Author: Marta Sfredo

Source: Zero Hora Online - Porto Alegre / RS - 08/05/2010

For some, five little pigs are shaking in front of the bad market that blows at the door. For others, it is Club Med exposing cracks caused by poor maintenance. What is certain is that the week ended by expanding fear of Greece's borders to a larger group of European countries. Portugal, Italy, Ireland, Greece and Spain have simply become the Piigs, an acronym that is the focus of the restlessness of a world still traumatized by the crisis of late 2008 is the scope of the new international disorder.

- Europe is in danger of going through a debt crisis similar to that faced by Latin America in the 80s - warns Mailson da Nóbrega, former Finance Minister.

Although he admits that the comparison is not perfect, Mailson sees an identical origin: years of fiscal irresponsibility. In other words, public money spent by the duo that moved the pre-crisis phase, abundant and cheap credit.

- The risk of contagion is not small. Bleeding must be stopped to prevent it from turning into bleeding. If European leaders do not restore confidence, it could be a tragedy. There, we will be facing a crisis with similar, if not more serious, contours to that of the Lehman Brothers crash - says Mailson, mentioning the episode that triggered the 2008 crisis.

Not all predictions are so pessimistic. Although he does not consider it possible to limit the crisis to Greece, the former minister Marcílio Marques Moreira believes that the price to other Europeans may be restricted to higher interest rates on the roll of their debts. But he agrees that the exit depends on the answer to the distrust of the payment capacity.

One of the most ambitious political projects on the continent is at stake, reinforces João Marcus Marinho Nunes, professor at the Getulio Vargas Foundation:

- The euro is over, and Greece was the trigger. As it stands, the 16 eurozone countries have no instruments to adjust. If they insist, the risk is to turn into a drowning hug, with one pulling the other to the bottom.

With exchange rates and interest rates defined for all by the European Central Bank, each country has no autonomy to define monetary and exchange rate policies, which usually accommodate economic bumps. The tremors of a Greek default have already shaken the stock markets and foreign exchange markets. The question is whether, like the earthquake with an epicenter in the United States, it will shake up the real economy. Marcílio bets on Asian dampers - China and India - and on the recovery of the USA, which he considers “impressive”, to predict less serious effects on the daily lives of Brazilians, but he warns that the country must learn lessons from the consequence of uncontrolled spending.

- The storm is in rich countries. There may even be hail left for others, but clearly they will not suffer so much in the short and medium term. The crises of the 21st century are of the rich, just as those of the 20th century were of the underdeveloped, emerging, or whatever we want to call it - defines Marinho Nunes.

Reflexes in Brazil

With an epicenter in Greece and reflections across Europe, the new global upheaval raises new discussions about the impacts in Brazil. The first have already occurred, in the form of stock devaluation and a rise in the dollar against the real. Whether they will stop there or whether there is a risk of a stronger quake is an issue that is in the hands of European leaders. The prevailing bet is that, in their own interest, they will do everything possible to contain the damage to the smallest possible area. But as the mission to limit contagion in Europe is not easy, it is better to pay attention to avoid a bigger bump here.

- In Brazil, the effect should remain on the stock exchange and on the exchange rate. But there is a lesson that cannot be ignored. We have a lot of homework to do. There was euphoria, and even a certain pride, that are not good counselors. Public sector spending is growing steadily, and we are seeing what happens to those who are not careful with their bills - warns Marcílio Marques Moreira, former Minister of Economy.

Three months ago, when the situation in Greece had not deteriorated to the current level, former Secretary of State for Finance Aod Cunha cleaned his stock portfolio and began to advise his interlocutors to adopt a more cautious position. Now that the difficulty of limiting the shock to the Greeks is clearer, not least because banks in other European countries are creditors of the bonds under threat of default, the economist already calculates:

- Let's feel a strong shake. The stock market is expected to fall below 60 points (on Friday, it closed at 62.870), and if the situation worsens, up to 50.

An “immense restructuring” of debts is also a way out that Aod envisions for the crisis. He does not see social and political conditions for a spending squeeze of the size that would be necessary for the adjustment. The combination of the two instruments, debt renegotiation and fiscal control measures would make up the solution. But Aod dismisses a reprise of the impact of the 2008 crisis, which caused a drop in industry production, unemployment and a year of stagnation.

- It won't be like in 2008. But next year, instead of growing 5%, we may grow 2% or 3%. This year, Brazil accelerated too much, and we do not have the capacity to grow all this in the short term.

This Sunday the Europeans will show if they have the remedy to prevent new global contagion or if they still resist financing the irresponsibility of spenders.

WHY PIIGS? The acronym - word formed by the first or first letters of a set of words - with only an 'i' started to be used by the British press to refer to the poor economic performance of Portugal, Italy, Greece and Spain (Spain, in English) . The term has been used in Europe since the 90s to refer to countries in southern Europe. The Economist magazine and The Times and Financial Times spread the use, even under protests, as pig, in English, means pig. Then, Ireland was added, forming the Piigs. Between the end of last year and the beginning of this year, the acronym was popularized with the worsening of concerns about its debts. Ironically, versions have emerged that include Britain in this group and update the name to Piigs.