Spain is in a deep recession with high unemployment and a weak banking sector that needs a bailout. Its struggling regional governments also need help from the central government. In the face of these problems it must reduce its debt to GDP ratio dramatically over the next few years to meet the austerity conditions imposed on the government in order to obtain support from the ECB and other eurozone funding sources.
Its fiscal problems are creating social unrest that will only get worse as the fiscal situation in Spain worsens. With negative growth in GDP, Spain must cut its budget deficits even further to reduce its debt/GDP ratio. Unfortunately, cutting government expenditures at the same time that consumers and businesses are reducing their spending, accelerates the decline in GDP. This is recipe for disaster.
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