PIIGS Reconsidered

August 11, 2014



It wasn't so long ago that pundits were talking about Portugal, Ireland, Italy, Greece and Spain as a kind of European BRIC block: a homogeneous set of beleaguered states that could be leveraged for recovery plays.

My how times have changed. The best-performing PIIG this year is Spain, up 3.38 percent year-to-date. The worst? Greece, down more than 14 percent in slightly more than seven months. So what's driving this difference?

  • The iShares MSCI Spain ETF (EWP | B-94) has been benefiting from that country's pre-growth reforms, and Spain is being seen by many in our Alpha Think Tank as the best country in Europe right now.
  • The iShares MSCI Italy ETF (EWI | C-91) is suffering, as Italy has dropped back into recession. Fund flows suggest the market is very nervous about EWI, with both big creations and big redemptions within the last week.
  • The iShares MSCI Ireland ETF (EIRL | D-65), while down for the year, should benefit from a slow-and-steady recovery in Ireland, which recently upgraded its GDP forecasts and is showing improvements in the labor and, critically, the export market.
  • The Global X FTSE Portugal 20 ETF (PGAL | D-73) has been slammed by the banking crisis there, which has culminated in the government takeover and the plan to split Banco Espirito Santo into good and bad banks. I literally don't follow a pundit who thinks there's a magical buy-level in Portugal right now.
  • Which brings us to beleaguered Global X FTSE Greece 20 (GREK | C-54), the ignoble winner of "worst PIIG" in 2014. Still trapped in recession, Greece is now feeling the brunt of Russian sanctions—Russia is Greece's largest trading partner. Greece is very much on the bubble managing its recovery, and it's difficult to assess the true risks of a re-collapse—or a surprise recovery.

The bottom line here? The only things these five countries have in common is geography and a sputtering recovery.

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