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Sean Egan, the head of Egan-Jones Ratings Company, was just on Bloomberg TV with Tom Keene this morning discussing the euro crisis and his company’s latest note on Spain.Egan does not sound optimistic on the country’s prospects. He discussed the difficulty of the many economic problems Spain currently faces:
There are multiple problems in Spain. One is the 24 per cent-plus unemployment rate. Another one is the underrecognized real estate losses. Another is the undercapitalized banking system. Third or fourth is the high funding costs. There are a huge number of relatively difficult problems to solve in Spain, and that’s why the bond yields are increasing.
When asked about having downgraded Spain six times since April and what it would take for Egan to maybe consider upgrading Spain, he told Bloomberg TV:
I’m not quite sure that they are going to be able to get out of the problem very easily. We use the metaphor of a black hole, and it appears as though they are entering the point of no return, whereby the debt is going to have to be cut for Spain to eventually pull through it.
An answer to a debt crisis is not additional debt, and that is what has been proposed so far.
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