A survey collecting the opinions of the largest 86 investment houses pointed out at Europe as the source of concern in 2013. The reason–here is a bit more comment on it–is that no one really expects austerity programmes to deliver economic growth.
The official version of what’s going on refers to cuts in external deficit and eventual, very short-term job creation. The truth is, though, that without economic recovery, the trouble with sovereign debt will come back in earnest.
In Spain, most forecasts indicate that the GDP will suffer a more severe fall than last year. This brings up again the rumours of a national rescue. President Rajoy has seen the markets tap open every time that premium risk pressures ease, and has concluded that the bailout can wait. He needs more electoral support, after all. But he should be warned: investors and fund managers, as the survey shows, are not confident at all about the current calm lasting for much longer. If the economic scenario in Spain turns more desperate, a rescue will come accompanies by harsher conditions and less capacity of negotiation.
For a bailout option to be effective, it must entail an exchange of internal fiscal contraction for external financial aid. This is what the European Central Bank promised. If the ECB guaranteed unlimited bond purchases… but the central bank said it six months ago, and governor Mario Draghi could change his mind.