Spain struggles to avoid Sovereign bailout

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With the country struggling to meet its deficit goal for 2012, it is getting more difficult for Spain to avoid a full-scale national Sovereign bailout.

This comes despite the recent 100 billion Euro investment in financial assistance for its banks.

However, the country is, for now, able to meet its debt obligations for the next few months, thanks to a strong liquidity position. The country can also attempt to boost revenue through energy and value added taxes.

With spiralling debts and borrowing costs, potential investors need more to believe in Spain's economy. The country can only support itself for a few months; there aren't any plans or signs of managing the debt market after that short period.

Furthermore, should Spain default on the debt, private creditors will be pushed to the bottom of the priority ladder. This is off-putting to investors, and is a clear warning sign of financial risk.

Poor Economy

The economy as a whole is not stable in Spain. After its second recession in three years, employment is at a low. Only one out of four Spaniards are employed, and various businesses have declared bankruptcy.

Interest payments on the rescue funds are likely to accrue to the country's public deficit. This would have been the same had Spain borrowed on its own markets to add capital into the banks, except the market rate would have been higher as a result.

Transferring Money to Spain

If you are planning to send money to Spain, there are a number of tools widely available to help you send money internationally.

It is, however, a good idea to think carefully about how you will be transferring money to Spain. Foreign currency exchange rates quoted by banks are almost always worse than the exchange rates available through specialist currency dealers.

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Spain struggles to avoid Sovereign bailout

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