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Blog Archive–NACM Blog Credit Real Time: The Latest in Commercial Credit

Downward March of the 'PIIGS' Continues

The grouping of nations dubiously known as the "PIIGS" (Portugal, Ireland, Italy, Greece, Spain) can't seem to catch a break. Not long after Ireland's reluctant acceptance of a European bailout and widespread pontification that Portugal will follow, the group now has contend with austerity-related rioting in Greece and a likely ratings downgrade in Spain.

Violent protests erupted this week in Greece as public sector workers demonstrated against deep austerity measures taken by the nation's leaders. At least one Greek official reportedly was injured in the chaos, which resulted in a widespread shutdown of businesses and port operations. Greece was the first member nation to officially accept a European Union/International Monetary Fund bailout as its finances spiral out of control.

Meanwhile, the Spanish were incensed by a report this week from Moody's Investors Service calling the outlook for the Spanish banking system negative on fears of poor bank capitalization. The once hot-running and third-largest European economy continues to face economic woes thanks to massive problems in sectors such as real estate. Moody's noted its expects deteriorating "fundamental credit conditions among Spanish banks over the next 12 to 18 months:"

"The economic downturn of the past three years has led to a 4.9% decline in Spain's gross domestic product and a sharp rise in unemployment (19.8% in September 2010 from 8% YE 2007). ‘Moody's expects corporate profits to remain depressed for some time, especially in view of the limited likelihood of an additional economic stimulus, adding strain on unemployment and contributing to further deterioration in loan quality,'" said Alberto Postigo, VP-Senior Analyst and author Moody's latest report on the Iberian nation.

Brian Shappell, NACM staff writer

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