PIGS as the financial media call the four countries: Portugal, Italy, Greece and Spain are one of the biggest risks to the current global financial stability. When much of the attention is grabbed by the troubled Greece, the Spanish economy is in reality in a position worse than that of the Greece.
While other European nations like France and Germany — and even Britain — are beginning to show signs of economic growth, Spain remains stuck in recession. Spain is the only G20 country that remained in recession in 4Q of 2009 and the IMF forecasts that it will remain so till 2011.
Some of the most worry some statistics from Spain, which clearly highlights the risks are:
- Unemployment for around 18% while the average for EU is only 9.5
- Although lower than average Debt to GDP ratio, it has doubled in last one year, etc
There are some noted economists who believe that it will take Spain 7-8 years running the same amount of deficits to become the next Greece, however others say that the crisis is much serious than it looks at the face.
Hence, I believe that Spain's problems coupled with debt issues of other EU countries poses a serious threat to the financial markets. We can expect more sovereign rate cuts like what has happened to Portugal and Greece last Tuesday.
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