Sovereign debt risk has been the talk of the town so far in 2010. Downgrades to Greece's credit rating and its government bonds impact on the rest of Europe and its currency, the Euro, has sounded the alarm across the continent.

It seems apparent by viewing the CDS and European bond market, that the PIIGS are being forced to quickly tighten fiscal policies. The question is, is this belt tightening happening too fast. The IMF has cautioned about paring back their stimulus programs too quickly, risking a a dip back into recession (see IMF Chief Cautions Against Early Stimulus Exit WSJ).

Acronyms for blocs of countries are all the rage these days: BRIC, MAVENS, now PIIGS (Portugal, Italy, Ireland, Greece, and Spain). As the BRICs and MAVENS were created to group strong growth countries into an investable group, the PIIGS are the polar opposite: countries on the brink of disaster. We didn't coin the acronym "PIIGS", but we are the first out with a comprehensive way to "play" it.

Europe's woes, particularly those in Greece have been well documented, as debt ratios and budget deficits are climbing. Sovereign risk is rising. Portugal just yesterday announced a budget deficit that was 9.3% of GDP vs. previous estimates of 8%. S&P and Moody's have downgraded or slapped negative watches on Spain, Greece, Portugal debt in recent weeks with Moody's going so far as to warn that Greece and Portugal's economies may suffer a "slow death." The IMF is estimating that Italian public debt will reach 120% of GDP next year. Ireland was forced to raise taxes and slash $3.6 billion government spending to help contain their annual budget deficit. In addition to a large budget deficit, Spain is battling the highest unemployment rate in Developed Europe and a Real Estate implosion worse than that of the United States.

The United States lost more jobs than anticipated last month, putting the unemployment rate at a steady 10%. The news tempered hopes for a quick and smooth economic recovery.

One surprise emerging from the report is that 4,000 jobs were actually created in November, instead of the 11,000 that had been projected, reports The New York Times. A number of economists are optimistic that the labor market is on pace for job creation, pointing out that the number of jobs lost each quarter has been declining.