PIGS is a pejorative acronym for the countries which are likely to pose the next round of challenges in the ongoing economic crisis. PIGS stands for Portugal, Ireland, Greece and Spain. Of these economies, Greece is already a full blown threat. This country has the dubious distinction of restating its accounts a la corporates. In October 2009, a new government was elected. Upon investigations, the new government found out that its predecessor had indulged in Enron-style accounting sleight of hand to grossly understate deficit figures. Consequently, deficits for 2008 and 2009 were restated from 5% and 3.7% of GDP to 7.7% and 12.7% respectively. It is now feared that Greece is likely to default on sovereign bonds. Sovereign default is the ultimate disaster for risk managers.
Any such default will have contagion effect. In addition, market sentiments will turn more bearish. Its ripple effects will postpone return to economic recovery by a few months.