By P Chong                               3 May 2010

Now that news is all over about Greece toppling as the first of the dominoes,  and the credit downgrading of Spain & Portugal that followed, it appears the rest of the other “PIIGS” nations are just teetering on the fringe. The crucial question is with the political and legal wrangling on what to do with these wayward “PIIGS” nations, will Euro survive?

(“PIIGS” stands for Portugal, Ireland, Italy,Greece & Spain)

This Mediterranean Greek nation, the first major sovereign debt domino to topple, is just the Eye of the Sovereign Debt Hurricane. Greece is buried under a massive load of debts and deficits, and the numbers are indeed shocking.

Social unrest & austerity riots, protests, strikes over fiscal cuts

According to the European Union’s (EU) statistics agency which has been combing through Greece’s books, the country’s 2009 deficit tally up to a whopping 13.6 percent of Gross Domestic Product (GDP) & may even be as high as 14.1 percent.

That’s more than four times the official “limit” for a country in the EU. And the nation’s total debt load is now closing in on $400 billion, or 115 percent of GDP. That’s among the worst ratios on the planet.

Greece is said to be an utterly corrupt nation . . . hence this plight. Towards the end of April 2010, Standard & Poor’s Agency lowered Greek debt to junk causing ripples in the world stock market & shares fell sharply. The other “PIIGS” nations are bound to be contaminated & it would mean just days for Euro to save itself. Already, sooner than expected, Spain & Portugal have also been downgraded by Standard & Poor’s.

Greek interest rates have exploded higher, with yields on 10-year Greek government bonds surging above 10 percent. Meanwhile, two-year note yields soared past 11 percent, more than a sub-prime mortgage borrower pays in the U.S.!

That’s a recipe for disaster for a country that needs to sell $72 billion in debt to cover its deficits just in the coming months.

In a report by Vincent Fernando CFA, from the Business Insider: “ . . . there’s just a broad deterioration in perceived creditworthiness happening right now, but it is particularly severe for the sovereign nation above given that their spreads are hitting record highs.”

Dr Marc Faber, an economic commentator, believed that the “PIIGS” nations will be defaulting & slaughtered. News from BBC carried the same kind of message.

Today’s clever acronym “PIIGS” for these EU nations of Portugal, Ireland, Italy, Greece & Spain is quite apt.

Facing a full-scale meltdown, Greece did the unthinkable recently by asking for a bailout from the EU and the International Monetary Fund (IMF). The lifeline will take the form of up to $40 billion in three-year loans from the 15 other nations that share the Euro currency. Those loans will carry a below-market rate of just 5 percent. Greece can also get its hands on another $20 billion in low-rate loans from the IMF.

Greece is far from being alone. We’ll take at one other of the “PIIGS” countries, Portugal:

• GDP shrank 2.7 percent in 2009, the worst recession in more than six decades.
• The unemployment rate recently hit a 23-year high of 10.1 percent.
• Budget deficit jumped to 9.3 percent of GDP.
• Total debt is more than 85 percent of GDP, the worst in 20 years.

What about Ireland?

• The budget deficit is almost 12 percent of GDP.

Italy?

• Its total debt load is on track to hit 117 percent of GDP.

Plus, Spain is battling a budget deficit of 11.4 percent of GDP.

The bottom line is among the “PIIGS” nations, Greece is just the first domino to fall. Many other European countries are next in line. If truth be told, Greece hasn’t done anything different from many other countries including the U.S.

The biggest domino of all will be the U.S.! Budget deficit is soaring . . . debt load is exploding . . . bond yields are starting to rise . . . and their risk premium is beginning to climb.

As evident as it is, it’s been reported what we could expect:

“The folks in Washington are sticking their heads in the sand, ignoring the warning signs all around them. They believe the same kind of bond market collapse that just struck Greece can’t happen there. So they’re continuing to bail out banks, brokers, mortgage companies, insurance companies, automakers, unions, homeowners and the unemployed.

But now, with demand for U.S. Treasuries waning — as evidenced by a string of disastrous auctions and continued net selling by China — the only question that remains is, “Who will bail out Washington?”

The simple fact is, no institution or group of institutions on Earth has the resources to save Washington when the bond market finally gives up on their ability to manage their own finances. When that day dawns, the bond market will come apart at the seams. Interest rates will shoot the moon. Their feeble economic recovery could just vanish.”

It’s all very well to go on a spending spree & enjoying lifge as though there’s no tomorrow, but sooner or later, the bills become due which must be paid, and if there’s no cash then what can you expect?

With well over 80% of the American population not trusting Washington with its free spending & free printing of paper money . . . doomsday is predictably not too far off!

In a recent report by Vincent Fernando of the Business Insider, he said that “the U.K. is about to crash along with the sovereign-default “PIIGS”.

Too much freedom in Democracy

Makes control go crazy!

Breaking News Over Aljazeera (Live): “Greekonomics” – Greece been granted a bailout package for 110 Billion Euros for three years from IMF & EU combined.

7 May 2010 Breaking News: Greece is paralyzed … Athens is in flames … rioters are firebombing banks, businesses and government buildings … the euro is plunging … stock markets are reeling …

And now, this great sovereign debt crisis is speeding towards US like a run-away freight train. Other “PIIGS” are cringing – UK included.