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Spain Continues to Dominate List of Sovereign Concerns at FCIB Hamburg Event

The struggles of nations like Greece and Portugal have been well documented as the European Union’s 2011/2012 economic downturn rages on. And, like NACM sources based in the United States, experts in economics, finance and credit management attending FCIB’s Annual International Credit & Risk Management Summit in Hamburg last week all appeared focused on one area of the map: Spain.

At the onset of the conference, Ducroire Delcredere Country and Sector Risk Coordinator Ben Deboeck expanded upon points he made previously to NACM’s eNews noting the implications of a continued downward spiral in Spain would be “catastrophic,” and far outpace the red herring that has been the Greece story.  With demand down throughout the EU, regions having vast autonomy that is hard for the Spanish capital to pull back on and unemployment surging to near 25% with youth figures exceeding 50%, things look bleak in the third most important economy on the continent.

“Spain’s banking problems pose the largest threat to public finances," he said. “It’s hard to see where robust growth should come from in the coming years.”

However, all is not lost just yet. Deboeck mentioned that, like Italy, Spain have done a good job to date meeting austerity/economic reform targets. In addition, there are examples where high-debt nations that made massive changes to policy emerged strong eventually. To wit, few save for Germany are in better shape presently than the Netherlands, a perennial debtor nation even during periods of last decade that is now in a somewhat of a catbird’s seat. In addition, Germany consumerism could play a role in heeling some problems.

“Greed can be good, as long as it's German consumer greed; It would spike demand for products,” Deboeck said.

Meanwhile, panelists Silvina Aldeco-Martinez, of S&P Capital IQ, and Jane Johnson, of Atradius, cautioned caution over analyzing big-picture, “simple” sovereign ratings without looking into things like intra-country regional happenings as well as established trade relationships. There can be low-ranked countries from a sovereign ratings standpoint that have some well-performing regions, and vice-versa.

“Between the good, you can always find a little bit of bad,” said Aldeco-Martinez. “In between the bad, you’ll find a little bit of good.”

Brian Shappell, CBA, NACM staff writer