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Dez Morgan explains what P.I.G.S means, the financial problems the Eurozone currently finds itself in, and the possible future of the European currency.
Skip: Hello, This is Skip Montreux in Tokyo, Japan.
Dez: I’m Dez Morgan reporting from Leeds in the UK.
Skip: And this is Down to Business English.
Dez: The title of this new episode of Down to Business English is PIGS and the future of the Eurozone. So Skip what does that title mean to you?
Skip: Hmmm…let’s see. Pigs and the future of the Eurozone. By any chance would it have anything to do with the agriculture industry or maybe farming in Europe?
Dez: Good guess but no. PIGS is an acronym for Portugal, Ireland, Greece and Spain.
Skip: Hold on Dez…Maybe we should explain to everyone what exactly an acronym is.
Dez: Good point. An acronym is a word formed from the initial letters or groups of letters of words in a set phrase or series of words.
Skip: So the acronym PIGS actually refers to the first letter of those 4 countries: Portugal, Ireland, Greece, and Spain.
Dez: That is correct.
Skip: Okay, so what do each of those countries have in common?
Dez: Given the current state of the world economy, I think you can probably guess that whatever unites them isn’t good. So Let’s get D2B; Down to Business with a story of 4 little Euro-PIGS and the problems of taking on too much debt.
Skip: A story of 4 little pigs and debt. Sounds very worrying. Can you give us the details Dez?
Dez: As I am sure everyone knows; the Euro Currency came into being in 1999 with Greece joining later in 2001. Each country had to keep it’s budget deficit below 3% of GDP to qualify to enter the Eurozone.
Skip: Okay, seems reasonable, but I imagine that those 4 countries, the PIGS as they are referred to, are having a difficult time adhering to the budget deficit regulations of the EURO.
Dez: Indeed they are. Greece is the worst with an annual deficit of 12.5%, next is Spain at 11.25%, and Ireland at 10.75%. Which means that each of these countries is adding to it’s debt levels at at least 3 times the Eurozone regulated rate.
Skip: Are you telling me that Greece’s deficit is annually running at 12.5% of their Gross Domestic Product?
Dez: That’s right. However every Eurozone country is above the 3% figure, even usually fiscally responsible Germany at 3.5%.
Skip: Those are some very scary statistics. It sounds like no one is playing by the rules that they set up. So what happens next? If all of these countries are borrowing money to pay for their overspending, how will they ever pay it back?
Dez: That is the key question Skip. If all of the countries are in the same currency, then they are each theoretically responsible for the other’s excesses. Put simply, Germany and France are responsible for bailing out Greece because they agreed to do so when they all adopted the same currency.
Skip: Does that mean the EU will have to bailout Greece?
Dez: Well that is of course one option. The European Central Bank could take on some of Greece’s debts or at least guarantee them, which is the most likely choice and also seems to be the way current sentiment is leaning. Other less attractive options are for Greece to leave the Euro voluntarily or perhaps the most worrying option for the Eurozone is to expel Greece from the currency.
Skip: Alright, so Option A is for the EU to payoff or guarantee Greek government bonds. Option B is for Greece to walk away from the Euro and go back to using a national currency. And Option C is to have the other Eurozone members kick Greece out. Wow. Recently, I saw an interview with the Greek Prime Minster, Mr. Papandreou on the BBC. He was adamant that Greece did not want to be bailed out, that they had their loan obligations covered until the end of March, and were only looking only to borrow money at the low interest rates available to less risky borrowers.
Dez: That’d seem to be the most likely course of action. The European Central Bank guarantees the debt and Greece is able to access capital at the lower rates available to less risky borrowers.
Skip: Let me ask you this Dez. In the event that the EU supports Greece by promising to payoff their loans if they are unable to do so, what effect would that have on the Eurozone? Wouldn’t that devalue the Euro?
Dez: Well it already has to some extent, but more importantly what is going to happen when the other PIGS nations start to need the same support when they are charged higher rates of interest to reflect the higher risks in each of their countries.
Skip: It sounds like the European Central Bank is in a no win situation. If they guarantee Greece’s loans, they will be sending a signal to these other countries that they don’t have to worry about their debt- devaluing the Euro. If they don’t support Greece, the Eurozone will lose a member- also devaluing the Euro. Does the ECB even have enough money to guarantee these PIGS ?
