Spain is in recession and will remain so with budget reforms yet to bite, export markets contracting and unemployment rising, indicate analysts at Grant Thornton. But that is one of the coin sides. Have a look at the brighter spots.
Spanish current account data gives signs of economic strength, but the global economy suffers from too much weak activity, a clear threat to Madrid’s reform efforts. Talk of bailout will not go away any time soon.
Large institutional investors such as Pimco have publicly acknowledged their interest in Spanish debt, precisely because of the ECB buying program, but it remains to be seen whether the foreign interest is consolidated.
In economist Luis Arroyo’s view, the Spanish Treasury would have made two mistakes that hit hard the economy: too high a VAT rate, and too expensive energy bills.
Non-resident investors have extended the maturities of their holdings of Spanish debt, according to the August data released by the Bank of Spain.
The day a new EU summit began, financial reports from Madrid poured in with a common alert: the Spanish economy needs fixing and the markets will keep watching how the Rajoy government’s reforms advance.
The bailout that would await the Spanish government’s request is surrounded by many suppositions over its conditionality and how the rescue fund would intervene. But the recent decision of Moody’s keeping Spain’s bonds on investing grades has made investors feel more confident.
Germany isn’t just refusing to play the paymaster’s role, it effectively is barring the way towards a banking and a true economic union for the euro zone. The upcoming summit could be one more missed chance to fix the common currency area.
Investors’ hoping that Madrid successfully implements the 2013 Budget were left wondering again after the IMF announced its gloomy expectations. For economist JP Marín Arrese, Spain’s euro partners will make a mistake if they keep pushing the country into the same line Greece, Ireland and Portugal have been forced to walk.
How much does ‘different identity’ account in fiscal transfers between regions and their central government? Catalan president Artur Mas mixes tax data with sentimental issues and accusations of mistreatment, says Fernando G. Urbaneja, so a necessary dialogue becomes unnecessarily difficult.