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Spain Calls For Tax Pact In Eurozone Crisis

Sarah Parvini |
June 7, 2012 | 7:57 a.m. PDT

Senior Entertainment Editor

(Creative Commons/Yanni Koutsomitis.)
(Creative Commons/Yanni Koutsomitis.)
Spain’s rescue from its current debt crisis seems to be a question of when, rather than if, it will receive aid.

Spanish Prime Minister Mariano Rajoy on Wednesday called for a new tax pact that would ensure direct aid for its banks, the Guardian reported.

The proposed plan would avoid the country’s fourth national bailout in two years, evading the humiliating economic policies troubled states like Greece, Ireland and Portugal have seen. 

The proposal comes after Spain's long-lasting struggle with its economic downturn, which began in 2008 after the collapse of its housing market. The country’s economy worsened once it became clear that unregulated banks were deeply rooted in the real estate market. 

Spain boasts the fourth-largest eurozone economy, and its government believes the country is essentially too vital to ignore; should the other European nations abandon it, the single currency would not survive.  

The nation’s economy continues to decline, as investors are reluctant to partake in a heavily indebted economy.  Despite this, Spain holds the cards in a delicate game of poker because of its importance as a main vein in the Euro system, The New York Times reported. It is not just Spain at stake, but the Euro itself. 

European talks on a potential tax pact have had an immediate effect on nations overseas. The U.S. stock market rose Wednesday, as a result of rumors that Europe is devising a plan to save Spain’s troubled banks. 

Whether this new tax plan will go into effect - and whether or not Spain will stoop to asking for a full-fledged bailout - remains to be seen. Spain has already made changes and taken steps to cut spending. The nation is likely stalling until the G20 summit and Greek election later this month to ask for official aid.

Spain also said is waiting for the International Monetary Fund to deliver its verdict on the conditions of Spanish banks on Monday. Spanish Finance Minister Luis de Guindos said the government would explore its options once the independent audit was complete. 

"From there, the Spanish government will take the decisions it has to in terms of recapitalizing the institutions," de Guindos said to reporters in Brussels.


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