The long-rumored bailout of Spanish banks to a tune of upwards of 100 billion euro is coming into better focus as the debt-hobbled nation will not have to start repaying until 2017 and will have to finish repayment without a decade thereafter. Still, NACM Economist Chris Kuehl argued during some of his 2012 Credit Congress appearances this week that the impact and even specific point of the bailout (other than to ensure the banks don't fail en mass) are yet unclear.
“It's a good plan generally, but the big conversation is what the emphasis will be,” Kuehl said. “Will it be about getting banks health or will it be about getting them active in the Spanish economy again. They are different things.”
What troubles Kuehl is that some of Spain's long-term strategies to reduce the strain on shrinking resources could leave the country without its brightest sons and daughters a decade or two down the road, which could threaten future growth/financial health. To wit, a grant program sponsored by the Spanish government in essence encourages nationals to seek jobs in other countries and, if they take the grant money aiming to help them relocate, they aren't allowed to return as a full-time resident for eight years.
“Who leaves? The young and the educated leave,” said Kuehl. “A semi-employed, 50-year-old is tied to family our community. So, you're sending the best and brightest away. And they're not going to come back after eight years.”
Kuehl added that such efforts, scattered and vague as they may be, are more likely to become the rule in Europe, rather than the exception.
“Spain is a harbinger of things to come: a series of short-term rescues aimed at helping out until another, better solution emerges.”
-Brian Shappell, CBA, NACM staff writer