Spain’s contagious collapse

The EU faces its biggest challenge to date: Containing Spain's economic woes

Topics: GlobalPost, European Financial Crisis, European Union,

BRUSSELS, Belgium — The words “Spain” and “contagion” have already made history together.

Global Post

Spanish flu spread around the world in the early 1900s. The pandemic didn’t begin in Spain, but it was there that the world realized how serious — and unstoppable — the outbreak had become.

Now, as Spain takes up a central position in Europe’s economic crisis, the analogy is clear.

Sickly economies in Greece, Portugal and Ireland may yet respond to the European Union’s limited array of economic remedies.

But if Spain’s attempt to heal itself with a shock-treatment of austerity fails, the EU may not be strong enough to prevent the infection from spreading to Italy, France and beyond.

“The big question is, can Europe ring-fence Spain, can they draw a line to stop this contagion happening? This is their biggest challenge,” says Carsten Brzeski, senior Brussels economist at the Dutch bank ING.

In the eye of the euro-debt storm late last year, Spain enjoyed a reprieve from the markets after Conservative Prime Minister Mariano Rajoy took office in December with a promise to knock the economy into shape and, more important, the European Central Bank’s (ECB) decision to give banks and governments a lifeline by pumping 1 trillion euros of cheap loans into the eurozone economy.

Things started to go sour in March when the effect of the ECB’s liquidity injection began to fade and Rajoy announced he wouldn’t be able meet an EU-agreed budget deficit target of 4.4 percent this year, despite 27 billion euros ($35.5 billion) worth of budget cuts and tax hikes.

“Spain is suffering from a serious loss of confidence again,” blogged economist Luis Garicano. “The perspective of a new reformist government had made our creditors think Spain was on the way up, now after the budget and some strange events, confidence has gone again.”

The rates Spain has to pay on borrowed money have been creeping up steadily.

On Tuesday, there was some relief as the country managed to raise 3.2 billion euros ($4.2 billion) in short-term loans, but at much higher rates. A bigger test will come on Thursday when the Madrid government tries to sell longer-term securities.



The yield on its benchmark 10-year bond has been edging over 6 percent — which is considered unsustainable for more than a short period. That is prompting concern Spain could be forced to seek a bailout from the EU and International Monetary Fund or worse: the risk of a Spanish default has risen to 37 percent, according to the consultancy CMA.

A bad bond auction on Thursday could cap a tough week for Rajoy, who has already seen Argentina’s President Cristana Fernandez feel confident enough of Spain’s weakness to announce she’s seizing a 51-percent share in the YPF oil company from its Spanish owner Repsol.

By eurozone standards, Spain’s public debt does not look so bad. At 66 percent of gross domestic product, it’s less than that of virtuous Germany and way lower than Greece at 150 percent or Italy at 119 percent.

Spain’s problems lie elsewhere. The collapse of a 2000s housing boom plunged families and banks into deep trouble. Household gross debt, which averaged 80 percent of income in the decade up to 2007, is now up at 126 percent.

Spanish unemployment is the highest in the eurozone, at almost a quarter of the workforce, and double that in Spaniards under 25 years of age. The economy is set to shrink this year and the country’s powerful regional governments are resisting Rajoy’s belt-tightening demands.

“We should be worried,” says Brzeski. “That does not mean that they are falling off the cliff or requiring an imminent bailout, but if you look at the combination of weak macro fundamentals, the still falling real estate market, high deficits, it looks increasingly likely that they will at some point in time need European support.”

Based on the bailouts of Ireland and Portugal, a rescue plan for Spain could cost the EU around 300 billion euros ($394 billion) over three years. That just about could be covered by the 800-billion-euro ($1-trillion) firewall that the EU hopes to have in place by the summer, but without leaving enough leftover if Italy gets into trouble.

A cheaper option, and one that would save Madrid the ignominy of handing over the running of its economy to the EU and IMF, could be a loan from the firewall fund to help Spain recapitalize its banks.

Neither solution tackles what many believe to be Spain’s fundamental problem: how to revive growth so that unemployment lines start to come down and home prices rise. Until that happens the risk of Spain’s economic malaise spreading will remain.

More Related Stories

Featured Slide Shows

  • Share on Twitter
  • Share on Facebook
  • 1 of 14
  • Close
  • Fullscreen
  • Thumbnails

    13 of "Girls'" most cringeworthy sex scenes

    Hannah and Adam, "Pilot"

    One of our first exposures to uncomfortable “Girls” sex comes early, in the pilot episode, when Hannah and Adam “get feisty” (a phrase Hannah hates) on the couch. The pair is about to go at it doggy-style when Adam nearly inserts his penis in “the wrong hole,” and after Hannah corrects him, she awkwardly explains her lack of desire to have anal sex in too many words. “Hey, let’s play the quiet game,” Adam says, thrusting. And so the romance begins.

