“The problem is solved”
said French President Nicholas Sarkozy just five weeks ago but we
have seen recently that Spain is the next Eurozone country facing a
crisis.
Spain is the fourth
largest Eurozone economy and the twelfth largest in the world.
- Spanish GDP last year was almost five times that of Greece.
- Unemployment in Spain in March hit a record of 24% which is by far the highest in the industrialised world and more than doubles the 10% Euro average.
- Almost one half of Spain’s young people are unemployed.
- Over 8% of banking loans are not being sustained.
In a bid to boost
employment the Spanish Government passed new laws making it easy to
cut wages and lay people off. The Spanish Unions have responded with
a general strike and there have been serious political protests.
Spain has now tipped back
into recession with GDP shrinking in the first quarter. The
Government predicts a 1.7% contraction in 2012 which many analysts
consider optimistic. As the economy slows, tax revenues fall and
welfare payments rise which makes the fiscal position worse. The
Government admit that the public debt will hit 80% of GDP by the end
of the year.
Spain must repay nearly
12 billion Euro Bonds by the end of April and another 13 billion Euro
loan at the end of July.
I hope Sarkozy has this
all under control. The King of Spain obviously isn’t too bothered –
he’s managed to get away from it all with a bit of elephant
hunting!
Tim Corfield - May 2012
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