Political Unrest Threatens Spain’s Return to Economic Vigor

Political Unrest Threatens Spain’s Return to Economic Vigor
The gap between what investors were demanding for taking on Spanish debt and
that for taking on German debt — the least risky asset in Europe — has widened slightly in recent weeks.
The possibility that Catalonia might declare independence has left those banks vulnerable to being severed from Spain
and — by extension — the European Union and the bloc of nations that uses the euro currency.
That is likely to translate into higher borrowing costs for Spanish banks,
and less credit for Spanish businesses and households, depriving the economy of fuel.
Investors have taken heed of the independence referendum in Catalonia and the violent efforts from the Spanish authorities to halt the vote.
The Catalan leadership accused the Spanish government of inciting businesses to leave
as a means of pressuring Catalans to relinquish their independence aspirations.
The euro — seemingly never far from danger — was, at least for the time being, spared fresh crisis.