Spain, whose economy is the fourth-largest in the euro zone, may be seeking a bailout soon, a step its government has been seeking to avoid.
Portugal, Ireland and Greece have all received bailouts from the International Monetary Fund (IMF), European Central Bank (ECB) and the European Commission. But the desperately needed funds have come with many strings attached, to balance budgets and impose unpopular austerity reforms.
But a bailout is looking more inevitable in Spain:
1) In the month of July, Spanish banks lost every 1 out of 20 euros deposited with them.
2) Plus, new data show that the Spanish recession is worse than thought. The country’s economy shrunk by 1.3 percent in the second quarter.
3) Statistics also reveal that the recession Spain is in actually started three months earlier than previously thought.
4) Earlier this week, the regional government of Catalonia said that it would need a 5 billion euro bailout from the Spanish central government’s rescue fund. Catalonia accounts for one-fifth of Spain’s economy. Analysts are predicting it will be running a higher-than-predicted deficit of 2.5 percent and Rajoy’s conservative central government has said it may have to take Catalonia’s finances under its direct control — a proposal that regional prime minister Artur Mas has said would lead to “snap elections.”
Catalonia is one of six Spanish regional governments in need of government help to roll over its debts and fund its budgets. All told, these regions have a combined debt of 145 billion euros.
In a country whose population has been hit hard by nearly 25 percent unemployment and government austerity, the severe decline in consumption is no surprise and suggests that imposing austerity measures cannot pull Spain (or any government) out of its financial crisis.
European Council president Herman Van Rompuy has said it is up to Spain to decide to seek a bailout or not; prime minister Mariano Rajoy has said he is waiting on getting more details from the European Central Bank first.
On the brighter side, Spain — despite wildfires threatening forests and vegetation in the Canary Islands — saw a boost in tourist income in July of 9 percent.
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Photo of unemployment protest in Barcelona by bonnieann1815
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