Euro strengthening, stocks higher… I feel like I am missing something…
no idea…but i’m betting spain’s fiscal situation improves over the next 3 years…
funny thign is, spain got downgraded yesterday too…
I think part of the reason is that Spain is unlikely to default due to the Eurozone put. They might have let Greece go since it’s small, but it seems like the EU will defend Spain at all cost. Hence, the market does not react much to downgrades.
my wager is contingent that Euro does not break up…what i expect to see is a long drawn out process…i’m not all too familiar with the economics of europe…
how exactly can they “defend” Spain? They’re running a budget deficit, with 25% unemployment, and entering into a recession, a solution inolving higher taxes and less spending the only fiscal solution - which is also going to reduce growth.
The only way out is to remove this debt overhang and at least do a partial default.
They can take money from other EZ countries. Or maybe take steps to devalue the Euro.
The other euro countries are already in enuf trouble plus Germany really wont want to bail out Spain. Cant imagine france would. Devaluing Euro is option, but Germany has a problem with devaluing currencies. German interests are what guide the Eurozone after all, and its not obvious Spain is crucial to EZ being intact.
Spain might not want a bailout if that means more austerity, political regimes can change and they might just want to default… I think that is the major risk
All I’m saying is that other EZ countries will be willing to sacrifice more to keep Spain from defaulting compared to Greece. If Spain and Greece both went to the EZ negotiating table, Spain would be able to get away with more favorable terms, since Spain is holding a bigger gun to the EZ’s head.
all I can say is this is what you get when you combine soverign countries under a single currency, allow them to isssue soverign debt in the common currency all the while knowing that some of the countries have socialistic fiscal policies without a sufficiantly large economic engine to support said policies. In the old days Greece, Spain, or soon Italy would be able to devalue thier currency and inflate thier way out of the mess. Now they alone do not get to make that decision and the countries who have a more stable economic evniornement are forced to bail them out or risk all the nastyness that will come along with a default.
Socialistic fiscal polices always, always fail. Depending on the economic enviornment, size of the economy and the speed that the ideas are embraced, it may even take 50 years or more but eventualy it will fail.
My opinon anyway.
Point is that I don’t think there is anything the other Europeans can do to prevent Spain from defaulting. Ultimately Spain is incapable of meeting its payments and more importantly soon may be politically unwilling to do so.
Imagine a politician getting elected in a country with 25% unemployment and then insisting austerity AND higher taxes vs default…which would he prefer?
The EU has benefited Germany big time. It allowed everyone to have a common currency, essentially devaluating the Deutsche Mark and increasing evey other currency. That has helped German exports immensely (especially during the recession) and has not allowed others to devaluate. It’s not for nothing Germany is bailing out other countries, it’s in their interest to keep the EU alive.
Spain’s high unemployement has to do with labour unions and a huge housing bubble that is being deflated at the moment (housing bubbles take out a huge amount of labour)…austerity is needed, labour reforms also, bank clean up, social works need to be cut and some time…
last time i checked, spain was moving towards this, just slowly as oppose to greece which showed no intention of resolving its problems…for this reason, Spain i believe will get a helping hand…
i’m bias though…