PIIGS - What the news does not tell us

Despite the arrogance of such a derogatory term, PIIGS, coined by the English press in the 1980s, a positive vision behind that seems to be hidden and linked to the figure of pigs in Orwell's allegorical masterpiece.

Through a simplistic analysis of the contemporary European situation, I will explain my point of view. Although it is true that behind this nickname, we mean anything but something positive, the swine revolution and their domination in Animal Farm should show some glimmer of light.

To return to the analysis of this name through which the economic weakness of the countries for which this name was coined is ridiculed (namely Portugal, Italy, Ireland, Greece and Spain), it is necessary to clarify some points that are often overlooked.

I will begin by talking about the Euro and the choice of member countries – except for England, a former European member - to abandon what was their currency in favour of a "foreign currency" belonging to a third institution, the European Union.

Starting in 2001, the Euro became the official currency of the European Union member countries, replacing the one that the states had as their own. Hence the first question arises spontaneously.

Who prints the Euro? Are we, European countries, the real owners of this currency?

The answer is negative.

The European Central Bank distributes money, which is then circulated through the member countries' various National Central Banks. Indeed, we recall that the ECB remains extraneous to the practical cash management operations carried out by the NCBs.

However, when the transfer of money becomes disproportionate between one country and another due to a greater quantity in one Member State than in another, the ECB will always coordinate the transfers of excess stocks through the NCBs. By this, we mean the minimum capital that each National Central Bank must possess and for which it will get into debt in the event of its lack.

Therefore, a bit like a third-party supervisor, or as it should be, the ECB is the only actual owner of the Euro. Before the financial crisis, the ECB paid out more or less precisely. Liquidity needs were estimated, and the necessary amount was provided through loans to national central banks.

Following the crisis, the idea that some economies are more robust than others upset the balance. Not a wrong idea, but it leaves out countless factors.

More than corruption rather than government inefficiency of the PIIGS states, we should instead speak of control. A control that is increasingly entrusted to third-party institutions that follow market logic, precisely, a capitalistic logic based on profit.

If we consider the ECB as an investor who uses his own money to make a profit - albeit intended as an excess stock - we realise how that inequity is created, consolidating some countries' virtuosity despite others' weakness.

In other words, not enough emphasis is given to the reason why some countries have more difficulty than others in achieving welfare or that they are in economic crisis while others are not.

"If you have five dogs and only three bones and have to face competition, those bones will be given to those with the most chance of winning" cit.

In our case, the bone dispenser, i.e. the ECB, will therefore tend to invest in a German market, for example, solid for years, representing the sure win even if the Euro is abandoned by buying the government bonds and increasing their liquidity. The German market would, in any case, be more profitable than the Italian lira or the Spanish franc, for instance.

At this point, another question arises spontaneously.

How is the economic wealth of a state nourished?

Here, as in any capitalist society where entrepreneurs on one side and the working class on the other stand, the European one is no exception. In a European context, where some countries grow through exports, others get into debt to import those same products.

<<Germany grew through exports because someone in Europe imported. Greece has accumulated much debt because someone lent it money to import German Mercedes >> cit. by Stefano Fassina, an Italian economist.

This is where I refer to Orwell's work. The last commandment, "All animals are equal, but some animals are more equal than others", seems more relevant than ever.

Member countries should be considered and treated equally when the European system does not admit this equality.

In conclusion, analysing the current economic system, the result Orwell talks about – the victory of the pigs – appears to be the right and desirable solution, even if far from what we are experiencing now, albeit achievable.

In this sense, a migration policy that allows PIIGS states to turn their Achilles' heel into their workhorse could be seen as one of the ways out, following the English model in which immigrants have always contributed to the achievement of national welfare.