The PIIGS are all in sh!t as we know. Portugal, Ireland, Italy, Greece and Spain all have massive exchequer deficits, eye watering national debt and negative growth. They are so far away from balancing the books that swingeing budget cuts are having little effect on their deficits but are pushing them further into negative growth, ie recession. Unemployment in all of the PIIGS is 15-25% when you factor in those on the dole, on training courses and those who don't appear in the stats, the self employed and those 'unfit/too sick' to work.
Basically they are so far in the hole they can't see the light. None of them have a plan to reduce their deficit or unemployment that doesn't involve Growth but none of them can grow because they can't afford their public sector costs and can't reduce their private sector costs, all because they're in the Euro. They are stuck because they can't devalue. Every other country in history in these circumstances has only escaped by devaluing. Devaluing allows them to borrow less to pay the same figure to their PS and yet their exports will be cheaper helping the all important export market in the private sector.
A lot has been said about Ireland pulling out of the Euro. It's a conversation happening in all of the PIIGS but a return to the escudo, punt, lira, drachma and peseta would badly affect business across the EU by introducing exchange rate uncertainty and indeed reintroduce exchange rate speculation. Individual currencies could collapse. However, they all do need to devalue. It has to be preferable to a default and an ECB/IMF bailout. The EU simply could not afford to bail out all of the PIIGS one after another.
So, instead of a return to individual currencies and fluctuating exchange rates what about introducing a separate currency for the PIIGS, devalued against but tied to the Euro? Call it the Oink! Lets say it's a 20% devaluation, and constantly held there by the ECB. You get the devaluation the PIIGS need while maintaining exchange rate stability.