European Woes Continue

Europe’s economy is going from bad to worse to awful. According to recently released figures the EU’s economy is expected to not grow at all over the next year whilst the Eurozone’s economy is expected to go through a mild recession. Spain is the latest centre of the European crisis, the government of Spain has done a review and has given a €30 billion bailout to some of its biggest banks. Yesterday one of the country’s largest banks, Bankia, was part-nationalised (45% of the bank belongs to the government now) this is putting a serious strain on the Spain’s finances as Spain has massive debts. The cause of most of Spain’s woes is very similar to what happened in Ireland, there was a gargantuan property bubble that burst, there are now vast wastelands of uninhabited apartments and home built by developers but never purchased. Bankia, lent €38 billion to property developers, €32 of which is currently problematic and Bankia may never receive the loans. In the entire banking system there is a colossal €184 billion of bad loans, with Spain’s unemployment rate at 25% and the youth unemployment rate at 50% austerity is going to cause massive pains for Spanish people. So will Spain need a bailout? It’s too early to tell at this stage but there is a chance it will, if it does need a bailout then it will become the fourth European economy that has received one. The problem with Spain is its economy is significantly bigger than the Portuguese, Irish or Greek economies and a Spanish bailout may put too much strain on the system

The problems in Greece are continuing there has been no government since Sunday and there isn’t going to be one until new elections are held. The third placed party PASOK tried to get a coalition going but failed, so now new elections are going to have to be held. What some of the centrist parties, and Brussels, are hoping is that after voting in the extremes on Sunday people will move back to the centre. If the polls are anything to go by, this will not be the case, the second placed party, SYRIZA will win more than any other party as it is polling 27% of the vote. If it does manage to get this amount of the vote then there is a serious chance that it will be able to form a coalition and thus a government. The problem. SYRIZA opposes the bailout, if it does manage to form a government and Greece goes bankrupt, this could have devastating effects on the global economy.  One of the biggest worries I have is the rise of Golden Dawn, hopefully their vote share will go down, but I fear this is wishful thinking.