First Stop: Greece. Second Stop: Spain?
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After Greece’s default resulted in sighs and the shrug of global markets, Greece has worked to implement the details of its bailout agreements. This leaves many wondering if the worst for Greece is over. Yet markets are making it clear that while Greece may be safe for the time being, other nations will still be held accountable for their out of control spending.
This week, Spain released its latest budget proposal. Since Greece’s default, bond markets have been paying a lot more attention to Spain, who’s interest on bonds has reached 6% and been on a steady upward climb. The high interest rate means investors of bonds are demanding a high right of return because they see Spain’s bonds as a risk.
Last weekend, Treasury Secretary Geithner went on the record as stating that the US is at no risk of facing the same problems of Greece in years down the road. It is true there are many differences between Greece’s fiscal crisis and that of the United States, but to date Washington has failed to institute any long-term plan to reduce the deficit, and many in Washington claim this will be impossible to do with an election around the corner. But before we face a serious crisis, it’s time for Washington to grow up and act.