Spain's Plight Tests European Drive for Austerity |
| New York Times - Apr 27, 2012 |
Since the onset of the debt crisis in Europe more than two years ago, defenders of the currency union have stuck to a basic argument: if the euro zone’s weaker economies would only keep pursuing policies of austerity, even as growth collapsed and job losses mounted, they would be rewarded by investors more willing to buy their bonds.
Yes, the social cost would be high, but over the long term, these economies would benefit from the lower interest rates that can come with the seal of approval from global bond investors. Or so goes the argument.
That approach, though, has failed in Greece, Ireland and Portugal. And now it is being severely tested in Spain, where the more the government promises to cut its budget deficit, the more foreigners are unloading their Spanish bondholdings.
Late Thursday, when Standard & Poor’s jumped into the fray by slapping Spanish bonds with a two-notch ratings downgrade, it gave public voice to what investors have been sensing for months now — that it would be nearly impossible for Spain to meet its target for deficit reduction amid one the most severe recessions in the euro zone.
Read Full Article from New York Times
- Posted: 2012-04-27 15:21:33
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