Yanis Varoufakis: Could Spain Be on the Verge of Economic Collapse

Spain could be on verge economic collapse
Image by er Guiri

Spain may be next in the line after Greece to face an economic collapse, according to the former Greek Finance Minister Yanis Varoufakis.

In an interview published on Sunday, August 2nd, Varoufakis warned that “Spain could become like Greece if the same austerity policies are imposed on the country.” (Source: AFP, August 03, 2015.)

“Spaniards need to look at their own economic and social situation and based on that evaluate what their country needs, independently of what happens in Greece or wherever,” he told Spain’s center-left newspaper El Pais.

Spain, like Greece and Italy, owes a massive debt to its creditors, the International Monetary Fund (IMF) and European Central Bank (ECB). Meanwhile, the country has been struggling with high unemployment and forced to imposed a series of austerity plans to restructure its debt and further be eligible to receive money from its creditors.

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“The danger of becoming Greece is always there and it will become reality if the same mistakes that were imposed on Greece are repeated,” Varoufakis warned.

In midst of the crisis in Greece, Spanish Prime Minister Mariano Rajoy used the latest possible European economic collapse to promote his government for the upcoming election in November.

Greece “has become a sort of football for right-wing politicians, who insist on using Greece to frighten their population,” Varoufakis said in a response to the latest statement by Spanish PM.

Spain has been able to come out of the five-year recession in 2013. Currently, the country’s gross domestic product (GDP) is expected to grow at the annual rate of 3.3% in  2015—higher than many countries in the region.

However, the country’s labor market remains weak with Spanish unemployment rates still above 22%. However, Spain has a debt to GDP ratio of nearly 100% according to the latest data from the statistics office. That’s much lower than the 177% rate in Greece. (Source: eurostat, last accessed August 3, 2015.)

All told, an unsustainable economic outlook with high unemployment rate, massive debt, and tough austerities policies imposed by the country’s creditors could trigger an economic collapse in Spain and the entire troubled eurozone. This could eventually ignite an economic collapse of 2015, sending the global economy into a recession.