Posts Tagged ‘zapatero’

Spain’s Economic Crisis Another Indicator of Worsening European Sovereign Debt Crisis

May 31st, 2010 Comments off

The decision by Fitch, one  of the three leading ratings agencies, to downgrade Spain’s government debt to below AAA status is another manifestation of the deadly sovereign debt contagion that has becoming increasingly virulent since Greece’s public finances imploded. What was once a Greek debt crisis that Eurozone politicians were confident could be contained has now contaminated the entire fiscal edifice of the European Union.

As a further  sign of the deteriorating economic and financial situation in Spain, a growing number of Spanish banks are facing insolvency. There is an attempt by the government and central bank to arrange a shotgun marriage that will consolidate dozens of regional banks that are in fragile condition. This comes on the heels of a major austerity package  enacted by the Spanish government headed by Prime Minister José Luis Rodríguez Zapatero, which was approved by the national parliament by a single vote. This illustrates the fragility of the Zapatero government, at a times when further economic and financial shocks are likely, on top of a labor revolt against the austerity measures, similar to what is occurring in Greece.

The worsening news emerging from Greece, Portugal and now Spain are mere markers on a path leading to a profound sovereign debt crisis that will afflict not only the Eurozone and UK economies, but eventually Japan and the United States.

Spanish Economy Facing Systemic Economic Meltdown

February 6th, 2009 Comments off
Spain may be following Iceland as the next country facing systemic economic collapse due to the global financial and economic crisis. Recently released macroeconomic data is illustrative of a national economy in free fall. Not even the United Kingdom, with its insolvent banks and a collapsing currency, is in as decrepit economic shape as is Spain.
Among the eurozone economies, it clearly has the worst performance. Not that the other eurozone countries should gloat, for the Spanish economic contraction is a roadmap for the destination in store for the European Union as a whole. Official tabulations reveal that in the month of December, Spain’s industrial output declined by 19.6%. In just one month, nearly a fifth of Spanish output eliminated! This is not merely a recession, but wholesale economic collapse. Other figures elaborate on the depths of the disaster. Spain’s National Statistics Institute disclosed that in the last quarter of 2008, 1,082 companies filed for bankruptcy. To put this number in perspective, the last quarter of 2007 had a bankruptcy rate barely more than a quarter of that grim statistic.
Without question, the Spanish economy is grinding to a halt, significantly increasing the unemployment rate, which currently stands at 14.4%. The European Commission is forecasting that Spain’s unemployment rate may reach close to 19% by 2010, reflective of an economy that has not reached bottom, despite wishful thinking by some financial analysts.
As with the United States, the perception of prosperity in Spain was largely fabricated on the basis of a housing boom and highly leveraged real estate speculation. Again matching the American experience, the housing asset bubble in Spain was punctured, in the process crippling financial institutions and curtailing access to credit by Spanish enterprises. The ripple effect brought on by the collapse in housing and the banking crisis has crippled the broader economy to such an extent, cascading business and personal bankruptcy rates and massively rising levels of unemployment seem irreversible.
There exists another parallel with the United States. As the Global Economic Crisis evolved, the Socialist government in Madrid led by Prime Minister Zapatero, as with the Bush administration in the U.S., at first denied the nation was in the throes of a virulent economic recession. Only when the dire facts overwhelmed political spin did both governments begin to face reality. By then, in both Washington and Madrid, it was too late. As with many other panic-stricken leaders across the globe, Zapatero will seek massive deficit spending as a means to stimulate the failing economy. Being a member of the eurozone with its own central bank, monetary policy falls outside the immediate purview of options available to the Spanish government. So fiscal stimulus, inevitably hampered by an inability for a left-leaning government to talk soberly to labor unions, will be the feeble response to the worsening disaster.
Spain will likely experience a level of economic decline unprecedented in the last half-century of her history. However, in this journey of gloom and doom, she will be far from alone. 
For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website,