For the last year or two, the standard MO in Europe has been pretty straightforward: a crisis of some kind every five or six months, followed by a solution that everyone claims will finally fix things, followed by yet another crisis. It’s about time for the next one, and Spain appears to be the most likely source this time around:
Spain has set off further alarm bells among bond investors and its crisis-hit eurozone neighbours by conceding that its debts will balloon this year to their highest level for two decades….Despite announcing its most austere budget for more than 30 years last week, Spain’s government admitted on Tuesday that the debt-to-GDP ratio will jump to 79.8% in 2012 from 68.5% last year.
….Nerves around Spain’s creditworthiness — whose economy is twice the size of that of Greece, Ireland and Portugal combined — had settled somewhat since the depths of the eurozone debt crisis last year. But recent days have brought renewed fears in financial markets and among fellow eurozone members that Spain could be the biggest threat to their future.
Yep, that’s a shocker. Spain’s most austere budget in three decades has produced a terrible economy, which in turn is producing even bigger deficits. Who could have predicted it?
As usual, it’s not as if there are any easy solutions here, so I suppose excessive snark isn’t really justified. Still, it’s not as if no one saw this coming. And it’s inevitable that these crises will continue popping up every few months until, one way or another, Europe solves its fundamental problems. That still doesn’t seem to be anywhere on the horizon. In the meantime, keep your seatbelts fastened.