July 30, 2012

More cracks in Spain

Surely the Spanish economy won't survive in the eurozone. As Ambrose notes, the IMF's predictions for Spain become worse and worse.
Recession will grind on until 2014, the Spanish now learn, with unemployment already at 24.6pc, or 53pc for youth. The jobless rate is 34pc in Andalucia. Twisting the knife, unemployment support is about to be slashed.
The politics of this will become insupportable.

We know the Spanish property market is slumping and has further to fall, and we know the smaller Spanish banks became the playthings of dodgy politicians who made them finance the white elephants now being paraded regularly in our media.

Recently the financially over-stretched Spanish regions have had to go cap in hand to the central government to finance their borrowings:
Monetary and fiscal suffocation has already brought Barcelona and Madrid to the point of blows, since the Catalans have been forced by the perversities of Spain’s tax system to request a "rescue" even though they subsidize the rest of the country.
And oh dear:
Catalan president Artur Mas warned over the weekend that the "whole nation of Catalonia" will rise up if Madrid tries to exploit events to roll back regional powers. We are moving into very dangerous waters.
Talking of Catalonia as a "nation" is really putting the Spanish central government on notice not to be too heavy handed. As if they didn't have troubles enough! He knows how weak their position is.

If the eurozone splits, Spain will probably fold into the southern eurozone as one country.

But if Spain breaks off from the eurozone, will it be as one country or two? Or perhaps a country where regions have even more power than they do now? That's till unlikely, but a little less unlikely than it was.

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