Are Internal or External Factors to Blame for the Sovereign Debt Crisis in Spain? What Are Policy Implications of Your Analysis?

Topics: Spain, Money, Euro Pages: 4 (1536 words) Published: March 8, 2013
Are internal or external factors to blame for the sovereign debt crisis in Spain? What are policy implications of your analysis? From market interest rates to lend it money, the Spanish government has risen to 10 years, far higher than the 6% - far below the level of 7% -8%, prompting Greece, Ireland and Portugal cap hand Brussels bailout. In comparison, the German government paid 1.42% interest rate- which, incidentally, is the lowest borrowing costs in Berlin has ever had. The market say they fear Spain may end up like Greece, and unable to repay the debt, so they put their money on safe German bonds. The fear is common, creating a vicious cycle. If you have more cash to leave the Spain's banking system might not maintain the government loan with lack of funding. Spaniards might intentionally transferred to the security of the bank account in Germany, if they have money, they witnessed a traumatic Greece out of the euro - which may involve the freeze and the savings of ordinary Greeks cast into serious devaluation of drachma. If, the Spanish banks are having problem, the Madrid government may not have enough funds to save them.

However, the problem faced by the Government and the Bank of Spain, only the symptoms. The real problem is the confusion of the Spanish economy. Whether you believe it or not, before 2008, the government of Spain is a least profligacy - unlike Greece in the euro zone. Or Germany. Spanish government debt is just 36% of the GDP in 2007, the economy, while the German government's 65%. More importantly, Madrid to pay its debts in the process - it has won more tax revenues exceed its total expenditure. Opposite Berlin regularly outbreak of the biggest years in the Maastricht Treaty provisions accounted for 3% of the gross domestic product (GDP) level of borrowing. Clearly, the crisis has nothing to do with the Spanish government's reckless. On the contrary, it is in the performance of others in Spain. Interest rates fell to lowest point in...
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