The year 2013 in Europe is expected to be challenging again economically. It is the sovereign debt crisis in Europe that directly impacts the credit markets.
Indeed, while we thought we had made significant progress in November 2011 in resolving the Greek crisis, public deficits are already reminding us of their presence. It is now Spain that is causing concern: the Spanish economy contracted by 0.3% in the first three months of the year compared to the fourth quarter of 2011. Spain has therefore officially fallen back into recession. The Spanish government acknowledged on Friday that it is experiencing “perhaps one of the toughest moments for its economy” but remained optimistic about the future.
The financial rating agency Standard and Poor’s downgraded the ratings of nine Spanish banks on Monday, including Santander and BBVA, as well as that of the savings bank confederation (Ceca), after lowering Spain’s sovereign rating by two notches from A to BBB+ on Thursday. Unemployment in Spain continues to break records, currently exceeding 24% of the population.
European governments have decided to tackle the issues of public deficits, and it has not gone unnoticed that austerity plans have been adopted across Europe. In Belgium, the 2012 budget planned to achieve 15 billion euros in savings. Unfortunately, this financial crisis is hitting the real economy hard. Consumer confidence is low, and the prevailing pessimism does not encourage households to spend. Similarly, SMEs are experiencing increasing difficulties in securing financing.