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EU places Spain on top of list of Europe critical economies

 
 
 
 
 
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A euro coin with the Spanish national flag in the background.

The European Commission says Spain is on top of the list of the eurozone 12 critical economies as new reports show investors flee Spain amid the deepening financial crisis.

Affected by Greece’s economic woes, the Commission on Wednesday listed Spain and Cyprus as two European states in “very serious” trouble.

“Spain faces major adjustment challenges following the bursting of the housing and credit bubble,” the Commission said in its annual report on the Spanish economy.

“Spain still faces significant challenges in rebuilding market confidence, securing the sustainability of public finances, reducing domestic and external vulnerabilities and underpinning medium-term growth and employment,” the Commission report added.

This is while following the resignation of Bank of Spain’s Governor Miguel Angel Fernandez Ordonez, the country’s debt risk premium hit a euro-era record.

As reports suggest, the borrowing rate on Spain’s 10-year bonds shot to a danger level of 6.703 percent which cannot be sustained over the longer term.

Meanwhile, the country’s central bank reported on Tuesday that Spain’s battered economy will shrink in the second quarter of 2012, with the recession expected to continue until at least mid-2012.

According to forecasts, Spain would be the only eurozone state still in recession next year, while around a quarter of the population is unemployed, and its banks are buried under bad debt.

Battered by the global financial downturn, the Spanish economy collapsed into recession in the second half of 2008, taking with it millions of jobs. Earlier this month, Spain fell back into recession.

The worsening eurozone debt crisis has raised Spain’s financing costs amid concerns that the country might have to seek a European Union bailout, like Greece.

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  • Jack Longchamp

    I can see no reason why the recession should end in 2012 at all.
    Anybody else ?

    People should buy less new cars on credit here and I somehow believe they will… why ? Why on Earth should a Spaniard consider not buying new stuff on credit like all over the last three decades ?

    Well those credit-happy banks are in trouble themselves now.
    So live it up a bit less pompously, like in the Franco era –
    buy a faux Rolex instead of a real one and everything will be okay
    in five years probably, maybe twelve.

  • Rick Alexander

    Surprise! As if no one knew this was coming. The falling dominoes of Ireland, Greece, Spain, Portugal, Italy, France, Germany and the list goes on. But, just Spain will be too big for the EU to bail out. More printing of ‘funny money’ that will soon be worthless. It amazes me that people forget the lessons of History like the Vymar Republic in Germany when wheelbarrow loads of useless money were being taken by employees to the local shop just to buy a loaf of bread! This collapse along with the US financial woes is a recipe for disaster. I am just wondering which country will ride in like a knight on a white horse to rescue the EU? That could be a disaster in its own right.

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