SPAIN VS. PORTUGAL: THE COUNTDOWN TO ZERO
By Walter Kurtz, Sober Look
On April 1st, 2011, Portugal’s 10-year spread to Germany went above 5% for the first time. Two weeks later Portugal formalized its request for assistance from the EU/IMF.
Yesterday, Spain’s 10-year spread to Germany exceeded 5%.
The chart below compares Spain’s and Portugal’s 10-year spread, aligning the charts at the point when the spreads first crossed the 5% level. The x-axis is the number of days until Portugal’s request for rescue funds, covering the full year prior to the event. If history repeats itself – and these spread paths have been quite similar so far – there isn’t much time left for Spain.
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9 to 5ers in germany are not bellying up to the bar to subsidize greek hairdressers to retire at 52 anymore than said hairdressers are going to forestall retirement to save the euro.
from matthew lynn, marketwatch:
6 reasons its Spexit BEFORE Grexit:
One: Spain is too big to rescue.
Two: Spain has tired of austerity already. Remember, the protests against cuts began in Madrid a year ago with the “indignados” movement, which started sit-ins across major cities in 2011. The protests spread from there to Greece, and other euro-zone countries. The austerity had hardly even begun, yet already it has provoked strong opposition.
Three: Spain has a real economy. The Greeks understandably feel nervous about life outside the euro zone. They don’t really make anything. Spain is a successful economy with a perfectly respectable industrial base – its export to GDP ratio is 26%, similar to the U.K., France or Italy. Only last week the Japanese car-maker Nissan announced a major new investment there.
Four: Spain is politically secure. For many countries, euro membership is more about politics than economics. The Greeks stay in because it locks them into Europe (rather than being part of the Turkish sphere of influence). Latvia wanted in because it made it part of the EU rather than being dominated by Russia. For the Irish, it is about separating themselves from Britain. The Germans stick with the euro because the EU still represents a break with its troubled past.
Five: Spain has bigger horizons. The Spanish economy looks partly to Europe. But it looks just as much to the booming Spanish-speaking economies of Latin America (and indeed the huge Hispanic market in the U.S.). Rather like the U.K., Spanish business has always looked to the global rather than the European market. Why tie yourself to a failing project when there are much bigger opportunities out there?
Six: The debate has already started. There is already a serious discussion underway in Spain about the future of the currency. Plenty of mainstream economists and pundits are arguing that the real problem is the euro, and Spain will only recover once it gets the peseta back. The taboo has been broken. That isn’t true in Greece, where even the far-left Syriza party still clings to the idea that it should stay in the euro.
Debate in Spain