This year the Spanish economy has been brought to the point of virtual collapse. Unemployment is standing at a staggering 25% and is set to rise. Debts continue to pile up on the Spanish government threatening to bankrupt the whole country. The nation’s banks are on the verge of collapse and despair is increasing amongst the people. Rates of homelessness are rising with many of the abandoned buildings left over from Spain’s building boom being used by desperate squatters. Families are struggling to survive as many have no members able to find a job.
“Whilst many are focused on Greece and the upcoming elections there, it is possible that the pace of the events could be driven by the fate of banks in Spain, not politics in Greece, We believe that the Spanish government are past the point of being able to fix this problem on their own. Ultimately, we need a resolution to the sovereign debt crisis and the crisis in the Spanish banking sector.” said Olly Burrows, senior credit research analyst for Rabobank international.
“Eurozone partners need to put into action the missing piece of the puzzle: fiscal unity. Economic and Monetary Union (EMU) doesn’t work if you have the ‘M’ without the ‘E’. At present we have one monetary policy, and 17 fiscal policies we are Euro optimists. We believe that the Euro will survive, but that the crisis must get worse before it gets better. Somewhat perversely, we view the current focus on the weakness of the Spanish banking sector as a potential boon: anything that speeds us to the brink of the crisis, and thus to a swift resolution, is to be welcomed.” He added.
The feared collapse of the Bankia group is what many fear could be the beginning of the end for Spain. The bank lost over three billion Euros in 2011, contradicting figures that showed it had earned a profit. The government was forced to nationalise it pumping billions into the faltering company. Anger amongst taxpayers is rising with fury at Bankia’s former chairman Rodrigo Rato claiming a salary of 2.4million Euros in the year that his bank incurred the second biggest banking loss in Spanish history.
Financial group JP Morgan is predicting that a Spanish bailout could cost the EU €350billion with a bank bailout costing €75billion. The big question on many observers lips is, just where are they going to get the money? Many German and French taxpayers must be nervous.
The longer the crisis goes on, the higher the cost in both blood and treasure for the member nations. Very soon the European nations are either going to have to make some solid decisions or face the collapse of the single currency, and who knows what that could bring.
The Pound to Euro exchange rate is currently trading at 1.251
The Pound to US Dollar exchange rate is currently trading at 1.557
The Euro to US Dollar exchange rate is currently trading at 1.244
The Euro to Pound exchange rate is currently trading at 0.798
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