The PIIGS have become an important consideration for many in the field of economics and finance. The spectre of default on soverign debt by a European nation is horrifying. While I would not like to make any forecasts on how this situation will plays out, I remember from my university days disucssions I would have with my supervisor - Marcus Miller. He is one smart guy ! Way back in 2007, he would tell us of the legal inadequacy of the EMU/EU institutions to deal with any systemic financial crisis. He couldn't have been more right ! Today, the fear plaguing the markets vis-a-vis the PIIGS are not as much about default/bailout of one country; what worries participants is the lack of a system to deal with such a situation. Recent lessons from Lehmans' failure in 2008 are a case in point. Hank Paulson, in his book 'On the Brink', goes to great lengths to explain how, against their better judgement, the Treasury and the US Fed were unable to bailout Lehman due to legal impediments. Further, from Paulson's book, it seems that AIG would almost certainly have been let go as well had they not bent the law to some extent.
Paulson's book is a absolutely essential reading for anyone who wants to understand markets, crises and crises responses in the current financial system.