Spain's Dangerous Waiting Game

Spain's delay in requesting a bailout doesn't look like a prudent bet

Jeremy Glaser 16 October, 2012 | 10:00AM
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The Spanish government (with an assist from the rest of Europe) has spent the last few weeks denying it is on the verge of asking for a bailout or even that the country needs a bailout at all. Given the underlying problems in the Spanish economy, the only way this could be at all credible is if the continent were on the verge of a surge of economic growth. 

As the International Monetary Fund pointed out this past week in its updated economic outlook, that is extraordinary unlikely. In fact, the IMF now sees an "alarmingly high" risk of a global slowdown in 2013. By holding out on accepting the help of the European Union, and by extension the European Central Bank (ECB), Spain is playing with fire and hoping the market's patience doesn't run out. It likely isn't a risk worth taking.

Spain's Tribulations
Spain's economy is in real trouble. The IMF expects gross domestic product to contract by 1.5% and 1.3% in 2012 and 2013, respectively, assuming everything goes to plan and there are no external shocks. Growth could be much worse. Unemployment looks set to remain stratospheric at more than 25%. The country is trying to bring budget deficits under control, but it keeps missing targets as revenue falls short of expectations and cuts are harder to execute than expected.  The housing market remains deeply troubled. Banks are going to need a huge amount of capital to stay afloat. Political protests and talk of regional secession are becoming the norm rather than the exception. The only plausible way out of this mess is going to be through a lifeline from the rest of Europe.

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Jeremy Glaser  is markets editor for, the sister site of

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