Spanish Prime Minister Mariano Rajoy’s economic policy is in tatters. Spain’s economic descent is now accelerating, with output shrinking 0.7% in just the last quarter alone – the worst since crisis began in 2009. For the full year, output has fallen 1.8%, retail sales have plunged a remarkable 10.7%, and vehicle ales have fallen 17%. This is diastrous. This is Greek-style debt deflation.
The Spanish cannot say they weren’t forewarned. Those who understand how an economy in a credit crisis works knew his plan was going to be disastrous. And so it has been.When Rajoy was campaigning for office, he was quite clear about what he planned to do. And he was elected anyway – with a sizeable majority to boot. Clearly, the Spanish have no one to blame but themselves.
But, we’re here now. The question is how this moves forward. First, I want to posit a thesis about the European crisis countries. [Content protected for Gold members only]