Eurozone Crisis: After Italy is Spain next?

11th November 2011

M E Synon asks the question on the Daily Mail's Right Minds this morning.

In fact she makes a grim prediction. "Give it a few more days. The bond markets are going to take another look at the figures coming out of Madrid and widen their eurozone field of fire."

Synon's view is based on a report from Lombard Street Research's economist Jamie Dannhauser issued this week. Among other things, the report says:

"'Whereas the Italian budget should be in balance this year before interest payments are taking in account, the Spanish look like running a so-called "primary" deficit equal to around six percent of GDP. Official projections that it could get down to four and a half percent of GDP look wildly optimistic with Spain almost certainly back in recession."

Citywire publishes an uncomfortable chart looking at Spanish debt and also asks when will market sentiment change if Spain's poor growth record continues. This is especially a worry because of the high level of debt in the private sector.  

 It also quotes Dannhauser saying: "Although Italy has higher public sector net debt, it is the downward spiral between private debt, fiscal consolidation, low growth and banking solvency that really threatens countries in the periphery."

The economic numbers are not improving by much either, and it is very likely Spain's left of centre Government will be ejected in the next election as this article on AFP demonstrates.

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