Europe seems to have reached the nadir economically, judging from the last few economic data points. But there is still a long way to go. In my view, Spain remains the most important country in Europe’s sovereign debt crisis because of its large size and the potential for economic under-performance.
I have a slew of Spanish articles that provide more colour on the situation that I want to review here in the context of my overall thesis that Spain will need to apply for an OMT program by year end.
The latest problem is one of political corruption rather than poor economics. Spain is in an uproar over this scandal, particularly as Spanish Prime Minister Mariano Rajoy waited two full days before coming clean. The scandal revolves around papers of Luis Bárcenas, the ex-Treasury secretary of the ruling Partido Popular, obtained by Spanish daily El Pais which detail pay-offs to various operatives within the Partido Popular fro the period between 1990 and 2008.
For me, this Spanish scandal is reminiscent of a secret political payments scandal that rocked Germany over a decade ago. [Content protected for Gold members only]