Dez: As this has never happened before no one knows the answer to that question but I suspect that over the course of the next few years we are going to find out.
Skip: It certainly is interesting that the media have all picked up on using the acronym PIGS to refer to these countries. The stereotypical image of a pig is that of being a greedy animal that will eat more than it needs. But as we pointed out, all the Eurozone members are breaking the spending regulations. I wonder how their annual budget deficits compare to other countries around the world?
Dez: As you say the important point is how they compare with the other big industrialized nations. Let us begin with the US where the deficit is currently running at 10.6 percent of GDP. How about in Japan? How are they doing?
Skip: Well for the fiscal year ending in March 2010, the annual budget deficit will be 8.6% of GDP. Now that might sound better than the United States or Greece BUT it is a historical high and puts Japanese total government debt at well over 100% of GDP.
Dez: Looks like the whole world is in a lot of debt and as our listeners can imagine a lot of the vocabulary we will be discussing today is connected with the topic of money.
Skip: Great! Why don’t we get to it and look at some words and phrases everyone can put into their English word bank.
Dez: Lets get down to business with some vocabulary.
Skip: So what’s our first word today Dez?
Dez: Our first word is, rather fittingly, deficit. That’s d-e-f-i-c-i-t. A deficit is when an individual or a country has spent more money than they have, and has had to borrow the difference. In the case of a country, as in the examples given here, the countries have had to issue government bonds to borrow money and finance the difference or deficit. When a country makes more than it spends, it is in surplus and the additional money can be used to buy back debt and pay off the deficit.
Skip: We should point out that the word deficit is often heard in the phrase ‘running a deficit’ If a country has a deficit, you can say it is running a deficit. Dez, can you give us an example sentence?
Dez: Sure can. As you said a country can be said to be running a deficit when it has spent more money than it has taken in. Do you know the last time that the US wasn’t running a deficit and was able to balance its books?
Skip: I believe the last time the United States was not running a deficit was just before George W. Bush took office wasn’t it? Maybe around 1999?
Dez: That was about what I thought too. The last time the US wasn’t running a deficit was under the Clinton administration.
Skip: Alright then. The next word I would like to look at is the verb ‘to adhere to something’. I’ll spell that A-d-h-e-r-e. In our conversation, I commented that the PIGS nations are having trouble adhering to the Eurozone rules. If I were to say this with more basic vocabulary, maybe would say ‘the PIGS are having trouble following the rules or keeping their promise. Simply put, to adhere to something means the same as to do something that you have promised to do. For example, a company president might announce to his managers “In order to keep overall company spending under control, it is important that all managers strictly adhere to their departmental budgets.”
Dez: Let’s adhere to our time schedule today then and move on. Our next word is debt; d-e-b-t, and is very closely linked to the word I spoke about earlier, deficit. A country or person can be said to be in debt after they have borrowed some money and before they have paid it back. A good example of this is when you borrow some money from the bank to buy a car. You’re in debt to the bank until this loan has been repaid.
Skip: And just to follow up a bit, if you finish paying off your bank loan, you can say you are out of debt. I made a final payment on my car last week and am now out of debt.
Dez: Sure feels good to feel out of debt I’m sure
Skip: It’s an amazing feeling. Okay, another important word is the adjective ‘fiscal’ and its adverbial counterpart ‘fiscally’. Fiscal is spelt f-i-s-c-a-l. Now both of these words come from the same root as the word ‘financial’ and are related to finance. A fiscal year is the business year set by a company’s accountants. It may run January- December but can be any other 12 month period as well. The adverb ‘fiscally’ can be used to describe an adjective. For example; The CEO was ousted by the board for being fiscally irresponsible with the companies earnings.
Dez: Now we are going to discuss the verb to bailout. That’s b-a-i-l and out, o-u-t. This is when a country, company or individual has gotten themselves into so much debt a friend or associate has to take over or assist you with your debts and so bail you out of the problem. A good example of this was when Abu Dhabi bailed out it’s fellow emirate Dubai with interest free loans to assist Dubai in this very difficult time. How about you Skip have you ever been bailed out?
