Spain’s Twin Crises
Spain is special. Every European country these days seems to have its financial crisis. Spain has two.
One crisis stems from the by-now-commonplace mismanagement of the nation’s finances. The other stems from a collapsed real-estate bubble and all the financial strain that can cause. Having bled into each other, these crises have imposed financial burdens on Madrid far beyond anything it can deal with on its own. The strains are so severe, in fact, that not even the committed resources of the entire euro zone are sufficient to handle them, not alongside the other demands of Europe’s so-called periphery. Making matters worse, markets, noting the untenable nature of Spain’s problems, have refused to lend unless Madrid pays impossibly high rates for credit. The only relief available has come from the European Central Bank (ECB). But at base, even that is insufficient. The best the ECB can do is buy Spain time for more fundamental fiscal, financial and economic reform.