Spain’s Future Uncertain After 100 Billion Euro Loan

Over the weekend Eurozone economic and monetary union (EMU) finance ministers finalized a deal that will see Spain receive a 100 billion euro loan, a move that will be watched over by inspectors from the European Union, European Central Bank and International Monetary Fund to make sure things stay on track. Amid the news that gave stock markets a lackluster boost, Europeans and others around the world may be asking where exactly is this money coming from and what does it mean in the long run. Germany’s finance minister Wolfgang Schäuble has said it will be more efficient for the loan to come from the European Stability Mechanism, “ESM loans are senior to other creditors, ensuring that Spain’s debts to other EMU members would take precedence over private lenders in the event of a default,” a recent CNN online article reported. In the days following the loan announcement bond yields have risen, “Spain’s borrowing costs have risen to the highest rate since the launch of the euro in 1999”, a BBC online article writes, and on top of that there has been a reduction of foreign stocks and bond investment in the country for some time.  From this Spanish banks are left to pick up the loose ends prompting observers to wonder if this will leave the country’s independence at the mercy of its banks. A bigger question emerges from this storm, has Spain traded one evil for another?  Has Madrid signed away the country’s political sovereignty of tomorrow in order to deal with its fiscal problems of today?  I think this is the kind of question that we won’t be able to answer for another decade or so. | Raymond Matt, CFP, CLU, TEP, CHS | The Ontarian, Writer, Editor

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