Crumbling relations

The so-called ‘Piigs’ countries – Portugal, Ireland, Italy, Greece and Spain – have been an ongoing source of worry for the financial markets in 2010. While the prospect of a Eurozone country being allowed to default appears low, insurers are under greater pressure than ever to tighten up their sovereign bond portfolios. Sarfraz Thind reports

Sovereign risk has dominated the financial markets this year. The fallout from Greece’s fiscal woes has shaken confidence in European sovereign bonds, once considered to be the safest of investments. The five countries affected most – Portugal, Ireland, Italy, Greece and Spain, which together have been given the somewhat pejorative acronym Piigs, saw their sovereign debt spreads balloon in January as investors were gripped with fear of a contagion spreading across the markets. Credit default