PIGS are not very exposed any more to sovereign debt - they offloaded their debt to vulture funds and hedge funds, several years ago. The reasons why Germany and IMF are imposing strict conditions are that German voters (understandably) don't want to throw good money after bad, and the IMF knows full-well from experience that unless drastic reforms are undertaken to weak, inefficient economies like Spain and Greece, there is not enough money in the World to stop these economies collapsing. The issue the PIGS have now is that they are stuck with a currency they cannot devalue to try to gain competitiveness, instead they must internally devalue by reducing salaries and spending - which is much more painful. "The prospect of Spain standing near the exit to the eurozone with Greece and Portugal had seemed outlandish only a few weeks ago" Really, eh? I supposed it might have seemed outlandish to people who think the EU's endless parade of bailouts is actually going to fix anything past the next few weeks. To the rest of us, not so much. Krugman blogged this today. It's Dr Rudi Dornbusch on the Mexican crisis and is a really incredible quote. An overvalued currency isn't tantamount to a crisis. The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought, and that's sort of exactly the Mexican story. It took forever and then it took a night. So to say it will