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Euro debt problems flare up in Spain

Protesters wave union's flags as they march past the headquarters of the Spanish bank BBVA, during a national strike in the Northern Spanish Basque city of Bilbao, on March 29, 2012.

Jeremy Hobson: Now let’s get to Europe where there are new signs of trouble in Spain. It has officially slipped back into recession and to make matters worse, Standard & Poor’s has downgraded the credit rating on 11 Spanish banks. That makes it harder for those banks to borrow money. Julia Coronodo is chief economist with the investment bank BNP Paribas. She’s with us live this morning from Washington. Good morning, Julia.

Julia Coronado: Good morning.

Hobson: So is Spain the new Greece?

Coronado: Well actually Spain is different from Greece in a couple of different ways. One, Spain is a whole lot bigger than Greece and secondly, Spain doesn’t have a package of assistance yet so we worry about Spain being able to implement austerity and grow, clearly that’s not working, they’ve slipped into recession. But they don’t yet have help from the euro zone to get through this crisis.

Hobson: Isn’t that what that giant bailout fund is for though, to help countries that end up in trouble?

Coronado: Absolutely and the good news is, there is plenty of firepower in the bailout fund. But basically Spain has to ask for help and the newly elected government isn’t really eager to admit defeat at the outset so, we’re not quite there yet and there’s a lot of uncertainty as to what comes next.

Hobson: And one of the reasons for the uncertainty right now is that this coming weekend, there’s going to be elections in France and Greece, two obviously key players in the European debt crisis and maybe there will be a new focus on growth as opposed to austerity. Is there your sense, going forward?

Coronado: Definitely there’s a sense that that’s the way the political winds are blowing. We really are getting to where austerity is biting hard on these countries and there’s some political pushback against this.

Hobson: Let me ask you this, because it does seem this crisis seems to flare up every week and then it sort of dies down for a little bit and comes back. If the euro debt crisis is a 5K race, how far along are we do you think?

Coronado: I think the problem is that we just don’t know, we don’t know how long this race is. I know that we are all tired at this point and wish that we could take a break and that the finish line was close but we just don’t know if it’s a 5K race or a 10K race or a marathon.

Hobson: Julia Coronado, chief economist with the investment bank BNP Paribas, thanks as always.

Coronado: It’s a pleasure.

About the author

Julia Coronado is chief economist at BNP Paribas.
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