Is Spain the next Greece? Or Italy? Or Portugal?
Even as Greece pledged anew on Wednesday to rein in its runaway budget deficit, briefly easing the anxiety over its perilous finances, traders on both sides of the Atlantic weighed the risks — and potential rewards — posed by the groaning debts of other European governments.
While investors welcomed the news that Athens would raise taxes and cut spending by $6.5 billion this year, analysts warned the moves might not be enough to contain the crisis-shaking Europe and its common currency, the euro. Some banks and hedge funds have already begun to turn their attention to other indebted nations, particularly Portugal, Spain, Italy.
The most vulnerable country after Greece, some analysts say, is Spain. With an economy expected to shrink by 0.4 per cent, Madrid has little wiggle room if investors shun 85 billion euros in new bond offerings.
Spain’s neighbour Portugal is also vulnerable. Trade deficits leave Portugal dependent on foreign investors. Italy is also heavily indebted, with more than $2 trillion in total exposure.
France and Germany also have deficits equaling 6.3 per cent of GDP and 7.5 per cent, respectively.