A fine essay by Jim Jubak.
4/12/2012 7:40 PM ET
By Jim Jubak
Why Spain scares the market
By turning private debt into public debt, Spain has created a crisis that almost certainly will require a bailout. But unlike Ireland and Greece, it's too big to bail out.
What's the big deal about Spain? Last year the country's government debt came to just 68.5% of its gross domestic product. That hardly puts Spain in the same class as Greece, right?
The goal of the Greek rescue package is, after all, to reduce that country's debt to 130% of GDP. Gosh, Spain isn't even in the same debtor class as the United States. The U.S. debt-to-GDP ratio passed 100% in 2011 and is forecast to hit 112% by the end of 2013.
So why have yields on Spanish 10-year bonds -- which rise with the perceived risk of those bonds -- climbed back within spitting distance of 6%? And why has that been enough to send the global financial markets into a bout of panic selling like the one we saw Tuesday?
How about because Spain's debt represents a worse crisis than Greece's and a far worse problem than U.S. debt. (Give us a few years, though.)
The Spanish debt crisis looks as if it has combined the worst of the Irish and Greek debt crises -- and has wrapped the results in an economy too big for existing eurozone funds and mechanisms to rescue.
Full article: http://money.msn.com/investing/why-spain-scares-the-market-jubak.aspx?s
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