Business, Economics and Jobs

Spain will likely need a bailout to save economy


Spanish Prime Minister Mariano Rajoy speaks to press after a control session at Madrid's Parliament on April 11, 2012 in Madrid, Spain. Spain appears to be going into a deeper recession, despite the severe austerity measures the Spanish Government is making to avoid bailout.


Pablo Blazquez Dominguez

Spain has become front and center in the European debt crisis.

Investors worry that the Spanish government will be unable to enact a number of austerity measures aimed at lowering the country's debt, while simultaneously stemming falling growth and unemployment.

With a quarter of its population unemployed - more than 50 percent of youth also unemployed - and a housing crisis that leaves the country's banks highly indebted, there are growing concerns that Spain will dip into a serious recession.

The Atlantic predicts that a combination of austerity and consequent low growth will push Spain towards national bankruptcy.

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There was a brief moment of respite Tuesday as a Spanish debt auction sold off more than anticipated, boosting European stock markets.

The good news was short lived and talk of crushing debt and bailouts re-emerged quickly

Spain's Prime Minister, Mariano Rajoy has consistently said that his country will not need a bailout.

"Spain will not be rescued," said the Spanish Prime Minister at a news conference in Poland this week, according to NPR.

"It's not possible to rescue Spain. There's no intention of it, and we don't need it."

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However, Reuters reported Wednesday that economists increasingly believe that the country's banks will have to tap Europe's rescue fund (EFSF) to cover losses during the property collapse.

The EFSF has already helped to bail out Greece, Ireland and Portugal.

"They're going to need EFSF money to recapitalize the banking sector," said Carsten Brzeski, a senior economist at ING in Brussels, according to Reuters.

"I think we'll only see a real end to the Spanish misery if the real estate market stabilizes."