Most of Europe’s economies are struggling right now, some worse than others. But the so-called PIGS (Portugal, Ireland, Greece, and Spain) are tottering on the brink. So what happened?
What Portugal, Spain, Ireland and other failing European states have in common — other than the Euro and membership in the EU, of course — are huge governments that spend well beyond their means.
In the 1980s and 1990s, the Irish government adopted a series of pro-growth policies — slashing corporate tax rates, for example — that allowed the productive economy to rapidly expand. Ireland went through a period of fantastic growth that led to its description as a “Celtic Tiger.” In the early 1990s, however, the government embarked on a massive spending spree, fueled by the private-sector wealth creation, that eventually saw public expenditures increase by more than 600 percent.