Euro Zone Crisis in PIGS

Greece

 ·         The government spent heavily to keep the economy functioning and the country's debt increased accordingly.

·         By April 2010 it was apparent that the country was becoming unable to borrow from the markets

·         By April 2010 it was apparent that the country was becoming unable to borrow from the markets

·         All the implemented austerity measures have helped Greece bring down its  fiscal deficit 10.6% of GDP in 2009 to just 2.4% of GDP in 2011, but as a side-effect they also contributed to a worsening of the Greek recession, which began in October 2008 and only became worse in 2010 and 2011.

·         As a result, seasonal adjusted unemployment rate grew from 7.5% in September 2008 to a record high of 27.9% in June 2013, while the youth unemployment rate rose from 22.0% to as high as 62%.

Ireland

·         The Irish sovereign debt crisis was not based on government over-spending, but from the state guaranteeing the six main Irish-based banks who had financed a property bubble

·         Irish banks had lost an estimated 100 billion euros, much of it related to defaulted loans to property developers and homeowners made in the midst of the property bubble, which burst around 2007.

·         The economy collapsed during 2008.

·         Unemployment rose from 4% in 2006 to 14% by 2010, while the national budget went from a surplus in 2007 to a deficit of 32% GDP in 2010, the highest in the history of the eurozone.

Portugal

·         Portugal had allowed considerable slippage in state-managed public works and inflated top management and head officer bonuses and wages.

·         Persistent and lasting recruitment policies boosted the number of redundant public servants.

·         When the global crisis disrupted the markets and the world economy, together with the US credit crunch and the eurozone crisis, Portugal was one of the first and most affected economies to succumb.

·         In the summer of 2010, Moody's Investors Service cut Portugal's sovereign bond rating, which led to an increased pressure on Portuguese government bonds.

Spain

·         Spain had a comparatively low debt level among advanced economies prior to the crisis.

·         Its public debt relative to GDP in 2010 was only 60%,

·         Debt was largely avoided by the ballooning tax revenue from the housing bubble, which helped accommodate a decade of increased government spending without debt accumulation.

·         When the bubble burst, Spain spent large amounts of money on bank bailouts.

·         Questionable accounting methods disguised bank losses.

·         During September 2012, regulators indicated that Spanish banks required €59 billion (USD $77 billion) in additional capital to offset losses from real estate investments.

·         The bank bailouts and the economic downturn increased the country's deficit and debt levels and led to a substantial downgrading of its credit rating.

·         To build up trust in the financial markets, the government began to introduce austerity measures.

·         Spain is suffering with 27% unemployment and economy shrank by 1.4% in 2013.