December 17, 2009 / 1:13 PM / 9 years ago

FACTBOX-Eurozone's embattled fringe PIIGS economies

LONDON, Dec 17 (Reuters) - Worries over Greece’s public debt have preoccupied markets this month, drawing attention towards the euro zone’s most troubled and indebted economies.

Analysts have expressed particular concern over the PIIGS — Portugal, Italy, Ireland, Greece and Spain. Below is an overview of the budgetary situation in each, with links to further stories.

For a story comparing Greece to other southern euro zone countries, click here [ID:nLDE5BE0WI]

For a factbox on public debt levels in southern euro states, click here [ID:nLDE5BE1KA]

For a graphic on government debt as a proportion of GDP, click here



Estimated 2009 public debt level: 77.4 percent of GDP

Portugal looks set to push ahead with spending despite pressure from the IMF to cut outgoings by at least 0.5 percent of gross domestic product and raise taxes, relying on a return to economic growth to reduce a growing budget gap [ID:nGEE5B22HA].

Ratings agency Standard and Poor’s cut Portugal ratings outlook last week [ID:nGEE5B61QN], the latest sign of mounting worry over Portugal’s debt burden.

Portugal’s opposition-dominated parliament approved the Socialist government’s 2009 budget budget on Friday, raising this year’s debt ceiling by a third to 15 billion euros [ID:nGEE5BA0V6]

A September election became a sort of referendum on a series of expensive infrastructure projects supported by the Socialists, who won but were left with a minority that makes it unlikely they will muster the necessary support to fast-track a high-speed rail link that could push national debt still higher.

Portugal’s government plans to raise the minimum wage by 5.6 percent in 2010, deepening concerns over the fiscal deficit [ID:nGEE5B31FG]

For a story on the views of ordinary Portuguese people, click here [ID:nLDE5BD1EB]


Estimated 2009 public debt level: 64.5 percent of GDP

EU policymakers and ratings agencies have contrasted Ireland’s three austerity budgets in 14 months with Greece’s approach, praising Irish policymakers for beginning to address spending.

Last week, the government proposed a 4 billion euro ($5.9 billion) budget spending cut — and so far has got its proposals through Parliament without its Green coalition partners quitting and forcing elections [ID:nGEE5BA1P0]

Strikes may loom, but many ordinary Irish reluctantly accept the cuts [ID:nGEE5BA0T1]. As in Greece, they remain generally favourable towards the euro, saying otherwise they would have seen a wider collapse such as that suffered by Iceland last year.

Analysts say the budget, which slashed between five and 15 percent off public sector wages, was just the start of a process that must seek further cuts to make Ireland more competitive [ID:nGEE5B91QJ].


Estimated 2009 public debt level: 115 percent of GDP

Italian Economy Minister Giulio Tremonti has succeeded in reining in spending this year despite angry calls from cabinet colleagues for tax cuts and higher spending to stimulate the economy [ID:nGEE5AL0A7].

The government has adopted a package of emergency measures to tackle the crisis, including a one-off tax amnesty for capital held illegally overseas [ID:nLM412087].

As a result, Italy’s fiscal deficit this year estimated at 5.3 percent — while well above the Stability and Growth Pact’s 3 percent ceiling — remains better than the EU average, and is forecast to decline sharply after 2011 [ID:nLN566808].

Acknowledging the government’s plans for a fiscal consolidation from 2010 onwards, Standard & Poor’s confirmed on Tuesday its A+ rating with a stable outlook.

The agency said it expected Italy’s debt to GDP ratio to decline from 2011 onwards, but noted obstacles to sustained high growth coming from both physical and institutional problems.

Italy’s government debt has declined from a peak of around 125 percent of GDP in the mid-1990s, but has crept up again during the current crisis and is expected to level out at around 117 percent of GDP in 2011.

Economist say that, while there is no risk of Italy defaulting on its debt or dropping out of the euro, its economic growth remains too anaemic to make inroads into its debt to GDP ratio [ID:nL1648752].


Estimated 2009 public debt level: 113.4 percent of GDP

Pressured by markets, European Union partners and ratings agencies, Prime Minister George Papandreou outlined late on Monday plans to cut a ballooning budget deficit that has left the country as the euro zone’s weakest link.

For details of the measures, which include restrictions on public sector pay — although not outright widespread cuts — and a 10 percent reduction in social security expenditure in 2010, click here [ID:nLDE5BD2E8]

Greek markets fell this week while the cost of insuring its national debt in the credit for stock market rose — but in a sign of how difficult making cuts would be, workers launched protests and communists called a national strike [ID:nLDE5BE0QZ]

Ordinary Greeks say membership of the euro has saved them from even worse economic disaster, but some say they would rather see the European Union take control of the Greek economy — certainly rather than the International Monetary Fund [ID:nGEE5B81YH]


Estimated 2009 public debt level: 53.4 percent of GDP

Spain’s government has insisted it will meet European Union guidelines on a public deficit of 3 percent of gross domestic product by 2012, and after the EU extended the deadline to 2013 it said only that the new timetable would give it more elbow room. See [ID:nLC486356]

Ratings agency Standard & Poor’s on Wednesday warned that Spain risks a debt downgrade in two years if the government does not take tough action on its fiscal deficit. See [ID:nGEE5B917V] and [ID:nGEE5B820M]

Spain’s 2010 budget will introduce a 2 percent hike in Value Added Tax to 18 percent from 16 percent from July, in an attempt to mitigate any effect on domestic demand, and the government in the last year has raised taxes on tobacco and petrol. It has also cut fiscal stimulus measures, such as a blanket 400 euro tax rebate for all tax payers and aims to cut spending by 3.9 percent in like-for-like terms year on year.

The measures would raise around 11 billion euros for public coffers, the government says. See [ID:nLQ704779] and [ID:nLQ514180]

Further tax hikes have been ruled out. See [ID: nL1165103]

Compiled by Peter Apps; editing by Stephen Nisbet

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