Greek burdens ensure some Pigs won’t fly

This Commentary by Daniel Gros looks at the acronym recently coined by financial markets to sum up troubled eurozone states – ‘Pigs’, for Portugal, Ireland, Greece and Spain – and finds it misleading, given its preoccupation with fiscal policy. In determining the sustainability of public debt, he argues that one should not look only, perhaps not even mainly, at today’s fiscal accounts, but at the resource balance for the entire country. It is one thing to provide financing to a country that is generating strong internal cash flows and got into trouble only because of excessive investment (the case of Ireland and Spain). But it is quite a different proposition to prop up one whose equity is being eroded because internal cash flow is not even sufficient to maintain the capital stock (the case of Greece and Portugal).