A quick update of the situation in the Eurozone.
Spain has been promised a bailout of around 100 billion euros by 17 Eurozone countries.
These are the Spanish bankers:
And these are the Spanish citizens:
The bailout is designed to only help ease the banking system in Spain. The bailout will not, however, help to ease the 24% unemployment rate in the country or help avoid the cuts on healthcare and education. The bailout has occurred at the price of further cut-backs in the public sector.
The problem being tackled by the bailout is rooted in the housing market. During the boom years of the housing market, from 2004 to 2008, housing prices rose 44 per cent. But since the burst, prices have plunged, up to 30 per cent. This has left some Spanish banks with a number of failed real estate loans, reducing Spain's overall capital and putting at risk its ability to issue loans.
The country is plagued with "ghost towns", empty houses that nobody can buy.
And thus begins the vicious cycle of losing money:
And the banks get the money, the people get austerity.
Are the people happy?
Also, this temporary "boost" to the Spanish housing market could be seen as a botched job. Although the bailout may help to inspire confidence in home-buyers and help stem the flow of money coming out of the country, it fails to address the issue of other investors outside of Spain. The country is struggling to sell of its governmental bonds to outside investors; the huge increase in debt could prevent private bankers from continuing to invest.