Despite bailouts and confident talk coming out of the European Union, Greece and other high debt European nations known as the PIIGS (Portugal, Ireland, Italy, Greece and Spain) were a significant concern at this year's Credit Congress in Las Vegas. And the ongoing problems could lead some nations to attempt controversial exits from the European Union entirely.
NACM and FCIB Economist Chris Kuehl told conference attendees that troubles in Greece have been building for 50 or 60 years, so their latest financial meltdown should come as no surprise. This is the same nation that threatened to align with the Soviet Union during the Cold War in an attempt to get bailout money in the 1980s and also swindled its way into hosting the 2004 Olympics even though the nation was in no way able to pay for even a fraction of the costs without handouts from other European nations.
EU counterparts are demanding Greece moves into greater financial practicality with an austerity plan, perhaps an unrealistic one, that's more conservative than anything even Germany has done in the past, said Kuehl. Additionally, there's infighting between private-sector employees who are bitter that public-sector employees, which include a large number of people working political kickback jobs with little real responsibility, are fighting proposed rollbacks of lavish benefits and pay packages.
"All they're being asked to do is something unprecedented," Kuehl joked. He added that the other PIGGS, though they haven't come knocking for a bailout just yet, each have their own deep problems to deal with in the coming years:
Portugal - "Like the Flint, MI of Europe." They simply don't have a lot of things going on to raise commerce. It's not new, it's just finally being noticed.
Ireland - Overgrew during the real estate boom years, which caused a lot of immigration to Ireland. The more educated from the United States and Canada took a lot of the technology-based jobs. Meanwhile, immigrants from nations such as Hungary and Czech Republic took the service jobs. The combination ran a lot of nationals into long-term unemployment or out of the country entirely. "I was in Ireland for three days and hadn't met an Irishman."
Italy - Major divisions between various political factions, including the more financially conservative Northern League and a new wing of the fascist party headed by Benito Mussolini's granddaughter. The business community, which isn't very intertwined with the nation's government, has preformed relatively well despite the recession, however.
Greece - see above.
Spain - The commercial boom was too hot, and it left a huge percentage of the population who worked in construction without jobs. As such, overall unemployment exceeds 20% (construction unemployment is a staggering 63%). The sector is "an absolute catastrophe" and is affecting many aspects of life in Spain.
All of these problems with the PIIGS have helped fuel the fire of those who don't believe in the euro's chances for long-term sustainability. Kuehl predicts that at least two or three European nations will either try to leave the EU or, if they're being considered for membership, may simply say "no thanks" to the invite to join in the coming years. Germany, tired of having to play a major benefactor role in the Greek bailout and possible other ones down the line, stands as the most likely to do so. Such a move would cause political and financial chaos throughout the EU but would be wildly popular with a majority of Germans who believe the country should revert to the Deutschmark.
Brian Shappell, NACM staff writer