1. Spain and Blakleyovich – Proceed with Caution Scott Jahnke, LauriKanerva, Yoichi Nakagawa, Tim Rose MBA 6211– Global Macroeconomic Business Conditions

2. Spain Was Flying High Construction boom brought employment and foreign investment from 2002 – 2007 Spain adopted the Euro in January 1999, this led to lower interest rates Wages rose at twice the rate of other European countries, Spain’s GDP became the 9th largest in the world and income per head surpassed Italy’s It is currently It is the 4th largest economy in the Euro Zone (after Germany, France, and Italy)

3. Why We Chose Spain Second most populous country out of Italy, Spain, Greece, Portugal and Ireland Their debt as a percentage of GDP is the lowest of the five countries that we’re considering We feel Spain has the best long term growth, although its long term growth potential certainly isn’t great

4. You Can’t Spell Spain without Pain In November 2009, The Economist reported Spain’s economy had shrunk for the 6th consecutive quarter The current unemployment rate is 20.7% (the highest in the EU) and The Economist reported youth unemployment to be an astonishing 40% ! Spain lost its AAA credit rating in June 2010 (downgraded to AA)

5. Negative Numbers Tell the Story Spain had a budget surplus in 2007, and now has a current account balance of -4.4% of GDP, a budget deficit of -9.7% of GDP, and a trade balance of -$70.7 billion The Economist reported in July 2010 that commercial property prices in Spain dropped 30% Spain is paying a hefty premium to issue 10 year bonds and it’s stock market is down -27.5% since Dec 2009

6. The Numbers (cont.)

7. The Numbers (cont.)

8. The Numbers (cont.)

9. Assumptions Upon Which Our Analysis Is Most Dependent We Need 3-5 Assumptions upon which Our analysis is dependent to be here

10. IS / LM and FX Analysis

11. Numerical Forecasts GDP Growth Short Term Interest Rates Unemployment FX Inflation

12. Referenced Articles and Further Reading New York Times. June 18, 2010. “I.M.F. Backs Spain’s Austerity Measures”. Matthew Saltmarsh and Caroline Brothers. Financial Markets. May, 2010. “Spain Outlines Austerity Measures”. Kay Murchie. The Wall Street Journal. Sep, 2009. “Spain’s Stuggles Illustrate Pitfalls of Europe’s Common Currency”. Thomas Catan. The Economist. July 31, 2010.“Zapatero’s Balancing Act”. The Economist. July 31, 2010. “Judgement Daze”. The Economist. December 4, 2010. Economist and Financial Indicators. The Wall Street Journal. December 2, 2010. “Spain, Italy Seek Action”. Santiago Perez, Brian Blackstone and Stephen Fidler.