Talin

So Just When Does Spain's Twin Deficit Problem Become Unsustainable?

Your analysis and numbers (forecasts) of the situation we are facing in Spain I Think are correct. If only I am a bit more pessimistic than you on the improvement of the current account deficit you mentioned.
With a 10% CA deficit average in the next years, and the inability of the private sector to absorb more debt it is pretty clear that budget deficits are going to escalate to plug the gap. The spanish government it is the only actor capable ot taking more debt. But how long and in what conditions? Even the very moderate debt we have may raise doubts under the present financial turmoil.
In the meantime we will observe a lot of selling of assets to foreigners. The contemplated Repsol deal and others we have just witnessed are just signals of the inability of the spanish private sector to mantain control of the assets by lack of finance. We will see many more... kind of strengtening the equity side of the balance sheets with foreign shareholders. Foreign assets will have to be sold also. All this is clear.

As for the future we need strong measures that this governement seems incapable of taking, more if you know the intellectual leanings of the policy makers on stabilization matters. The radical change in relative prices that the spanish economy needs it is not even contemplated.

Thanks for your analysis. Not in a single blog in Spain we find something remotely similar. But you must know this already.