Sprexit

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DEFINITION of 'Sprexit'

Sprexit, or SPanish euRo exit, is the possible case of Spain leaving the euro common currency and re-establishing its own separate, sovereign currency such as returning to the peseta. Inspired by the potential for Greece to exit the euro, or Grexit, the fear is that contagion among the European economies with higher debt loads will follow suit once Greece leaves. These are the so-called PIIGS nations which are at risk of leaving the euro: Portugal, Ireland, Italy, Greece & Spain.

BREAKING DOWN 'Sprexit'

Due to bailouts by the European Union and IMF following the financial crisis of 2008, PIIGS nations, which had a large amount of sovereign debt, were forced to cut government spending and undertake austerity measures in order to service the bailouts. Largely unpopular, the austerity measures failed to bring about a recovery in these nations, and in 2015, the Greek people voted in a referendum to reject further European Union bailout terms after defaulting on an IMF loan.

If the Greeks do exit, Spain is likely next, as it also is undergoing largely unpopular austerity measures without seeing much of an economic recovery. If Spain leaves the euro, the contagion is likely to spread to the rest of the remaining PIIGS and perhaps beyond, spelling the possible end of the common currency system.