PIGS is a pejorative term used to denote five economies burdened with significant debt and how they relate to sovereign debt markets. Those countries are Portugal, Italy, Ireland, Greece, Spain and now Great Britain.
With all that went down with Greece, the fear was it could spread to Portugal, Spain and perhaps eventually Italy.
Although, the economies of Italy and Great Britain are far more developed and diversified than the other four nations mentioned so I would treat their inclusion cautiously. When all is said and done, they have better means to combat debt problems.
Both are major diversified export economies supplying the world with important goods and services. They are among the biggest visible and invisible traders in the world. More importantly, their industrial and manufacturing bases - filled with famous brand names and luxury items -dwarf other members of the so-called Pigs. That means they have a steady stream of cash flow and revenues. Moreover, Italian banks have been well-managed through the crisis.
Yes, the Italian public debt (as a percentage of total GDP) remains a serious issue, it's short-term debt, on the other hand, is more manageable. But a strong industrial base coupled with competent fiscal management hardly make Italy an official member of the PIGS.
Good point. In addition we must bear in mind that, even though Italy's big issue still is the level of public debt, at 115.8 percent of GDP in 2009, in Italy
ReplyDelete"contrary to Greece, there has been no fiscal drift in the recent period. For instance, the public sector accounted for 15.6 percent of total employment in Italy in 2009, against nearly 18 percent in the mid-1990s."
Furthermore,
"56 percent of Italian public debt is domestically held. Since the private sector debt is one of the lowest in Europe, Italy is less at risk than the peripherals of a catastrophic de-leveraging."
PS: I forgot: the quote is from Gilles Moec, Deutsche Bank.
ReplyDeleteI'm not surprised although Italy (like France) have a massive public sector, no? Nonetheless, as we mentioned, it has the means to finance it.
ReplyDeleteI would also be cautious to add Ireland to the mix.