Storm looming in eurozone as Spain economy falters
2012-07-27 0:00


Spain’s worsening economic crisis and fears that the cash-strapped country might need a bailout that the eurozone can barely afford have caused a violent economic storm in European financial markets.

Fears soared high after the interest rate on Spain’s debt bonds climbed to a record high of 7.39 on Monday causing the euro to take a nosedive versus the US dollar and China’s Yuan, a recent report by Radio France Internationale (RFI) said.

While every euro was dealt for USD 1.20, most financial and economic experts in Europe expect further fall in euro-dollar parity during the coming weeks.

Meanwhile, on Monday Moody’s Investors Service changed the outlook for the ratings of Germany, Luxembourg, and the Netherlands to negative from stable, citing the uncertainty about the eurozone’s ongoing debt crisis. If fears over the eurozone financial crisis continue to rise over the next months, Germany’s AAA-ratings as Europe’s number one economy will be lowered.

The recent development comes as financial markets believe Spain’s economic woes go far beyond the country’s ailing banks that have been grappling with major economic problems.

Global investors say the single currency area’s economic situation will remain critical considering the amount of the Spanish government’s debt, which demands capabilities beyond the current European mechanisms for assisting the eurozone member states, Greece’s worsening economic crisis and its possible exit from the 17-nation bloc, and also Italy’s falling economy. As a result, many analyst wonder whether Spain can be still considered a financially creditable state.

The bitter fact to admit is that Spain is experiencing a seriously critical economic situation with all its macroeconomic indicators having crossed the red line. Moreover, the country’s economic growth has been negative during the past nine months.


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