The pain in Spain is felt mostly by the plain Joses, according to Alan Abelson in his “Up and Down Wall Street” column in this week’s edition of Barron’s. This is not an April Fool’s Day joke, folks, even though you might think so from the related news item that Spanish hookers have gone on strike against bankers. (But that still leaves politicians. . .) While everyone is still digesting the Greek default and bailout (let’s not sugar coat it—it was a default), Spain, Europe’s fourth largest economy, may be about to slip under the waves, and revive the potential for full-blown Eurozone crisis.
Investment guru John Mauldin says we are now in a period that will be “All Spain All the Time,” for at least the next year, as he tallies up the grim scene:
Spain is in a recession, though only down an estimated 1.7% in 2012, if things go well. Unemployment is at 23%, which is higher than Greece for the latest Greek data that I can find. But more than half of young Spaniards (over 51%) are out of work, creating a lost generation that has been hardest hit by Spain’s economic woes. The total number of unemployed has climbed above five million, and Spanish under-25 unemployment has nearly tripled, from 18% just four years ago.
Mauldin also points to an ominous report in the Financial Times about two leaked documents from the European Central Bank:
The first document tells us that €1 trillion in ECB largesse is not enough and has simply calmed the storm. “Contagion may … re-emerge at very short notice, as demonstrated only a few days ago, and re-launch the potentially perverse triangle between sovereign, bank funding risk and growth,” one of the analyses, prepared by the EU’s economic and finance committee and seen by the Financial Times, said.
“The second document, which was prepared by the Commission, warned bluntly: ‘The euro crisis is not over. Many of the underlying imbalances and weaknesses of the economies, banking sectors or sovereign borrowers remain to be addressed.’”
Meanwhile, the Wall Street Journal reports that Germany’s central bank has stopped accepting bank bonds backed by Ireland, Greece and Portugal as collateral.
Oh well, that’s just the European weenie socialists who can’t put their house in order. Can’t happen here, could it? Well, it turns out that last year the Federal Reserve accounted for 61 percent of purchases of U.S. government debt. In other words, we’re just printing money–lots of it. Hard to see how this doesn’t end badly. And then the big question is: who bails out the United States when it becomes Greece? Anyone? Buehler?
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