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| 'O bailout, wherefore art thou? |
To put things in a cyclist's perspective, the Spanish aren't known for their strict attention to detail. Few were surprised when Alberto Contador was cleared of doping charges because Spanish authorities are seen as been somewhat less stringent than...the rest of the planet. Little surprise when the UCI (cycling's highest international body) appealed the decision effectively saying they had little faith in Spain's decision. Turning to the issue of debt, the Spanish government spends most of its time saying it does not require a bailout but the facts suggest otherwise.
The paralells between Ireland in 2008 and present-day Spain are frightening...as is the European Union's rhetoric. Back in 2008, anyone and everyone was saying Ireland had successfully avoided financial armageddon. The Irish government guaranteed all bank deposits, swiftly recapitalised major banks, created a "bad bank" for toxic assets, and drastically cut spending. And yet the Irish still required an international bailout in November 2010. Move forward to 2011. Spain has done all of these things and, yet again, everyone is breathing premature sighs of relief. There is one factor both governments didn't take into account: a black hole called housing. House prices will eventually be Spain's undoing.
Like Ireland in 2008, Spain now has the daunting task of stabilising house prices in a market with 1-2 million vacant homes, double-digit unemployment, and slow growth. Like Ireland, Spain is doing everything possible to prop up its banking sector to prevent a housing crisis. And like Ireland, Spain will eventually stumble and fail. As I have already written in this blog, politicians are not particularly adept at delivering bad news. Only the non-elected governor of the Bank of Spain has delivered something less than a fairy-tale view of Spain's housing and financial crisis. While the BOS puts the pricetag for recapitalising Spain's banks at 20 billion euros, in a stressed situation (like after a housing bust) that figure could baloon to over 100 billion euros. As we learned in Ireland, governments tend to lowball so I'd bank on the higher figure.
Portugal confirmed how fickle financial markets can be regarding government debt. One day Spain's neighbour was "on the road to recovery" and then it suddenly needed a bailout. Spain is also trying to simultaneously cut its deficit, restore growth, reduce unemployment, bolster house prices, combine and recapitalise its banks, and raise fresh private-sector capital for these newly combined banks. Each of these steps individually would take years to properly implement and yet Spain is supposed to execute all of them perfectly under the shark-like eyes of international bond traders. There is zero margin for error.
What does all of this mean for our 2011 Tour de France clients? Unless there is another breakdown in federal budget talks, which is highly likely, Spain should have another 8-10 weeks reprieve before the bond sharks smell blood in the water...again. The next countries in line to fall: Italy; Belgium; and France - but hopefully not before the Tour de France.
Spyns is an active travel company based in Whister, BC (Canada) and Beaujolais France. Spyns specializes in 2011 Tour de France packages for both riders and non-riders. We specialize in providing clients with Tour de France bike and non-biking packages with Paris grandstand seats and VIP access. Spyns offers active holidays to Europe including trips to the 2011 Tour de France. For more information about Spyns 2011 Tour de France tours, please go to http://www.tdf-tours.com/ or http://www.spyns.com/. You can also call us toll-free at 1.888.825.4720.
