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José Luis Álvarez, Dir. Dep. Economics , University of Navarra
What is to be done?
Why do you think the attacks on Spanish debt have intensified so much three days before the elections?
- Of course, it is difficult to find an objective reason, based on the fundamentals of the Spanish Economics , as these could not have deteriorated in any way at such a speed. It seems that there has been an increase in the uncertainty surrounding the financial markets in Europe, from which those countries that started from a worse relative status , such as Spain, have suffered the most.
Can Spain withstand these interest rates and this risk premium for a long time?
-I believe that the problem is not so much how long it can be withstood, but at what cost. If we continue to refinance our debt at rising rates, interest will eat up a substantial part of the State's budget , weighing down the possibilities of growth and further complicating our delicate financial status .
Do you think that the attacks will now spread to unsustainable levels to other countries such as France or Belgium?
-Although France is also suffering from the financial tensions, in the case of Belgium the extension of the attacks seems a more real possibility, as its public debt - very close to 100% of its GDP - and, above all, its risk premium - above 300 points - are at dangerous levels. In other words, Belgium's current status looks very much like Spain's a few weeks ago.
Will the attacks stop when the elections are over?
-Who knows. It will depend on the markets' interpretation of the election result and on whether or not the current uncertainties hanging over the sovereign debt of European countries will remain. But the result of the elections alone will not put an end to the status unless decisive measures are taken.
What must be done to put an end to this crisis? Does the solution lie in Spain, in the European Union or in the IMF?
-In the short term deadline, the Euro zone needs a courageous intervention by the European Central Bank, which must decide to play, without hesitation or hesitation, its essential role as lender of last resort written request, buying sovereign debt in the secondary markets. On the other hand, structural reforms must be adopted in Spain to improve growth prospects and thus make the costs that must necessarily be incurred to correct the imbalance of the current public and private indebtedness more bearable.