Just three weeks ago, prior to the Greek bailout many commentators, pundits, market insiders and bloggers were saying that at the very least Spain should be able to handle their debt.
Three weeks is a long long time, and a lot can and does change in just 21 days.
The IMF had this to say on Saturday about Spain:
Spain’s economy needs far-reaching and comprehensive reforms. The challenges are severe: a dysfunctional labor market, the deflating property bubble, a large fiscal deficit, heavy private sector and external indebtedness, anemic productivity growth, weak competitiveness, and a banking sector with pockets of weakness. Ambitious fiscal consolidation is underway, recently reinforced and front-loaded. This needs to be complemented with growth-enhancing structural reforms, building on the progress made on product markets and the housing sector, especially overhauling the labor market. A bold pension reform, along the lines proposed by the government, should be quickly adopted. Consolidation and reform of the banking system needs to be accelerated. Such a comprehensive strategy would be helped by broad political and social support, and time is of the essence.
Such austerity measures wouldn’t simply be difficult for Spain to put in place, they’d verge on downright impossible. With an unemployment rate already balancing on the 20% mark enacting what would effectively be seen as a government induced deepening of the job losses wouldn’t see Spain climbing out of the hole it is in for a long time.