Greece's sovereign debt crisis--which increased public borrowing costs for Greece and other European governments--has raised concerns that other eurozone countries with large fiscal deficits may soon default on their debts. Investors consider Portugal, Ireland, Italy, and Spain--which together with Greece have been termed "PIIGS"--more likely to default given their large budget deficits, weak growth prospects, and high overall debts. European policymakers had hoped the global economic recovery would help these governments grow enough to reduce their debt levels gradually and avoid default. But protracted talks over the terms of a joint EU-IMF Greek aid package coupled with successive downgrades of Greece, Portugal, and Spain's debt exacerbated fears of contagion. Greece's fiscal position also remains shaky, since many investors are not confident the country can implement the austerity measures required by the bailout package. Of great concern is the possibility that defaults in the PIIGS states could increase pressure on bond markets in Spain and Italy and reduce the euro's value. While some analysts think Greece's bailout may strengthen the IMF and EU's authority to manage future crises, others believe it has created a moral hazard that threatens the monetary
union's staying power.

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