With summer fast approaching, millions of holidaymakers will make the annual trip to favored destinations in Spain including the southern region of Andalucia, the Canary Islands and the capital of Madrid. These are just three of the eight places that have been placed for a downgrade by rating agencies across Europe and beyond however. The creditworthiness of some regions now borders on junk status.
Spain has not had the best of luck in the economic game in the last year. It has now become the second main threat to the euro after Greece.
Investors and wealthy Spaniards have been pulling their money out of the banks and moving it to financially more secure countries. The scale of the removal of funds is unprecedented and will do no good to help the country’s public finances.
News that the banking giant Bankia needs a €19 billion bailout has been met by the government with a rescue package but the markets have shut the door on Spanish agencies that need assistance due to the sheer size of the debt buildup and the likely need for further bailouts.
Despite reassuring investors and other countries alike that Spain will maintain its economic sovereignty and not require a bailout that could cripple the single currency union, Prime Minister Mariano Rajoy will be hard pressed to get more of his own workers.
Spiraling unemployment has led to a stubbournly high 24.4 percent of the working population being out a job. The figures regarding the youth who cannot find a place of employment is almost double that.
The government will attempt to slash the deficit to a mere 5.3 percent of economic output this year and down further to 3 percent the following year. With the economic climate currently battering Spain’s investment worthiness, this will be an ambitious feat to manage even in what has always been the most financially productive time of the year for the country in a foreign investment context.