Spain May Be A Greater Threat Than Italy To Eurozone

This article argues that Spain represents a greater threat to the eurozone than Italy. Spain was running budget surpluses prior to the crisis and household debt increased by a factor of three during the real estate bubble. The bursting of the real estate bubble led to an unemployment rate exceeding 20% and rising. Youth unemployment is even worse. 50% of Spain's youth under age 25 are unemployed. This will make its workforce less productive the longer that they remain unemployed. Government austerity measures are making matters worse. Raising taxes, and cutting government spending at the same time that consumption is falling, has led to a drop in GDP. The debt/GDP ratio has worsened as a result.

To make matters worse, Spain has only had a democracy since Franco died in 1975. If the economy continues on its current path it may present a social and political threat that will be difficult to contain. Spanish democracy may be at risk as well.