Spain Bailout Signals a Global Problem

Spain is following in the dubious footsteps of Greece, Ireland and Portugal after accepting a 100-billion euro bailout. The move signals that the European crisis is now officially a global problem. Spain is the largest country to take a bailout and its economy mimics that of other larger Euro nations like Italy and France.  It’s this comparison that scares business journalists like me into thinking the Spanish bailout is a watershed moment and could mean bigger bailouts are on the way.

Why Spain’s Bailout Is Different

With smaller nations like Greece, Ireland and Portugal asking for money to revive their economies, the concern was viewed as a Euro crisis – one that would be solved with E.U. intervention. In most cases, the problems that have plagued the continent have been isolated to its member countries. As the bailouts move up the totem pole of the E.U., though,  economies like Canada and the U.S. are faced with the reality that they may have to chip in. Funds will be needed from non-Euro nations that stand to lose a great deal of business if Europe was to fail. A problem, that up until recently was an ocean away, is now hitting home around the globe.

The Beginning Of The Next Recession?

Spain is one of Europe’s largest economies. It’s not only an important trade partner in Europe but also to Canada. According to the government of Canada in 2011, commercial trade between both countries reached $2.7 billion. Canadian exports to Spain were $977 million, led by minerals, vehicles and equipment, vegetables, machinery, metal and paper. Spain merchandise exports in 2011 amounted to $1.7 billion, and consisted mainly of chemical products, minerals, machinery, food, and base metal.  A fall off trade from a country like Spain could mean decreased business for Canada and the effect on our country’s GDP could perhaps trigger another recession.

Don’t Be Fooled By Optimistic Investors

Financial markets around the world have reacted positively to the news that Spain is getting enough money to shore up its debt problems. But don’t be fooled by the renewed optimism on the stock exchange. Traders and investors like liquidity and more money being pumped into Spain’s economy means there is more cash available for bankers to play with – and that’s what are creating a surge on indexes around the world.


How This Could Affect Canadians’ Pocket Books

As previously mentioned, there are rumors that nations outside the E.U. may be asked to pitch in to help out the European crisis. The attitude is we are all in this together – and should help each other out in times of need. Prime Minister Stephen Harper is under pressure to show “solidarity” to countries tackling Europe’s financial crisis. He recently refused to show support to the International Monetary Fund in raising at least $430-billion in case any members need a financial rescue. Harper says the IMF is to help developing nations with their debt problems – not well established nations. If Canada was forced into helping Europe out, it would be Canadian taxpayers footing that bill.

Worried about what a Spanish bailout means for your own economic future? It’s a good idea to carefully watch the moves of the Federal government and of other national governments around the world. If non-Euro nations start doling out money – then this Euro crisis will truly be global problem.

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