Why €100 Billion Is Not Enough

10/07/2012

The Eurogroup's recent €100 billion bailout package for Spain will not solve many of the country's lingering problems, says IESE Prof. Javier Díaz-Giménez. In the future, Spain will still grapple with a weak labor market, doubts about its ability to meet deficit reduction targets and the problem of bad banks.
 
Díaz-Giménez argues for a radical strategy: Spain should place all the damaged assets of other banks and savings and loans into a single "bad bank, namely Bankia, and then go into liquidation. This possible solution, however, will likely be rejected in favor of some other more politically correct one”, he says.

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