The PIIGS situation

Greece has (or certainly had) become the poster boy for the fiscal mismanagement/sovereign

debt plague in Europe, but Portugal is not far behind in the we-owe-more-than-we-can-make-or-save stakes.

Titled the PIIGS, Portugal, Ireland, Italy, Greece and Spain all have high debt, and high budget deficits, and low growth, a recipe for austerity and bail-outs, which the UK only just managed to avoid becoming an ingredient for.

But Greece and Portugal are apparently having the worst time selling their austerity measures to both their populations and global investors.

Both are suffering from unrest within the population, political turmoil and upheaval, and a distinct lack of support or enthusiasm for any of their ideas within the world of global investors.

This week the Organisation for Economic Cooperation and Development said that the Portuguese austerity measures are not enough, that it must extend the pay freeze until 2013 and consider swift rises in the taxation of sales and property.

Left-wing Portuguese president Jose Socrates had hoped to phase austerity in gradually, with growth helping to trim the budget deficit from 9.3% last year, to 7.3% this year, but investors have responded to this with a massive thumbs-down. Yields on Portuguese bonds have reached 6.41%, levels not seen since before Portugal became part of the European Monetary Union.

Worsening the situation is the fact that Socrates is relying on opposition votes to support his actions, and this is and will continue to get more and more difficult as the knife cuts deeper.

The political situation is a little more simple, but equally tense in Greece, which is having a bigger problem selling any and all austerity measures to its population.

From an overseas property perspective,property in Portugal is still by far the best bet. Property buyers seem keen to buy in Portugal, while Greece is a bit tougher. But this could all change if Portugal increases property taxes as we have seen in Greece.

The PIIGS situation

By: Les Calvert

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