Europe's Debt Woes Getting a Spanish Accent

Could Europe’s next debt crisis have a Spanish accent? From swelling government debt to banks burdened with bad loans, the news from the euro zone’s fourth-largest economy is getting worse by the day.

Spain is tipping into its second recession since 2009, with the economy forecast to contract 1.7 percent this year under pressure from deep austerity measures and flagging exports. Public debt has soared to 68.5 percent of gross domestic product, the highest rate in at least two decades, and the government of Prime Minister Mariano Rajoy has had to scale back plans to reduce budget deficits. “Spain seems to be the main risk in the near future for Europe,” says Stéphane Déo, chief European economist for UBS (UBS). “The market is losing patience.”

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