Skip: Oh yes I have. Dez don’t you remember when you came and bailed me out of that certain drinking establishment in Roppongi a few years back? I had run up a huge deficit on my bar tab and my credit card was declined. Did you ever bail me out! Thanks again for that!
Dez: My pleasure Skip and I’m sure you’d do the same if the tables were turned.
Skip: Of course.
Dez: Okay, and what’s our next word Skip?
Skip: Next up is the word guarantee. Now everyone, please be careful with the spelling of this word. I myself misspell it all the time. The spelling is g-u-a-r-a-n-t-e-e; that’s guarantee. Now, guarantee is very useful both as a noun and as a verb. It is similar in meaning to a promise, however it is more formal in nature and is often used in a business context. For example; the employee’s contract guarantees a bonus if sales increase 30% in a quarter. Or another example; the government guaranteed the bank that they would cover the company’s loan if the project did not succeed.
Dez: And, our final word for today is the adjective adamant. A-d-a-m-a-n-t. To be adamant is when you are 100% sure about something. As an example I had a terrible holiday in Thailand a few years ago and I was adamant at the time that I would never return, and indeed I haven’t. Although I really could do with a few weeks on those beaches after a long hard English winter.
Skip: It doesn’t sound like you are adamant about never returning now.
Dez: True, but at the time I certainly was.
Skip: I completely understand. Well okay that does it for our vocabulary for today’s show. We encourage you to go back and listen to our conversation about the PIGS and the Eurozone again, and try to catch each of these key words as we use them.
Skip: Well that does it for today’s show. Thank you very much for listening everyone and Dez its’s been wonderful talking with you.
Dez: And you to Skip, always a pleasure. And everybody, don’t forget to visit our website and download the PDF of today’s audioscript it’s a useful tool in helping you study today’s show. Our website is www.downtobusinessenglish.com
Skip: Great, and while you are there feel free to leave a comment in the comment section. We would love to hear from you.
Dez: We hoped you enjoyed today’s topic. Thanks so much for listening. Until next time, I’m Dez Morgan from Leeds here in the UK.
Skip: And I’m Skip Montreux here in Tokyo, Japan. And you have been listening to Down to Business English. Take care everyone.
Dez: Yes, take care. Bye.
Dez: I’m Dez Morgan reporting from Leeds in the UK.
Skip: And this is Down to Business English.
Dez: The title of this new episode of Down to Business English is PIGS and the future of the Eurozone. So Skip what does that title mean to you?
Skip: Hmmm…let’s see. Pigs and the future of the Eurozone. By any chance would it have anything to do with the agriculture industry or maybe farming in Europe?
Dez: Good guess but no. PIGS is an acronym for Portugal, Ireland, Greece and Spain.
Skip: Hold on Dez…Maybe we should explain to everyone what exactly an acronym is.
Dez: Good point. An acronym is a word formed from the initial letters or groups of letters of words in a set phrase or series of words.
Skip: So the acronym PIGS actually refers to the first letter of those 4 countries: Portugal, Ireland, Greece, and Spain.
Dez: That is correct.
Skip: Okay, so what do each of those countries have in common?
Dez: Given the current state of the world economy, I think you can probably guess that whatever unites them isn’t good. So Let’s get D2B; Down to Business with a story of 4 little Euro-PIGS and the problems of taking on too much debt.
Skip: A story of 4 little pigs and debt. Sounds very worrying. Can you give us the details Dez?
Dez: As I am sure everyone knows; the Euro Currency came into being in 1999 with Greece joining later in 2001. Each country had to keep it’s budget deficit below 3% of GDP to qualify to enter the Eurozone.
Skip: Okay, seems reasonable, but I imagine that those 4 countries, the PIGS as they are referred to, are having a difficult time adhering to the budget deficit regulations of the EURO.
Dez: Indeed they are. Greece is the worst with an annual deficit of 12.5%, next is Spain at 11.25%, and Ireland at 10.75%. Which means that each of these countries is adding to it’s debt levels at at least 3 times the Eurozone regulated rate.
Skip: Are you telling me that Greece’s deficit is annually running at 12.5% of their Gross Domestic Product?
Dez: That’s right. However every Eurozone country is above the 3% figure, even usually fiscally responsible Germany at 3.5%.
