{"id":29384,"date":"2012-04-30T10:35:06","date_gmt":"2012-04-30T14:35:06","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/04\/the-eurozone-crisis-why-you-dont-need-to-worry-about-spain\/"},"modified":"2012-04-30T10:35:06","modified_gmt":"2012-04-30T14:35:06","slug":"the-eurozone-crisis-why-you-dont-need-to-worry-about-spain","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/04\/30\/the-eurozone-crisis-why-you-dont-need-to-worry-about-spain\/","title":{"rendered":"The Eurozone Crisis: Why You Don\u2019t Need to Worry About Spain"},"content":{"rendered":"

Article by Investment U<\/a> <\/p>\n

\"The<\/p>\n

There is concern that Spain will drag the rest of Europe into recession. But ultimately, the financial markets will force politicians to do the right thing.<\/p>\n<\/div>\n

The Eurozone is back in the news again and \u2013 needless to say \u2013 it isn\u2019t good<\/em>.<\/p>\n

The problem is Spain. Unemployment is almost 24%. Among those under 25, it\u2019s 50%. Last year, the budget deficit was 8.5% of GDP. Tax revenue is down sharply. And the IMF projects that this year\u2019s deficit is going to be another stunner.<\/p>\n

This is a much bigger problem than Greece\u2026 or Ireland\u2026 or Portugal. Why? Because Spain\u2019s economy is more than twice as big as those three countries combined.<\/p>\n

Germany and France want Spain to bite the bullet and follow austerity measures. But the Spanish government is acutely aware that its citizens don\u2019t want austerity, they want growth. They want jobs.<\/p>\n

There is concern that Spain will drag the rest of Europe into recession. Remember: Europe is about one-fifth of the world economy (roughly equal with the United States). The 27 members of the European Union are the world\u2019s largest importer (excluding exports to each other).<\/p>\n

So while politicians dither, the clock keeps ticking. And investors on both sides of the pond keep wringing their hands. They shouldn\u2019t.<\/p>\n

Yes, politicians throughout the West are famously spineless, afraid to act (and therefore offend some special interest group) and always ready to kick the can down the road, especially past the next election. But, ultimately, the financial markets will force them to do the right thing.<\/p>\n

How can we be sure? Because it always happens, and it\u2019s happening now.<\/p>\n

Opinions and talk are worth about what you pay to hear them. But investment capital is precious. And it doesn\u2019t stick around where it\u2019s treated poorly.<\/p>\n

Note that interest rates<\/a> on Spanish government bonds have already pushed up to 6%. This is a warning shot across the bow. Spain well knows that it cannot afford to keep borrowing at 7% or higher. At that point, its deficit becomes immediately unsustainable.<\/p>\n

The Lesson All Politicians Learn<\/strong><\/h2>\n

Ultimately, markets force politicians to make the tough decisions. At last they can tell their constituents the truth: \u201cWe simply have no other choice.\u201d<\/p>\n

All politicians learn this in the end.<\/p>\n

Bill Clinton\u2019s most famous quote wasn\u2019t \u201cI smoked it, but I didn\u2019t inhale\u201d or \u201cThe era of big government is over\u201d or \u201cI did not have sexual relations with that woman, Miss Lewinsky\u201d or even \u201cIt depends on what the meaning of the word \u2018is\u2019 is.\u201d<\/p>\n

As Bob Woodward reported in his book The Agenda<\/em>, Clinton was astounded to learn that he couldn\u2019t just take whatever executive action he wanted or pass populist legislation to stimulate the economy. The markets would tell him what he could and couldn\u2019t do.<\/p>\n

Or as Clinton put it, \u201cYou mean to tell that the success of the economic program and my re-election hinges on a bunch of ****ing bond traders?\u201d<\/p>\n

Ah, daylight at last.<\/p>\n

I\u2019m not saying Europe isn\u2019t a mess right now. It is. I would certainly stay away from European banks or Spanish bonds or euro-denominated debt of any kind right now. But in the end, financial markets will force Europe\u2019s politicians to act responsibly.<\/p>\n

And that\u2019s a good thing.<\/p>\n

Good Investing,<\/p>\n

Alexander Green<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

<\/p>\n

Article by Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"

Article by Investment U There is concern that Spain will drag the rest of Europe into recession. But ultimately, the financial markets will force politicians to do the right thing. The Eurozone is back in the news again and \u2013 needless to say \u2013 it isn\u2019t good. The problem is Spain. Unemployment is almost 24%. … <\/p>\n

Continue reading “The Eurozone Crisis: Why You Don\u2019t Need to Worry About Spain”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-29384","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/29384","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=29384"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/29384\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=29384"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=29384"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=29384"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}