Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

PIIGS

What it is:

The Eurozone nations of Portugal, Ireland, Italy, Greece and Spain make up a group of financially weak countries often referred to in the financial media by the acronym PIIGS.

How it works (Example):

The Eurozone is made up of 16 different countries that all use a single currency, the Euro. In the mid-2000s, Eurozone countries could borrow at relatively low interest rates, and some of the financially weaker countries were able to borrow much more than they can now afford to pay back.

The Portuguese Finance Minister has decried the use of the term PIIGS, saying that it is pejorative and racist. The Financial Times and Barclays Capital have banned the use of the term in its publications.

Why it Matters:

Some believe that the growing divide between the EU's financially weak countries and financially strong countries like Germany and France could ultimately lead to the breakup of the EU. As investors force Greece, Ireland and Spain to adopt austerity measures to get their budgets under control, strikes, riots and civil unrest have broken out across those countries.

To learn more about the debt problems in the EU, click here to read Crisis In Greece: Why This is Your Problem, Too.