Eurozone issues have been dominating headlines over the last few months with fears of Greece leaving the euro and many countries facing high unemployment numbers. Spain has certainly seen its fair share of difficulty and adversity. The Indignado movement that started last year involved thousands of frustrated Spaniards gathering together to protest increasing austerity measures implemented by the government.
Youth unemployment is at about 50 percent, according to NPR. Along with growing discontent in the job sector, taxes have been raised and austerity measures threaten at every corner. Many social services look to get slashed.
In tandem with the growing concerns about increasingly crushing austerity measures, Spain’s banks are also facing a difficult era during this European economic slump. The BBC reports that Bankia, Spain’s fourth largest bank, has officially asked for a 19 billion euro bailout. Bankia was created two years ago as a merger between seven struggling regional banks.
Bankia emphasized to its customers that their money was still safe in the hands of the institution. The group claims that this loan will help the bank maintain liquidity and stability in the increasingly unstable banking and economic system.
The New York Times reports that about 51 billion euros have left the Spanish bank over the last year. Investors have been slowly moving their assets to other countries that have more financial stability.
Spain’s credit rating was downgraded by Standard and Poor recently, according to the BBC, which means that markets will demand close to a 7 percent interest rate to loan funds for a ten-year period. Greece is closer to 8 percent at the moment and Germany now sits at a cool 1.42 percent.
Rumors of a full-on bank run went rampant this past week as financial experts speculated on the state of Spain’s banks. Although most officials have said that the withdrawal of assets from banks is more of a slow trickle than a catastrophic collapse, fears continue about the continued draining of accounts.
Banks are not the only area of the Spanish economy facing difficulties. Catalonia, the wealthiest region of Spain, has asked for a loan from the government as well. The region has 13 billion euros to refinance this year. Catalonia has implemented a wide number of austerity measures to get the economy back on track. According to Yahoo! News, it has:
Cut public sector wages, instituted a tourism tax and a 1 euro charge to fill each medical prescription, applied the maximum surcharge on gasoline and frozen infrastructure investments to try to get the budget under control.
All of these controls come in the wake of crucial meetings between the big heads of state in the European Union, including Germany’s Angela Merkel and France’s new president FranÁois Hollande. These two leaders are notoriously opposed when it comes to implementing austerity measures on countries such as Spain and Greece. Merkel maintains that austerity measures need to be implemented, while Hollande emphasizes that some restrictions need to be lifted to encourage growth.
The Indignado campaign still exists, although many participants are beginning to feel a sense of hopelessness. With banks and regions going through massive structural changes in Spain, it remains difficult to predict how many of the economic hurdles will be overcome. Many officials fear that summer unrest could mark Spain, Greece and Italy as restless and unhappy populations demand change.
Photo Credit: Marcello Vicidomini
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