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Bruegel
30 April 2010

Bruegel: Where does Spain stand compared to Greece?


Benedicta Marzinotto argues that Greece has a fiscal problem, whose origin is domestic. The costs of a possible default are greater for euro zone partners than for Greece. On the contrary Spain’s problem has a European origin but the costs of delayed adjustment shall be borne by Spanish citizens.

Bruegel research fellow Benedicta Marzinotto argues for better clarity in identifying the differences between the crises affecting Greece and Spain. The author explains why comparing the Greek crisis with the situation in Spain is unwarranted. Greece has a fiscal problem, whose origin is domestic. The costs of a possible default are much greater for euro zone partners than they are for Greece itself, as foreign European banks hold 58 percent of the Greek debt. The situation of Spain is reversed. The Spanish problem has a European origin but the costs of delayed adjustment shall be borne by Spanish citizens. The EU has a vested interest in the solution of the Greek problem but a moral duty to support smooth adjustment in Spain. 
 


© Bruegel

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