EU bailout big enough to pull Spain from the muck?

Article Highlights

  • Signs were already appearing Tuesday that the EU loan to #Spain may not be enough to ward off a debt crisis

    Tweet This

  • Spain is the eurozone's fourth-largest economy, yet it's got an unemployment rate of 25 percent.

    Tweet This

  • Spain is looking at a 140 percent ratio of external debt to GDP

    Tweet This

The European Union agreed to give a $125 billion loan this weekend to Spain for the country's banks to sustain themselves in the face of mounting debt and fading hope for a quick turnaround in the struggling nation's financial outlook.

On Tuesday, however, signs were already appearing that the loan may not be enough to ward off a debt crisis that has cascaded from Ireland to Portugal to Greece to Spain and which could head to Italy next.

The interest rates on Spain's 10-year bonds rose Tuesday to 6.63 percent -- near the 7 percent threshold at which the cost of borrowing money has proven too painful for Spain's neighbors. Private investors are also spooked that the loan could be provided in such a way that they may not get dibs in being paid back for their bond purchases, further frightening investors away from risky debt and prolonging the cycle of instability.

The crisis in Spain, the eurozone's fourth-largest economy, may sound familiar. It is in part the result of a busted real estate market as well as a lingering recession with unemployment at nearly 25 percent. And as it copes with mounting debt, Spain's GDP projections for this year are in the negative. 

The charts below — with props to AEI's Daniel Hanson for crafting them — provide a visual depiction of just how bad the situation is.

 

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Sharon
Kehnemui
  • Sharon Kehnemui is managing editor of AEI.org, and is responsible for AEI content on digital media outlets.

  • Phone: 202-828-6037
    Email: Sharon.Kehnemui@aei.org
  • Assistant Info

    Name: Sarah Murphy
    Email: sarah.murphy@aei.org

What's new on AEI

image The Fed can't save the stock market again
image Obama's IRS and AP scandals cast big chill on free speech
image Organic industry's credibility eroded by misinformation about GE foods
image It's not universal coverage
AEI on Facebook
Events Calendar
  • 20
    MON
  • 21
    TUE
  • 22
    WED
  • 23
    THU
  • 24
    FRI
Tuesday, May 21, 2013 | 5:00 p.m. – 6:30 p.m.
Free beer: Liberating libations from ‘Bootleggers and Baptists’

Join us for a discussion of the history and future of federal and state alcohol regulation and competition, followed by a reception with beer, wine, and spirits.

Wednesday, May 22, 2013 | 5:00 p.m. – 6:30 p.m.
NCLB sanctions: Tests taken, lessons learned

Join education scholars and practitioners for a discussion about the latest NCLB research and its implications for future education policy.

Event Registration is Closed
Thursday, May 23, 2013 | 12:00 p.m. – 1:30 p.m.
Competing visions of the common good: Rethinking help for the poor

What shared commitments do we have as citizens and neighbors to care for one another? How can a proper ordering of America’s political economy enable the most people to have the best life? At this event, Rep. Frank Wolf (R-VA), a longtime champion of human rights causes, and AEI President Arthur Brooks will join Wallis in addressing these and other questions.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.