GIIPSGreece, Italy, Ireland, Portugal, and Spain
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This challenge remains a work in progress in both the United States and the Eurozone, and the hope is that GIIPS greater access to renewed borrowing will not backfire down the road.
The euro-area average, however, remained stuck at 10 percent as unemployment rates in the GIIPS continued to climb long after the official recession had ended.
The weighted average of growth in the GIIPS countries was roughly -1 percent over that time, while the rest of the euro area grew by roughly 1.
At the same time, they can learn from the GIIPS experience.
Capital flight has occurred, as bank deposits in some GIIPS have declined substantially, but the within-euro-area central bank transfer system, TARGET2, has ensured that banks within the GIIPS still have enough liquidity as they borrow from the ECB through their national central bank.
The most recent estimates for 2011 show that the combined current account deficits of the GIIPS will be on the order of 127 billion [euro], and their net foreign debt position will have risen to l,620 billion [euro].
No warship and not even a public letter will be sent to the GIIPS countries or the European Central Bank.
The remaining two GIIPS, Ireland and Spain, had budget surpluses over 2000-2007.
The GIIPS must complement fiscal tightening with structural reform, however, to promote renewed growth (including via restoration of market confidence).
They should instead adopt expansionary budget measures to impart at least a modicum of growth to the eurozone as a whole, strengthening their own growth and thus the prospects for successful adjustment in the GIIPS in terms of both economics and political sustainability.
With lower interest payments and a boom in revenues, government spending grew faster in the GIIPS than in the core.
However, the market is increasingly viewing GIIPS exposures in the aggregate and looking at mark-to-market valuation rather than potential loss, which drives concerns about overall capital adequacy.