Friday, January 29, 2010
PIGS is an acronym for a group of four countries. Portugal, Italy (Ireland is also being added to the acronym), Greece and Spain. They've got one thing in common - they're all in deep economic troubles. And they're all in the eurozone. The recent performance of the Euro reflects that situation.
While Germany and France deny report of aid to Greece from EU, Goldman Sachs is being reported to broker Greek bonds to China. It appears that several countries are trying to sell their debt to Chinese while the cost of insuring against a sovereign-debt default is rising for Greece, Portugal, Spain and Italy. It's true that pigs cannot fly, and they never will. They will always pay a high price for their fiscal irresponsibility.
It's a pity that a country within the euro-zone find itself in such a situation. Definetly for the euro-zone, a member country being rescued directly or indirectly by China is not a good signal, politically and economically. It's not just a matter of diversifying the sources of funding national debt.
Yet, my question is: what does it happen to a country if its public and sovereign debt is being sold massively to another country like China?
While Italy's debt is at present still mainly held by Italians, its debt/GDP increasing ratio is not sustainable and sooner or later Italians might ask help to Chinese to place Italian bonds.
Will some lipstick make PIGS fly?
Will PIGS be Chinese pigs?