Updated on January 31, 2024
Article byPeter Johnson
Reviewed byDheeraj Vaidya, CFA, FRM

What is PIIGS?

The term PIIGS is a derogatory acronym that refers to a group of nations that were in a financially unstable position during the European debt crisis. The acronym included Portugal, Italy, Ireland, Greece, and Spain, which had unsustainable national debt levels and particularly weaker economies relative to other nations in the European Union. 

These few countries had the most profound impacts on the debt crisis brought about by the bankers’ excessive spending habits and irresponsible decisions. The acronym received several criticisms from economists, investors, and experts from around the globe for being discouraging and offensive.

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Key Takeaways

  • PIIGS is an acronym that was given to a group of nations in the European Union that were financially unstable and had high government debt levels.
  • The countries include Portugal, Italy, Ireland, Greece, and Spain.
  • The European Commission and the International Monetary Fund enacted several measures to support these nations’ economies and revive them from their ongoing financial crisis.

PIIGS Countries Explained

PIIGS countries received that name in the early 1980s itself. At first, the acronym was PIGS without including Ireland.

Starting in 1999, European Union members began to issue and utilize the same currency (the Euro). And hence, with the nations conforming to these standards, the debtsDebtsDebt is the practice of borrowing a tangible item, primarily money by an individual, business, or government, from another person, financial institution, or state.read more issued by the individual members of the union began to merge.

Initially, these developments seemed to be a positive occurrence as it was thought the economic riskEconomic RiskEconomic Risk is the risk exposure of an investment made domestically or abroad. These risks could be macroeconomic factors like government policies or collapse of the current government and major swing in the exchange rates.read more could be spread amongst the EU members. However, as time went on, it was evident that some countries were more financially responsible than others, such as France and Germany. Because of the irresponsible spending habits of countries like Greece, they began to accumulate debt excessively.

In October 2009, Greece declared that they had been underreporting the countries deficit numbers for several years. As a result, this announcement had adverse effects on the nation’s financial systemsFinancial SystemsA financial system is an economic arrangement wherein financial institutions facilitate the transfer of funds and assets between borrowers, lenders, and investors.read more as investors began to worry about its ability to repay its debt.

Greece was not the only country in the European Union to experience financial worries at this time. Other nations in the EU also had high sovereign debtSovereign DebtSovereign debt is the money borrowed by a country’s central government, primarily achieved by selling government bonds and securities. Treasury notes, bonds, and bills are some examples of sovereign debt issued by the United States.read more including Portugal, Italy, Ireland, and Spain.

That is how PIIGS economies received their name. According to a study posted in the European Journal of Political Research, there are arguments for saying the acronym may have caused more damage to those particular nations than what needed to be, which is referred to as “Granger causality.” As the media promoted the term PIIGS countries, evidence pointed to an increase in the nations’ bond yields.

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Impact on European Union

The European debt crisis started in 2009 after the alarming global financial crisisFinancial CrisisThe term "financial crisis" refers to a situation in which the market's key financial assets experience a sharp decline in market value over a relatively short period of time, or when leading businesses are unable to pay their enormous debt, or when financing institutions face a liquidity crunch and are unable to return money to depositors, all of which cause panic in the capital markets and among investors.read more that sent shockwaves worldwide.

The pressure began to mount for central banks worldwide, especially in the European Union, to act and contain the crisis. The European Central Bank acted quickly by implementing policies that were favorable for the economies, such as

The effects of the crisis varied in different parts of the European Union. In many instances, investors began to reevaluate their international investmentsInternational InvestmentsInternational investments are made outside of domestic markets and offer portfolio diversification as well as risk management opportunities. As a result, an investor can diversify his portfolio and extend his return horizon by making international investments.read more, especially for those assets held in countries that experienced high sovereign debt, such as the PIIGS economies.

