April 7th, 2011
06:15 AM GMT
(CNN) – One by one, the PIG economies - first Greece, then Ireland, now Portugal - have gone to the EU and IMF trough to bail out their debt-ridden economies.
The European Monetary Union is desperate to make sure that the acronym of troubled economies doesn’t turn into PIGS. So far, Spain has been spared.
And EU finance officials hope the request Wednesday by the Portuguese government for a bailout will be a firewall that stops the debt contagion from spreading to Spain – a much larger economy, with greater significance to the world economy and the future of the euro.
“That’s the main question now in the European Union: How far can this get,” Pedro Santos Guerreiro, editor-in-chief of Portugal’s leading financial newspaper, Jornal de Negocios, told CNN. “And Spain is quite nervous today, more nervous than they were yesterday, because it shows that maybe they’ll be the next country.”
“Spain has dramatically cut (its) problems but still has a lot of unemployment,” he added. Spain’s unemployment is forecast by Madrid to hover just below 20% in 2011, according to government figures released Wednesday.
Mounting sovereign debt has become a top global concern in the wake of the financial crisis. European nations like the UK are moving toward greater austerity, and Japan’s natural and nuclear crises exacerbate its world-topping debt load. The budget debate in Washington and the possible U.S. government shutdown underscore the political divide over the huge pile of debt amassing in the world’s largest economy.
When Greece sank into debt woes in late 2009, there were real fears the 17-nation eurozone wouldn’t survive a spiraling crisis, as richer and growing economies like Germany and France were being forced to pick up the tab for debt-ridden smaller nations.
“The Eurozone has really had a big question mark on this new phenomena of a bailout system, and the European Union is quite skeptical, I think, not only towards Portugal but mainly in what ways this crisis is going to evolve,” Guerreiro said.
Eliminating the shared currency for a return to national currencies would offer greater flexibility for ailing economies to raise or lower the value of their currency, but the economic fallout from abandoning the euro is too great for European economic planners to contemplate.
“The euro must prevail – there is this feeling quite strongly in Europe,” Guerreiro said.
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