Spain Austerity Problems

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Spain’s political leaders will present EU budget directors with its plan to comply with new austerity measures. It needs to hurry the process. Spain’s bond yields have risen to unsustainable levels as capital markets have deserted its paper. Yields on its 10-year notes have risen to 5.84%.

Spain’s budget deficit target for next year is 3% of GDP. The government may be able to control expenses, but these are not the greatest threat to compliance with its budget.

Unemployment in Spain is above 20%. Among younger workers, the figure is as high as 50%. The jobless problems and a collapse in real estate values means that cuts will be far from sufficient for Spain to make austerity the sole aspect of its economic solution

Douglas A. McIntyre

 

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