How Long Until The Market Decides That Spain Is Killing Itself?

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Photo: Tom & Katrien, Flickr

This morning, the Spanish government announced new austerity measures.Stocks are a bit higher and yields are a bit lower, so that’s good.

According to Reuters, the cuts will involve 65 billion in spending cuts, a 3% increase in the VAT, plus other taxes on other areas.

Note that Spain is in the middle of its worst recession ever.

There is an impulse, still, to believe that in a time of budgetary crisis the solution is to cut… but Spain is now actively weakening its economy when it can least afford to do so.

How long until the market decides that Spain is only exacerbating what’s killing it, rather than doing anything that actually will make it more solvent?

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