While the strongly studded euro economy balances itself on the basis of domino effect, Spain is acting like a key block that will either tear or make the mark, for this single currency (i.e. Euro). Recent news have pointed out that the head of the IMF has been taking a tour across Spain, and we are left thinking that sooner or later Madrid is going to ask for help.
Based on a cheap credit, Spain hasn’t been getting the type of response that was expected from the construction industry and the small bubbly property sector. Out of 5 workers, 1 is always looking sad and gloomy because of the unemployment factor.
Markets were expecting some sort of reassurance as per a new financial stabilization policy, but in vain. Most likely, Spain is expected to ask for aid from the IMF officials in hopes of hauling the economy on its legs again. A possible solution might be an urgent EU-IMF cash injection, worth 200 Billion euros.
Meanwhile, far across the globe, there are German officials, who have been panicking due to accusations of de-stabilizing Spain amid concerns in Berlin and Madrid, that not enough is being cut to save the day. The German banks are openly exposed to market contagion because they own billions of Euros in Spanish debt.
It is not as easy as it looks, printing new bank notes or throwing billions more at Spain will only degrade the value of money. Moreover, the money injection tactics will be unpopular in countries such as Germany, where the government is trying to cope with its own financial downturns. Feeble cracks are already visible in the European economy as a whole, and we still await the ultimate outcome of this whole fiasco.