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Italian prime minister Mario Monti — obviously confident that significant progress had been made under his watch — voices what the market has been concerned with more and more lately: Spain.From the FT:
In an answer to a question at a conference, Mr Monti said: “[Spain] certainly made profound reform of the labour market but it did not pay the same attention to public finances. This is causing us big concern because their yields are rising and it wouldn’t take much to recreate trends that could spread to us through contagion.”
Spanish yields rising above Italian yields are obviously a cause for concern, but as Credit Suisse stated in a recent note, it’s not all bleak:
They cite three reasons not to despair:
- The current Spanish government is one of the most serious and committed to reforms anywhere.
- Europe has learned lessons of past reform efforts, not to push things to fast (lest they prove counterproductive).
- Spain has one of the lowest debt-to-GDP ratios in Europe.
The bad news: The labour market, the financial system, and regional governments all remain a wreck.