PIIGS nation did not have much manufacturing on their revenue source. They were mostly dependant on tourism for their revenue. When the single currency Euro was announced they started spending on the cheap money they got from the Germany and the France banks. Thus they invested in their infrastructure or they subsidized their public services even though they did not have that much revenue. They were able to do that because there cheap money which was given to them. Thus indirectly it was the Germans who were paying for this. Germans and French were competitive in their industries and these nations’ costs of production were high and as a result these nations did not export much. Post the euro currency it became easier for the Germany firms to export and this even further reduced their competitiveness. Thus the revenue source for these nations was not much and they should not have spend the money they spent prior to the crisis.
Advantages and Disadvantages of Euro Common Currency
When everything was going good there was nothing happening with these nations. However post the 2008 crisis things started to worsen. When they hit the debt ceiling and the time started to come to repay they couldn’t repay it. Greece was at the top of the list in terms of amount to be repaid. It has already by the private investors and other government nations. There is no way that they can repay the debt. The only way is to take more debt. However there are many obstacles for these nations.
One way for the nations is to default on the debt. However as this debt is mainly been finance from the Germany and France banks there would be less chance that these nations would allow the PIIGS nation to default as they will face huge losses.