Inkwell Institute

Subject:  Europe

We all have that special place…the place we lived as a child or that place of the first kiss or our first sexual encounter or…..well a place that holds a special place in our hearts…..Mine is Spain…..I lived there twice in my life…once as a young teenager and then as an adult…..a place of great food, wine and beauty….and yes my first adventure in love and sexuality……..her name was Charlotte a French girl from Paris and a red head….in retrospect….that could explain my obsession with red heads…..whatcha think?  I also worked as a researcher for a Spanish newspaper….so I guess Spain is a place that I watch fondly…….

Sorry I digress into my past……but Spain is a source of concern in the existing economic upheaval around the world, but especially in the ailing European Union.

You may remember all the hub-bub over the situation in Greece….well Spain is reaching that point, as we speak……observations of Gonzalo Lira…….

Spain’s jobs-scarce economy plunged back into recession in the first quarter of 2012 as employment slumped even further, the Bank of Spain said Monday.

Barely two years after emerging from the last downturn, Spain slid into recession again with two consecutive quarters of economic contraction, the central bank said in a report.

Gross domestic product fell by an estimated 0.4-percent in the first quarter of 2012 after a 0.3-percent decline in the last three months of 2011, the bank said.

Spain, whose unemployment rate at the end of 2011 was already the highest in the industrialised world at 22.85 percent overall and nearly 50 percent for the young, suffered a further sharp jobs decline.

The government forecasts the jobless rate will rise to 24.3 percent this year as the sagging economy struggles to absorb millions of jobs destroyed in the collapse of a property boom in 2008.

The European Central Bank had helped to ease market tensions, Spain’s bank said, alluding to the ECB’s decision to extend more than one trillion euros in low-interest, three-year loans to the region’s banks.

Spain’s economic woes are just the beginning…..and with their propensity for protests and not always the calmest of situations….. I look for rising violence and the new government, elected last year, to fall and chaos will reign…..kind of like Greece……

If this happens and I think it will what will happen to the country?

An opinion is that they will exit the Euro on a dead run……..

With a 24% unemployment rate that is rising, and over half of the young people unemployed, no politician in his right mind—especially a nationalist—will decide that even more austerity is the cure for the disease. One thing is cutting off the fat—it’s quite another to be cutting to the bone.

For Rajoy and de Guindos, it will be simpler to exit the eurozone, go back to the peseta, and devalue by 20% to 30% right off.

It is always easier for a politician to cut expenditures via devaluation than via nominal spending cuts. Since the Eurocrats won’t allow a 20-30% devaluation of the euro, and since Spain cannot really cut any more or find any more money in the bond markets, then the only thing left for it to do is devalue a currency that it controls.

On a personal note…..I would not cry over Spain leaving the EU….I remember it from my youth and would like to see a Spain that can be enjoyed and not feel like I was held at gunpoint by the EU.