As funds began to dwindle and credit was harder to access, many constructions and manufacturing companies in these nations had to bring their progress to a halt. Moreover, the discontinuation of these projects adversely affected the economyEconomyAn economy comprises individuals, commercial entities, and the government involved in the production, distribution, exchange, and consumption of products and services in a society.read more, like higher debt to GDP levels across the PIIGS nations.

These effects impacted financial marketsFinancial MarketsThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces.read more as investors became warier of international investments. As a result, the varied impact on the European Union members became evident as spreadsSpreadsSpread is the price, interest rate, or yield differentials of stocks, bonds, futures contracts, options, and currency pairs of related quantities.read more in the bond market began to surface, and the bond yield in the PIIGS nations was rising sharply. When bond yields started to rise, it can signify that the economy is expecting signs of inflation or other negative effects.

The relief started with a bailoutBailoutA bailout refers to the prolonged financial support offered by the government or other financially stable organization to a business in the form of equity, cash, or loan to help it overcome certain losses and stay afloat in the market.read more package to save Greece from debt defaultDebt DefaultDebt default refers to a situation in which a borrower fails to repay loans, causing the borrower's reputation to suffer. However, before the debt is declared a default, a notice is sent to the borrower stating the debt's position and the lender's intention to declare it a default in the event of non-repayment of the debt.read more in May 2010. Ireland similarly received a relief package in November. In May 2011, Portugal became the next nation to receive a bailout. Shortly after, the European Central bank began buying bondsBondsBonds refer to the debt instruments issued by governments or corporations to acquire investors’ funds for a certain period.read more from Italy and Spain.

PIIGS Crisis Timeline


The subprime mortgageSubprime MortgageA subprime mortgage is a loan against property offered to borrowers with a weak or no credit history. Since the risk of recovering is high, the interest rate charged on such mortgages is higher so that the lender can recover a maximum amount at the beginning of the loan.read more crisis in the U.S collapsed, sending ripple effects throughout the world’s banking and lending services lasting several years.


In October 2009, George Papandreou wins Greece’s national election. Shortly after, he disclosed that the nation’s budget deficit to GDPGDPGDP or Gross Domestic Product refers to the monetary measurement of the overall market value of the final output produced within a country over a period.read more reflected almost double the previous amount at 12.7%.


The countries of Portugal and Spain have begun to take measures to reduce their budget deficitsBudget DeficitsBudget Deficit is the shortage of revenue against the expenses. The budgetary deficit could be the sum of deficit from revenue and capital account. read more


  • April/May: Portugal is the latest country to receive a bailout financial package.
  • July: Introduction of European Stability Mechanism
  • November: ECB lowers interest rates to 1%


  • January: ECB begins buying of bonds in Italy and Spain
  • February: Standards & Poor’s lowered the Greeks credit rating by selective default.
  • June: Spain receives bailout funds to help stabilize the nation’s banks
  • July: Interest rates cut again to.75%
  • November: Protests in Portugal, Italy, Greece, and Spain over measures taken to reduce the deficit

Frequently Asked Questions (FAQ’s)

What Countries Are Included in PIIGS?

The countries that were considered part of the PIIGS economies included the following:
And Spain

Who Invented PIIGS?

Several sources have noted that the term PIGS (Portugal, Italy, Greece, and Spain) was used back in the 70’s or ’90s to describe countries performing poorly relative to the other nations in Europe.

However, it wasn’t until the Euro Crisis that the acronym became popularized. Since 2002, the term has been used a handful of times in the media. On May 13th, 2008, Professor Andrew Clare produced a report for the Fathom Consulting Group that contained “PIGS,” which he later clarified implied both Italy and Ireland.

On May 19th, 2009, the Financial Times released an article with the acronym “PIIGS” and was followed up by a posting in the Sunday Business Post.

This has been a guide to PIIGS and its definition. Here we explain PIIGS countries, its crisis, timeline along with its impact on European Union. You can learn more about finance from the following articles –