The Economist – The good fight

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A battle for the euro will rage in Spain

Since its long decline from imperial might in the 16th century, when Philip II ruled much of the old as well as the new world, Spain has mostly been on the margins of European history. But in 2013 it will be centre-stage in the fight to save the euro. From the outset of the crisis, in early 2010, the fate of the single currency seemed to hang on events in Greece. The Greeks may yet shake the euro zone in 2013, but what happens in its fourth-largest economy poses a larger threat—not least since Spain itself faces a rising threat of break-up from Catalonia, its biggest economic region.

The battle of Spain will be fought on several fronts. The bond markets will pitch foreign investors against the Spanish government, which reckons that in 2013 it will have to borrow €207 billion ($261 billion), 20% of GDP. Worryingly, this hefty amount does not include any allowance for capital needed to shore up Spain’s shaky banks, which have incurred big losses as the country’s wild property boom turned sour. Instead it will finance the deficit and redeem €159 billion of maturing debt.

Read @ The Economist The World In 2013