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Kevin Rafferty

Pigs, of course, can't fly. Nor can the PIGS (Portugal, Ireland, Greece and Spain), the ailing euro-zone economies, fly away from their problems of heavy debts.
But the cost to the PIGS of raising money is flying alarmingly high. 
Five-year sovereign credit default swaps of Portugal, Ireland and Spain have risen to record levels of 500, 600 and 320 basis points respectively. 
To put this into an international perspective, debt-laden California trades at 300, Lebanon at 295, and Hungary at 360. At the other end of the scale, Coca-Cola trades at 38,  McDonald's at 39 and the US at 42.
Events of the last few weeks have shown that the economic morass in the developed world has spread wide and deep. 
Markets have been twitching like nervous rabbits at every passing breeze of a rumour, while politicians lack any hint of vision, let alone a practical plan to climb out of the pit.
The only people who  are laughing all the way to the bank are the bankers who caused so much of the mess, plus the very fattest cats of business.
Unless someone can come up with some bold and imaginative ideas and carry the clout to get them accepted politically, the rolling  economic and financial crises  paralysing the old world can only hasten the demise of the West. 
Despite the obvious temptation to gloat at the misfortunes of old  colonialists, creating a new order on its own will pose problems for Asia.
Even now, with Ireland having sealed  a combined European Union-International Monetary Fund Euro85 billion (HK$869 billion) bailout that looks likely to be politically unacceptable, rumours are spreading that the EU is pressuring Portugal to accept a bailout package before the worries spread to force one on it. 
It is a mark of the extent of the  nervousness that Spain's prime minister Jose Luis Rodriguez Zapatero tried to pre-empt problems for his country by declaring that anyone betting against Spain would lose their shirts, a defiance that Lex of London's Financial Times called 'either very brave or very foolish'.
But you have to feel sorry for Ireland, which committed none of the sins of Greece, such as overspending, running up huge deficits and then trying to hide the truth. Ireland's net public debts in 2007 were just 12 per cent, compared with 50 per cent for Germany and 80 per cent for Greece.
Dublin was undone by massive private spending sprees, largely on property, heavily fuelled by German banks as well as domestic ones. The government's room for manoeuvre was limited by its inability to raise  interest rates to prick the bubble.
Its membership of the euro meant that it did not have the exchange rate flexibility to encourage exports, whose continuing success has  depended on cutting costs and  reducing domestic demand. The economy has already shrunk by a savage 15 per cent, which may  increase to 20 or even 25 per cent as the price of the bailout is paid.
Brian Cowen's Fianna Fail  government has resisted cutting the low 12.5 per cent corporate tax rate, which  attracted companies like Google, Hewlett-Packard, Intel and Microsoft to set up major operations.
But that will mean the hardship with fall more heavily on the common man and the government is not likely to survive more than a few weeks. There is a threat to the whole of euroland, and indeed the EU, as both German chancellor Angela Merkel and Herman Van Rompuy, the president of the EU council, have acknowledged. Indeed, there is speculation as to who may be next AFTER Portugal and Spain, with Belgium also being mentioned.
Goldman Sachs' chief economist Jim O'Neill warned that 'very  extreme outcomes' were possible unless the EU got its political act  together and leaders started 'singing from the same hymn sheet'. 
In an interview with Britain's Sunday Telegraph, he added: 'The euro clearly deserves a risk premium - it is expensive compared to fair value. 
'I think fair value for the euro is 1.20 against the dollar and anyone buying it 10 per cent above that is not very sensible.' 
O'Neill, who is to become chairman of Goldman Sachs' asset management division, made it clear that according to traditional debt fundamentals 'you wouldn't want to touch the debt' of the developed members of the G20.
The rigid line of Germany's  Merkel is not helping. She and France's Nicolas Sarkozy have put their heads together to try to introduce a sovereign-debt-restructuring mechanism and to have it backed by a treaty revision. The inevitable result was speculative runs - merely proving again that the road to hell is paved with good intentions.
The greedy bankers seem unworried as politicians cave in. When he was in opposition in the UK last year, George Osborne damned 'inexcusable bonuses' paid out by the big banks. Liberal Democrat spokesman Vince Cable also slammed bonuses given to 'spivs and gamblers'. 
Fast forward to this year and  Osborne controls the UK's precarious purse strings and Cable is business secretary. And the government is trying to limit the tax take from big bonuses to GBP2.5 billion (HK$30.2  billion) as it hacks GBP81 billion from public spending.
The gap between the highest and lowest earners in the UK is at levels not seen since 1918. In the 29 years from 1980 to last year, the pay of a nurse went from GBP5,044 to GBP29,431. A doctor in general practice saw a sixfold salary increase from GBP12,480 in 1980 to GBP78,366 last year. 
But the average pay of the chief executive of a company quoted on the FTSE 100 leapt by more than 40 times from GBP85,000 to GBP4.9 million, with Bart Becht, CEO of Reckitt Benckiser, pocketing a handsome GBP92.6 million. 
An official survey showed more than 2,800 bankers at 13 financial concerns received GBP1 million-plus in pay packages last year. The disparity in the US is only slightly better and is likely to get worse with unemployment persisting at 10 million as corporate profits rise. Barry Ritholtz, who writes the Big Picture blog, may be right to call 'zombie bears' those who deny that the US is growing. Yes it is, slowly, as he concedes. 
But continuing mass unemployment will take both an economic and political toll, just when the US is struggling to get its own debts under control. 
America has a long history of resilience in the face of adversity, but the impending deadlock in Congress will test US President Barack Obama's leadership skills, and Washington - whatever it may boast about being the biggest and best in the world - needs a partnership with a united  Europe and a growing Asia. 
But there are few constructive radical thinkers coming up with new ideas of how to achieve it.
Feeling the squeeze
Ireland's economy has shrunk by 15 per cent, with worse to come
As the price of the Euro85 billion EU/IMF bailout is paid this may increase to: 25%
The huge pay divide
The pay of a nurse in the UK rose from GBP5,044 in 1980 to GBP29, 431 in 2009
The pay of a chief executive of a FTSE 100 company leapt from GBP85,000 to: GBP5m



Debt crisis threatens the whole euro zone