Raphael Gallardo analyses the risks hovering on the Spanish economy. He comes to a positive conclusion regarding the long term solvency of the government. Real estate deflation will continue to weigh on the quality of banks’ assets, but the government has the capacity to recapitalize the banking system without jeopardizing the reduction of the public indebtedness in the medium term. Nevertheless, an EFSF loan would accelerate the process as long as restrictive fiscal policies are supported by the domestic public opinion.
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