Skip: Those are some very scary statistics. It sounds like no one is playing by the rules that they set up. So what happens next? If all of these countries are borrowing money to pay for their overspending, how will they ever pay it back?
Dez: That is the key question Skip. If all of the countries are in the same currency, then they are each theoretically responsible for the other’s excesses. Put simply, Germany and France are responsible for bailing out Greece because they agreed to do so when they all adopted the same currency.
Skip: Does that mean the EU will have to bailout Greece?
Dez: Well that is of course one option. The European Central Bank could take on some of Greece’s debts or at least guarantee them, which is the most likely choice and also seems to be the way current sentiment is leaning. Other less attractive options are for Greece to leave the Euro voluntarily or perhaps the most worrying option for the Eurozone is to expel Greece from the currency.
Skip: Alright, so Option A is for the EU to payoff or guarantee Greek government bonds. Option B is for Greece to walk away from the Euro and go back to using a national currency. And Option C is to have the other Eurozone members kick Greece out. Wow. Recently, I saw an interview with the Greek Prime Minster, Mr. Papandreou on the BBC. He was adamant that Greece did not want to be bailed out, that they had their loan obligations covered until the end of March, and were only looking only to borrow money at the low interest rates available to less risky borrowers.
Dez: That’d seem to be the most likely course of action. The European Central Bank guarantees the debt and Greece is able to access capital at the lower rates available to less risky borrowers.
Skip: Let me ask you this Dez. In the event that the EU supports Greece by promising to payoff their loans if they are unable to do so, what effect would that have on the Eurozone? Wouldn’t that devalue the Euro?
Dez: Well it already has to some extent, but more importantly what is going to happen when the other PIGS nations start to need the same support when they are charged higher rates of interest to reflect the higher risks in each of their countries.
Skip: It sounds like the European Central Bank is in a no win situation. If they guarantee Greece’s loans, they will be sending a signal to these other countries that they don’t have to worry about their debt- devaluing the Euro. If they don’t support Greece, the Eurozone will lose a member- also devaluing the Euro. Does the ECB even have enough money to guarantee these PIGS ?
Dez: As this has never happened before no one knows the answer to that question but I suspect that over the course of the next few years we are going to find out.
Skip: It certainly is interesting that the media have all picked up on using the acronym PIGS to refer to these countries. The stereotypical image of a pig is that of being a greedy animal that will eat more than it needs. But as we pointed out, all the Eurozone members are breaking the spending regulations. I wonder how their annual budget deficits compare to other countries around the world?
Dez: As you say the important point is how they compare with the other big industrialized nations. Let us begin with the US where the deficit is currently running at 10.6 percent of GDP. How about in Japan? How are they doing?
Skip: Well for the fiscal year ending in March 2010, the annual budget deficit will be 8.6% of GDP. Now that might sound better than the United States or Greece BUT it is a historical high and puts Japanese total government debt at well over 100% of GDP.
Dez: Looks like the whole world is in a lot of debt and as our listeners can imagine a lot of the vocabulary we will be discussing today is connected with the topic of money.
Skip: Great! Why don’t we get to it and look at some words and phrases everyone can put into their English word bank.
Dez: Lets get down to business with some vocabulary.
Skip: So what’s our first word today Dez?
Dez: Our first word is, rather fittingly, deficit. That’s d-e-f-i-c-i-t. A deficit is when an individual or a country has spent more money than they have, and has had to borrow the difference. In the case of a country, as in the examples given here, the countries have had to issue government bonds to borrow money and finance the difference or deficit. When a country makes more than it spends, it is in surplus and the additional money can be used to buy back debt and pay off the deficit.
Skip: We should point out that the word deficit is often heard in the phrase ‘running a deficit’ If a country has a deficit, you can say it is running a deficit. Dez, can you give us an example sentence?
Dez: Sure can. As you said a country can be said to be running a deficit when it has spent more money than it has taken in. Do you know the last time that the US wasn’t running a deficit and was able to balance its books?
Skip: I believe the last time the United States was not running a deficit was just before George W. Bush took office wasn’t it? Maybe around 1999?
Dez: That was about what I thought too. The last time the US wasn’t running a deficit was under the Clinton administration.
