EconInvestor

9 Reasons Why Spain Is a Dead Economy Walking. If this author is correct, Spain might have to leave the Euro Zone.

EU chief warns ‘democracy could disappear’ in Greece, Spain and Portugal. Politics and banking is always a bad mix.  Here’s the way I see this shaping up.

Greece will have to leave the Euro zone. It cooked the books to get in the Euro Zone. It has NEVER met the requirements to be in the Euro zone.

There is a 50/50 chance Spain will have to leave the Euro Zone. It is fighting a three-front war. First, it is barely holding together as a country. It is more like a confederation of states. The central government is getting weaker. Second, the housing bubble and subsequent housing crisis is going to take years to resolve. Third, its economy has run out of steam. The austerity measures may be too much too handle.

Portugal will stay in the Euro Zone for four reasons. First, its economy never took off as had Spain’s.  So, it doesn’t have to face as large a bubble as Spain. Second, its debt isn’t as bad as the debt in Spain and Greece. Third, the people will accept austerity measures because they have first-hand knowledge of the alternative. After the Carnation Revolution, the communists briefly ran the country into the ground. Staying with the EU and staying with the Euro ties Portugal to the democracies of the West. If it means austerity to stay in, they will take austerity rather than succumb to the left.  Fourth, Jose Manuel Barroso, EU Commission President, is from Portugal and will do everything possible to keep Portugal in the Euro Zone.

In the meantime, I see the euro getting weaker against the dollar. Start planning a European vacation!