The Spanish Conundrum

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Presentation by Dr. Xavier Sala-i-Martin, Professor of Economics, Columbia University (USA) at the Bank of Latvia conference "Economic Adjustment under Sovereign Debt Crisis: Can Experience of the …

Presentation by Dr. Xavier Sala-i-Martin, Professor of Economics, Columbia University (USA) at the Bank of Latvia conference "Economic Adjustment under Sovereign Debt Crisis: Can Experience of the Baltics Be Applied to Others?"
Riga, November 2, 2012.

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  • 1. The Spanish Conundrum Xavier Sala-i-Martin Columbia University Riga, November 2, 2012
  • 2. Spain The 1990s Debate The decision: Idea of Europe The Bubble Years The Crash  Early reaction  Fiscal Expansion  Fiscal Problem (even though deficit was zero)!  Banking Crisis  Bad policies  No Bankrupcy: government bailout!  Mergers  The collapse  The regional "problem"
  • 3. Spain: The Problems Stock Problems  Public Debt:  Insolvent or solven but illiquid?  Greek contagion and SPREADS  Private (Bank) Debt  International Debt Flow Problems  Deficit  Lack of Growth, Unemployment Need to address ALL of them!
  • 4. Spain: "Solutions" Labor Market Reform Austerity measures: feedback loop into GDP growth Financial Market Reforms The June 10 Bailout  Spain Rescues its banks The June 28 Bailout  Europes money  Conditions:  Evaluation  3 categories: Solvent, Bailout, Liquidation  Bankrupcies!  Bad Bank: "fair price" and "no cost to taxpayer"  The ECB will intervene to lower spreads for Spain and Italy June 23: "All necessary to save the euro!"
  • 5. Todays Debates Rescue or not Rescue? Referendum or not Referendum? Competitiveness…
  • 6. Other (current) Debates Austerity vs Growth: The Hollande Factor!  Spending and growth  Devaluations  Monetary  Internal  Fiscal The NO-DEBATE!:  Competitiveness: the WEFs GDI
  • 7. Euro-Politics! Bailout fatigue in the center Austerity fatigue in the periphery The "idea of Europe" in danger!
  • 8. THE ENDwww.salaimartin.com