Skip: Alright then. The next word I would like to look at is the verb ‘to adhere to something’. I’ll spell that A-d-h-e-r-e. In our conversation, I commented that the PIGS nations are having trouble adhering to the Eurozone rules. If I were to say this with more basic vocabulary, maybe would say ‘the PIGS are having trouble following the rules or keeping their promise. Simply put, to adhere to something means the same as to do something that you have promised to do. For example, a company president might announce to his managers “In order to keep overall company spending under control, it is important that all managers strictly adhere to their departmental budgets.”
Dez: Let’s adhere to our time schedule today then and move on. Our next word is debt; d-e-b-t, and is very closely linked to the word I spoke about earlier, deficit. A country or person can be said to be in debt after they have borrowed some money and before they have paid it back. A good example of this is when you borrow some money from the bank to buy a car. You’re in debt to the bank until this loan has been repaid.
Skip: And just to follow up a bit, if you finish paying off your bank loan, you can say you are out of debt. I made a final payment on my car last week and am now out of debt.
Dez: Sure feels good to feel out of debt I’m sure
Skip: It’s an amazing feeling. Okay, another important word is the adjective ‘fiscal’ and its adverbial counterpart ‘fiscally’. Fiscal is spelt f-i-s-c-a-l. Now both of these words come from the same root as the word ‘financial’ and are related to finance. A fiscal year is the business year set by a company’s accountants. It may run January- December but can be any other 12 month period as well. The adverb ‘fiscally’ can be used to describe an adjective. For example; The CEO was ousted by the board for being fiscally irresponsible with the companies earnings.
Dez: Now we are going to discuss the verb to bailout. That’s b-a-i-l and out, o-u-t. This is when a country, company or individual has gotten themselves into so much debt a friend or associate has to take over or assist you with your debts and so bail you out of the problem. A good example of this was when Abu Dhabi bailed out it’s fellow emirate Dubai with interest free loans to assist Dubai in this very difficult time. How about you Skip have you ever been bailed out?
Skip: Oh yes I have. Dez don’t you remember when you came and bailed me out of that certain drinking establishment in Roppongi a few years back? I had run up a huge deficit on my bar tab and my credit card was declined. Did you ever bail me out! Thanks again for that!
Dez: My pleasure Skip and I’m sure you’d do the same if the tables were turned.
Skip: Of course.
Dez: Okay, and what’s our next word Skip?
Skip: Next up is the word guarantee. Now everyone, please be careful with the spelling of this word. I myself misspell it all the time. The spelling is g-u-a-r-a-n-t-e-e; that’s guarantee. Now, guarantee is very useful both as a noun and as a verb. It is similar in meaning to a promise, however it is more formal in nature and is often used in a business context. For example; the employee’s contract guarantees a bonus if sales increase 30% in a quarter. Or another example; the government guaranteed the bank that they would cover the company’s loan if the project did not succeed.
Dez: And, our final word for today is the adjective adamant. A-d-a-m-a-n-t. To be adamant is when you are 100% sure about something. As an example I had a terrible holiday in Thailand a few years ago and I was adamant at the time that I would never return, and indeed I haven’t. Although I really could do with a few weeks on those beaches after a long hard English winter.
Skip: It doesn’t sound like you are adamant about never returning now.
Dez: True, but at the time I certainly was.
Skip: I completely understand. Well okay that does it for our vocabulary for today’s show. We encourage you to go back and listen to our conversation about the PIGS and the Eurozone again, and try to catch each of these key words as we use them.
Skip: Well that does it for today’s show. Thank you very much for listening everyone and Dez its’s been wonderful talking with you.
Dez: And you to Skip, always a pleasure. And everybody, don’t forget to visit our website and download the PDF of today’s audioscript it’s a useful tool in helping you study today’s show. Our website is www.downtobusinessenglish.com
Skip: Great, and while you are there feel free to leave a comment in the comment section. We would love to hear from you.
Dez: We hoped you enjoyed today’s topic. Thanks so much for listening. Until next time, I’m Dez Morgan from Leeds here in the UK.
Skip: And I’m Skip Montreux here in Tokyo, Japan. And you have been listening to Down to Business English. Take care everyone.
Dez: Yes, take care. Bye.
