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?
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3 comments:
About Italy:
please keep in mind the obvious fact that the total of sovereign debt and private italian debt is substantially under control and on the line of eurozone Countries and at least much better than Spain etc...etc..
In addition, the italian people, as others wisdoms Countries, have always been a good savers.
That's why the italian economic situation cannot be related with the PIIGS's country.
Maybe we have to start to talk of PIGS (Ireland and not Italy).
thanks
i really don't know what ur on about. if u look at it as a business transaction, it is like a bigger company buying up a failing one. how does it change things? it means the country being bailed out will do more business w/ china than in the past, bc this helps the bigger company and was the original incentive for them to make this move.
and while we're at it...if china is so horrid...why r they the only ones w/ the means to bail out these supposed 'better' economic/political systems?
the point isn't if a country 'can' bail them, meaning, another country out, it's whether they 'need' to! A country like China doesn't by debt because they're being nice, they do it because they know that it's a smart business decision and political move. Why do you think they own so much of the United States debt? Because they felt bad for them? No it's because if they don't, then the system starts to break down, and suddenly the US becomes weaker, translating in a drop in consumer activity. Which in the end is a much greater cost to China then buying the debt. It goes on and on...
Interesting article and discussion. Thanks for sharing.
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