    13 of "Girls'" most cringeworthy sex scenes

    Marnie and Elijah, "It's About Time"

    In an act of “betrayal” that messes up each of their relationships with Hannah, Marnie and Elijah open Season 2 with some more couch sex, which is almost unbearable to watch. Elijah, who is trying to explore the “hetero side” of his bisexuality, can’t maintain his erection, and the entire affair ends in very uncomfortable silence.

    13 of "Girls'" most cringeworthy sex scenes

    Marnie and Charlie, "Vagina Panic"

    Poor Charlie. While he and Marnie have their fair share of uncomfortable sex over the course of their relationship, one of the saddest moments (aside from Marnie breaking up with him during intercourse) is when Marnie encourages him to penetrate her from behind so she doesn’t have to look at him. “This feels so good,” Charlie says. “We have to go slow.” Poor sucker.

    13 of "Girls'" most cringeworthy sex scenes

    Shoshanna and camp friend Matt, "Hannah's Diary"

    We’d be remiss not to mention Shoshanna’s effort to lose her virginity to an old camp friend, who tells her how “weird” it is that he “loves to eat pussy” moments before she admits she’s never “done it” before. At least it paves the way for the uncomfortable sex we later get to watch her have with Ray?

    13 of "Girls'" most cringeworthy sex scenes

    Hannah and Adam, "Hard Being Easy"

    On the heels of trying (unsuccessfully) to determine the status of her early relationship with Adam, Hannah walks by her future boyfriend’s bedroom to find him masturbating alone, in one of the strangest scenes of the first season. As Adam jerks off and refuses to let Hannah participate beyond telling him how much she likes watching, we see some serious (and odd) character development ... which ends with Hannah taking a hundred-dollar bill from Adam’s wallet, for cab fare and pizza (as well as her services).

    13 of "Girls'" most cringeworthy sex scenes

    Marnie and Booth Jonathan, "Bad Friend"

    Oh, Booth Jonathan -- the little man who “knows how to do things.” After he turns Marnie on enough to make her masturbate in the bathroom at the gallery where she works, Booth finally seals the deal in a mortifying and nearly painful to watch sex scene that tells us pretty much everything we need to know about how much Marnie is willing to fake it.

    13 of "Girls'" most cringeworthy sex scenes

    Tad and Loreen, "The Return"

    The only sex scene in the series not to feature one of the main characters, Hannah’s parents’ showertime anniversary celebration is easily one of the most cringe-worthy moments of the show’s first season. Even Hannah’s mother, Loreen, observes how embarrassing the situation is, which ends with her husband, Tad, slipping out of the shower and falling naked and unconscious on the bathroom floor.

    13 of "Girls'" most cringeworthy sex scenes

    Hannah and the pharmacist, "The Return"

    Tad and Loreen aren’t the only ones to get some during Hannah’s first season trip home to Michigan. The show’s protagonist finds herself in bed with a former high school classmate, who doesn’t exactly enjoy it when Hannah puts one of her fingers near his anus. “I’m tight like a baby, right?” Hannah asks at one point. Time to press pause.

    13 of "Girls'" most cringeworthy sex scenes

    Hannah and Adam, "Role-Play"

    While it’s not quite a full-on, all-out sex scene, Hannah and Adam’s attempt at role play in Season 3 is certainly an intimate encounter to behold (or not). Hannah dons a blond wig and gets a little too into her role, giving a melodramatic performance that ends with a passerby punching Adam in the face. So there’s that.

    13 of "Girls'" most cringeworthy sex scenes

    Shoshanna and Ray, "Together"

    As Shoshanna and Ray near the end of their relationship, we can see their sexual chemistry getting worse and worse. It’s no more evident than when Ray is penetrating a clothed and visibly horrified Shoshanna from behind, who ends the encounter by asking if her partner will just “get out of me.”

    13 of "Girls'" most cringeworthy sex scenes

    Hannah and Frank, "Video Games"

    Hannah, Jessa’s 19-year-old stepbrother, a graveyard and too much chatting. Need we say more about how uncomfortable this sex is to watch?

    13 of "Girls'" most cringeworthy sex scenes

    Marnie and Desi, "Iowa"

    Who gets her butt motorboated? Is this a real thing? Aside from the questionable logistics and reality of Marnie and Desi’s analingus scene, there’s also the awkward moment when Marnie confuses her partner’s declaration of love for licking her butthole with love for her. Oh, Marnie.

    13 of "Girls'" most cringeworthy sex scenes

    Hannah and Adam, "Vagina Panic"

    There is too much in this scene to dissect: fantasies of an 11-year-old girl with a Cabbage Patch lunchbox, excessive references to that little girl as a “slut” and Adam ripping off a condom to ejaculate on Hannah’s chest. No wonder it ends with Hannah saying she almost came.

  • Recent Slide Shows

Comments

0 Comments

Comment Preview

Your name will appear as username ( settings | log out )

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>