Ignoring the poor practices of banks in the nation, along with spending more than the country can afford, Prime Minister Mariano Rajoy rather chose to point the blame on uncertainty over the euro zone for the rising costs of borrowing.
Rajoy said this in a news conference:
There are major doubts over the euro zone and that makes the risk premium for some countries very high. That's why it would be a very good idea to deliver a clear message there's no going back for the euro.The costs of borrowing aren't because of the uncertainty surrounding the region, but rather because nations in the euro zone, just like Spain, refuse to stop spending in regard to promises they cannot keep.
As Keynesianism (using debt to fund government programs and growth) is increasingly seen as a failed "economic" method, countries in Europe and other areas of the world, are embedded in a financial circumstance they don't have the will or means to remedy.
Greece is a good test case to see how the populations will respond when austerity is enforced in response to unsustainable budgets. It won't be pretty as things get worse.
According to Reuters, Spain is thinking about funding Bankia using sovereign paper, which would result in the country taking shares in the bank. That would raise the debts in Spain to 79.8 percent of the estimated economic production in 2012.
The Spanish government has already injected $4.5 billion into the company, and parent BFA has requested an additional $23.8 billion on top of that.
Even though the bailout is immanent, the means Spain will take to employ it still hasn't been decided.
Interest rates on Spain's 10-year bonds have jumped to 6.42 percent on the secondary market, moving closer to the 7.0 percent mark which is believed to be unsustainable.
Rajoy continues to insist that's because of the situation in Europe and Greece, and not related to Bankia itself.
To make things worse for Spain, the government announced the areas of the country that are in serious debt face a refinancing bill of 36 billion euros, far above the the formerly estimated 8 billion.
Spain is the one country most analysts and observers believe would bring the euro zone to its knees if it defaulted, probably ending the misguided experiment.
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