to recover independently.
Several officials from PIIGS nations have spoken out rather strenuously about the acronym, arguing that it is derisive and does not really contribute to boosts in confidence. However, many financial columnists and publications continued to refer to these troubled nations as PIIGS when discussing the economic crisis in Europe. The acronym is convenient and well suited to punning which means that it will probably be a difficult one to shake for the PIIGS members, despite their general dislike of it.
In late 2009, it became evident that several of the PIIGS were in serious trouble with sovereign debt. So-called sovereign debt is debt issued in the form of bond obligations issued by a government in the currency of another nation. Countries use sovereign debt to raise funds when their own currencies are not strong or stable enough to sustain a bond issue. The concern with sovereign debt is that the issuing country might not be able to pay it back.
As a result of the risk, it is typical to offer higher yields, which can in turn increase the risk of default because the debt costs more to service. In the PIIGS, sometimes referred to as “Europe's weakest links,” debt quickly outgrew gross domestic product (GDP) and raised concerns about the ability to repay the debt. Since governments cannot go bankrupt, several of the PIIGS attempted austerity measures and leaned on stronger EU members such as Germany for assistance.
The problem with the PIIGS is that speculators swooped in, compounding their debt issues and making the situation much more entangled. Many European Union members were also reluctant to rescue these struggling nations even when it became apparent that assistance would be needed. The sovereign debt crisis sparked a number of conversations about reforming financial policy in the European Union to prevent similar problems in the future.