Spain is in a Greek-style debt trap

Spain looks ever more likely to need a bail-out as the economy lapses back into recession.

First Greece, then Portugal, now Spain? While Spain has made some progress, with the new government making it easier to fire workers and thus improving the country's competitiveness, it still looks likely to need a bail-out. The government has just agreed with the EU to cut the budget deficit to 5.3% of GDP this year, from around 8.5% in 2011.

By the end of 2013, the annual shortfall is supposed to fall to 3% of GDP. Reaching these targets could be, "at best, challenging", says Bank of America Merrill Lynch. In fact, it looks well nigh impossible.

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