The pressure mounts

23 Nov 2011

Lucky me. Today, I got to experience not just one but TWO gota frías. (A gota fría is when it downpours in just one spot.)

As I was waiting for my ride to work, it started to downpour. Thankfully, I could hide under the overhang at the bus stop. Within five minutes, the street almost turned into a river--it was so full of rain!

Later, right when were preparing to leave for lunch, it started to rain even harder than it did this morning! We were stuck inside for 20 minutes before it tapered off enough for us to be able to leave without getting soaked!

Like Alicante, the new Spanish government is (metaphorically) being inundated with demands from the rest of the European Union.

Even though Spain just elected a new Prime Minister on Sunday, Spain is being pressured to take action immediately to deal with the current economic situation--or risk the downgrading of their credit rating.

They fear that Spain--like Greece and Italy--will be the next country to fall to the debt crisis. And not without reason. Spain is the third government within the last few weeks that has changed political leadership due to the economic situation; admittedly, in Spain, the elections were planned.

At this point, Spain is teetering on the brink of financial crisis. As I understand it, in Europe, a country's financial viability is measured by the interest rate that they are charged. An interest rate of 7% or higher indicates that the markets have little faith in the country's ability to pay its debts. Up to this point, countries (like Ireland, Portugal, Italy and Greece) with a rate of 7% or higher have received a bailout from the EU. Spain is hovering around 6.3%.

In addition to Spain's interest rate, there is also the issue of unemployment in Spain. Spain has one of the highest rates of unemployment in Europe at 21%. It's even worse for young people. Olli Rehn, a commissioner with the European Union said, "Si yo fuera un joven español, afrontaría un paro juvenil por encima del 40 %, mientras que en Holanda tienen un 4 % y en Austria un 5 %, y me preguntaría por qué." (If I were a Spanish youth, confronted with an unemployment rate upwards of 40%, while Holland has a rate of 4% and Austria 5%, I would ask myself why.)

The Spanish economic situation is highly problematic for the European Union because Spain has the 4th largest economy within the European Union. If Spain fails, it may signal the end of the euro. 



** Disclaimer: I'm not very knowledgeable about economics. I'm explaining what I've read to the best of my ability--based on my understanding.