Monday, February 27, 2012

Spain Says It Would Be Suicidal To Slash GDP As Demanded by Eurozone; Unemployment Would Soar to 25%

Mariano Rajoy has concluded that it would be "suicidal" to try to slash the budget deficit from 8% of GDP to 4.4% as demanded by the Eurozone.
Says Evan-Pritchard: "Such a policy would require a further €40bn or €50bn of cuts and accelerate the downward spiral already underway, beyond the 1.7pc contraction expected this year by the International Monetary Fund.

The unemployment rate would rise to well over 25% with six million out of work by the end of the year, equivalent to 30pc under the old definition used in the last jobless crisis in the early 1990s".

"There is near unanimity across the political spectrum that drastic pro-cyclical tightening at this stage is unwarranted and dangerous. Josep Borrell, ex-president of the European Parliament and the voice of Spain's pro-European establishment, said such debt-deflation risks pushing the banking system over the edge. "To cut the deficit almost four points in one year would be a true depressionary shock for an anaemic economy, made worse by the requirement for banks to mark their real estate losses to market prices."

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1 comment:

Josh said...

Maybe you could revisit the question of "Is Morgan Stanley Going Bankrupt?" That stock is in bad shape.

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