Spain’s central bank, The Bank of Spain, has officially stated that for the second time since the onset of the global economic crisis in 2008, Madrid’s economy is in recession. The news that the Spanish economy has entered a double-dip recession is no surprise for the Spanish people, currently experiencing the misery of an official unemployment rate of 20 percent.
In the words of the Bank of Spain, “The most recent information for the start of 2012 confirms the prolongation of the contraction in output.” This all happens as the Spanish government reins in spending, with a current deficit to GDP ratio of 8.5 percent. With the fiscal drag imposed by a retrenchment in government spending, there will be no Keynesian solution to Spain’s current recession. Furthermore, Spain is not alone; other vulnerable Eurozone economies are in recession-or about to double dip into one. The economists keep telling us that economic growth is the only solution to the Eurozone’s debt crisis. With many of its struggling economies in negative or stagnant growth, it is hard to see a solution to the Eurozone’s debt crisis, other than bank-destroying sovereign defaults and inflation-creating loose monetary policies by the European Central Bank.