Daily Commentary: The Pain in Spain

Spain has really hit the wall now. Given what we know of how the sovereign debt crisis has proceeded. The likelihood that Spain can escape from the rise in yields without ECB or EU-wide intervention is slim. We would need to see some very remarkable things come together. The important thing to remember about Spain is that it has dragged Italy in tow. So it should be clear that bailouts for Spain alone can’t work because Italy too is imperilled.

My newsletter for the week is on Spain, its economy and the implications of the Spanish debt crisis. I expect this situation to get worse. Moreover, because the push higher in rates for Spain came after Spain unilaterally flouted its 2012 targets, I expect the euro zone to draw the wrong conclusion from this episode and force more deflationary cuts. One way or another, defaults are coming.

I was to be on CBC tonight on the Lang & O’Leary show to talk about it. But that has been postponed.

That’s it. Here are the links.