Watch Spain Carefully!

By: Ian Campbell | Thu, Mar 8, 2012
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In recent commentaries I have noted, after Greece, my next greatest concern in the Eurozone is Spain. Last week the Spanish Minister of Finance is reported as having said that Spain's 2011 budget deficit was equal to 8.5% of Spain's GDP in 2011, up from earlier estimates of 8.2% and above forecasts of 6.5%. In round numbers, Spain's budget deficit in 2011 was €91 billion. Apparently Spain has set a deficit target of 4.4% of GDP for 2012. This means the Spanish Federal Government deficit in 2012 ought not to exceed €46.5 billion. The question is, where will Spain find either very significant Federal Government budget cuts in 2012, or enhanced GDP in 2012, in circumstances where Spain's economy is now forecast to contract in 2012 by 1%, and where Spain currently is reported by some as having a 23% unemployment rate. It seems to me the obvious answer is that it won't.

I continue to tie this sort of information back to the current buoyancy of the equity markets. If Greece was and continues to be a worry economically, how can Spain not be 'front of mind' for economists, Central Bankers, and stock market participants not only in Europe, but in America and elsewhere. Spain is, after all, the 12th largest economy in the world, the 4th largest economy in the Eurozone, and the 5th largest economy in the European Union. If there was a concern (and I think still is) about spillover (contagion, particularly in the international banking system) in the event of a Greek sovereign debt default, it seems to me that the spillover concerns of a sovereign debt default by Spain would have to be much larger in comparison.

I continue to say that anyone investing in the financial markets ought to keep a close eye on Spain over the course of 2012 and beyond. I suggest you do that, and while doing it speak at an early date about Spain with your investment advisor.

See 'Sharpen the Mower: Spain Needs Triple the Budget Cuts and Tax Hikes to Meet EMU Imposed Budget Targets',, written by Michael Shedlock, March 1 - reading time 4 minutes.



Ian Campbell

Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
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Through the Economic Straight Talk Newsletter Ian R. Campbell shares his perspective on the world economy, the financial markets, and natural resources. A recognized business valuation authority, he founded Toronto based Campbell Valuation Partners (1976), Stock Research Portal (2007) a source of resource companies market data and analytic tools, and Economic Straight Talk (2012). The CICBV* annually funds business valuation research in his name**. Contact him at
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