Lombard St: Spain needs to act to avoid exiting euro

Lombard St Research has expressed concerns Spain may have to leave the euro if it does not take drastic steps to improve its public finances.

The group says the Government and the private sector must take action if Spain is to avoid leaving the single currency and defaulting on its debt. "Spain's public finances are unsustainable at present. The economy is running a primary Budget deficit which, cyclically adjusted, was 6.7% of GDP in 2009. Meanwhile, the real rate of interest on its debt exceeds real output growth," says Diana Choyleva, a director at LSR. "In addition, Spain's private sector has engaged in a massive borrowing and spending spree, with little attempt to improve productivity growth. On our estimates Spain's t...