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Spanish Debt Issues

There is a lot of talk about Spanish sovereign debts recently. I came across a research paper which I think is very useful for me and wish to share it here. This is taken from www.fundsupermart.com, an online fund broker where you can purchase funds form various fund managers. This portal provides some research and comparisons and it is essentially a self service portal.

From the chart provided, we can see that there is a problem for Spain to service their debts for the next 4-5 years if the debts are not re-structured. With this kind of risk, no sane investors would want to risk their money to buy Spanish bonds. They can only turn to European central bank for bail out. The blue arrow is a fictitious line I draw assuming re-structuring is going to happen. Essentially, they have to move the payment of capitals into next 5-20 years to be affordable. In addition to that, they can't make additional loans. This is just taking a very simplistic view of the situation. To have that happen, what will the people on the ground have to endure? How can the economy be revived without new funds pumping in? At the end of the day, a big brother (or a group) is required to save them. Sponsor them during the difficult period. The people on the ground will have to adjust to different level of standard of living over next 5-10 years.

Bad debts will have to be written off gradually. Productivity has to increase. Hand outs will have to be reduced.

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