Eurozna must support economic growth and dream debt if it wants to regain the yard of the investor. At the same time, however, it should embark on the path of a banking union and a joint Eurobond, and should also welcome the recapitalization of banks from the ESM protection fund.
This was stated by the European Commission in the draft recommendation for budgetary measures and structural reforms in the euro area countries.
In most of the euro area’s economic strategy for the year, the Commission directly mentions the market’s concerns about the sweat of Pan-banks and the high costs that Spain is running to help the sector. The first problems of Spanish banks are the main cause of the increase in the cost of servicing Spanish debt. These are close straight, which are unsustainable for a long time.
It is recommended that the euro area consolidate more and align its banking sector, but that it was enough to change the exchange rates, stocks and commodities in the market. The euro detached from the two-year low against the dollar and from $ 1.2425 to $ 1.2468.
Investors fear that public finances in Spain will find themselves in a situation that will be unmanageable. If this were to happen, Spain would be a candidate for international financial assistance from 17 out of 17 euro area members, namely Greece, Ireland and Portugal. The problem, however, is that Spain is much more affected and its financial problems could lead to predictable developments and impacts on the euro area as a whole.
Spain is facing a recession and record unemployment of around 25 percent. The country will continue to face the collapse of the real estate sector in 2008 and virtually every bank in the Spanish Republic will have a portfolio burdened with even a smaller volume of bad debts.
The European Commission, which is also the executive of the European Union, in the recommendation warns against a vicious circle of weak banks and indebted countries, where one indebted country joins another indebted country. According to the commission, this habit must be broken.