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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The Spanish Conundrum
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
Europe's 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!"