Don’t believe the European spin. We’re told that if the Spanish banking problem is cleared up, the sovereign will be fine.
Maybe, but probably not.
Unemployment is still running 25% and the semi-autonomous regions are still bleeding red ink, and will continue to do so until economic growth resumes.
As we have seen, recovery from burst economic bubbles tends to be very slow as all sectors of the economy de-lever.
Spain had the good fortune of entering the crisis with an admirably low debt to GDP ratio, but that ratio is rapidly catching up with the rest of Europe. It’s rising about 8% a year and markets remain unwelcoming with spreads within shouting distance of crisis highs.
Spain’s problems will not end with a bank bailout. They will just be buying time.
