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Public Debt Dynamics of Europe and the U.S. by Dimitris N. Chorafas

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7

Spain in Free Fall

Since 2008, considerable uncertainty has arisen regarding the state of the Spanish financial system and the health of Spanish public finances. Having obtained some euro 40 billion ($52 billion) out of a pledged euro 100 billion to beef up the treasuries of its badly wounded banks, Spain is hesitating to apply for support from the ESM, and therefore from ECB’s OMT program.

The Spanish economy is about twice the size of Greece’s, Ireland’s, and Portugal’s put together. The ECB’s OMT rescue program would put a large dent in ESM’s coffers. Theoretically, the common currency area has enough resources to finance a Spanish bailout, but the failure of the Greek rescue saw Euroland’s ability to influence economic policy weakened. ...

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