Line chart and statistics of external debt for exports ratio, 1999 through 2009. In 2009, the ratio values are 6.8 for Portugal or 2.5 times Euro's area ratio, 8.53 for Ireland or 3.1 times Euro's, 8.84 for Greece or 3.2 Euro's, and 6.2 for Spain or 2.3 Euro's

The ratio of gross external debt to exports provides a quick indicator of the capability of an economy to repay external debt with enhanced revenue from sales to foreign countries. A ratio below 1 suggests that debt can be repaid rapidly, theoretically in less than one year. Conversely, the higher the ratio, the lower the country's capability to finance the debt with revenue from exports.

The group of countries formed by Portugal, Ireland, Greece and Spain currently find themselves in a critical position. Not only external debt reaches 6 to 8 times the size of exports, about 3 times higher than the Euro area's average, but it also ran out of control, growing at an alarming annual average rate of 6.2% to 8.2%.

Without decisive remedial action, these countries are at high risk of insolvency. Until recently, they were commonly presented as a showcase of the magic that the European Single Market could operate on the economic laggards. The 2008 crisis dissolved the veneer and brought to light the fundamental weaknesses of an economic development model based on public debt, current account deficit, private consumption, real estate bubbles, financial engineering and outright accounting cosmetics.

 

PIGS (Portugal, Ireland, Greece, Spain)
Ratio
Gross External Debt / Exports of goods, services, income and workers' remittances

Year

Portugal

Ireland

Greece

Spain
Gross external debtExports

Ratio External debt / exports

 Gross external debtExports

Ratio External debt / exports

 Gross external debtExports

Ratio External debt / exports

 Gross external debtExports

Ratio External debt / exports
(Million current US$)(Million current US$)(Million current US$)(Million current US$)
1999 41,948  107,961  29,294  183,818 
2000 41,665  119,736  33,861  190,542 
2001 42,855  129,992  33,427  197,080 
2002 43,916 508,068141,3583.59 32,720 708,055212,9053.33
2003270,45453,8275.02734,333164,7804.46204,57740,9545.00979,794264,2853.71
2004310,62762,7294.951,052,149196,3165.36253,28753,2144.761,235,322310,4313.98
2005302,22065,8854.591,336,187216,6326.17262,95456,4814.661,350,105336,0314.02
2006381,45378,6904.851,763,130249,1977.08329,78261,7725.341,804,654393,4544.59
2007483,91695,8165.052,267,387325,0816.97454,20075,3966.022,301,967479,1024.80
2008484,710104,7664.632,355,639344,8606.83504,61290,2405.592,326,273515,1184.52
2009548,13480,7356.792,384,730279,5538.53587,56266,4728.842,545,095410,1866.20
2010-Q1537,585  2,255,759  556,707  2,409,824  
2010-Q2497,762  2,131,267  532,934  2,165,945  
Average annual change rate5.16% 13.16% 9.96% 9.29%

 

Sources: JEDH for external debt, and World DataBank for balance of payments items.

 

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