Over the last two weeks, we have witnessed an intensification of upward pressure on the Spanish risk premium, which has peaked at around 500 basis points. Part of the rise in this premium is due to the fall in German interest rates, about which we should not be too concerned. The real problem lies in the sharp rise in interest rates on Spanish ten-year debt to over 6%.

The consequences of this loss of confidence in the Spanish Economics - this is how we can interpret the premium demanded to invest in Spanish bonds - of course reach the labor market. On the one hand, higher interest rates imply a greater financial burden of debt for the State, complicating compliance with deficit targets and thus forcing new austerity efforts. To get an idea of the magnitude of the problem, let us consider that the 2012 state budgets include an expense of close to 30,000 million in interest. In such circumstances, any increase in interest rates damages growth and employment due to the pressure it puts on the public expense .

On the other hand, it should be borne in mind that the risk premium also reflects in some way the confidence that investors have in Spanish companies. Thus, the higher interest rates borne by Spanish public finances translate into significant difficulties for Spanish companies in obtaining financing, which, in turn, have a negative impact on employment.

The deterioration in the credibility of Spain's Economics also affects foreign direct investment. Those foreign companies that were thinking of investing in Spain, creating or installing production capacity and pulling the employment, are driven away by the uncertainty that they can glimpse after the rise in the risk premium.

We should not forget either that in this case, as in many others in the field of Economics, we are facing a vicious circle. Poor prospects for employment and growth raise the risk premium, because they suggest greater difficulties in the future repayment of current debt. In turn, as we have just seen, higher risk premiums complicate the creation of employment. And back to square one. However, this dynamic has a potential positive reading: the vicious circle can become a virtuous one if better macroeconomic prospects lead to lower risk premiums that facilitate reactivation.
Let us hope that the expected European growth summit will succeed in initiating this change.