Maravi

Spain follows Greece and Portugal into debt crisis

Spain follows Greece and Portugal into debt crisis
By Graham Hiscott, mirror.co.uk
Thu 29 Apr. 2010, 13:50 CAT

The crisis started in Greece. Above Greek Prime Minister George Papandreou
Europe's debt crisis mushroomed yesterday as Spain had its credit rating lowered, and fears spread that the UK economy may be hit. The move came 24 hours after Portugal's rating was downgraded and Greece's debt was given a "junk" status.

Julian Jessop, of Capital Economics, said Greece's plight poses as "big a risk to the global economy" as the collapse of Lehman Brothers - and Britain could be dragged into it, despite being outside the eurozone.

Uk banks have refused to reveal how much they lent to Greece but estimates put it at £10billion. If it fails to repay £7.4billion by mid-May, lenders risk huge losses. The biggest worry, however, is over Britain losing its triple-A credit rating.

Jeremy Batstone-Carr, of brokers Charles Stanley, said: "Spain is the key. If Spain were to fail it would threaten all indebted economies, including the UK and US."

David Cameron said: "Greece stands as a warning to what happens if you don't pay back your debts."

But Foreign Secretary David Miliband hit back, accusing the Tory leader of "economic illiteracy". His comment was echoed by Business Secretary Lord Mandelson, who said Greece's debt as a share of GDP was 115-120%, compared to the UK's 54%, and while our economy is growing, Greece is still in recession.

He added: "We have a triple-A rating and Greece's debt is of junk status."

Markets had begun to regain their composure after Greece and Portugal's downgrade the day before, when Standard & Poors cut Spain's rating to AA from AA+ amid concerns about the pricking of its property bubble.

Although Spain's overall debt is fairly modest, it has a high budget deficit and has done less than other countries to get a handle on its public finances.

Greece must pay £7.4billion in debts by May 19. It needs 15 partners in the eurozone and the International Monetary Fund to come up with an agreed £40million bailout. Yesterday Germany said its £7.3billion contribution should be approved by parliament by the end of the week. "The stability of the euro is at stake - we will defend it," said Finance Minister Wolfgang Schaeuble.

Greek Prime Minister George Papandreou yesterday insisted that Greece would bring its economy into order.

Labels: GREAT DEPRESSION II, NEOLIBERALISM

posted by MrK @ 2:42 PM