Spain's World Cup Loss Increases Likelihood of a Spanish Sovereign Default

Spain has just suffered an extraordinary 1-0 defeat at the hands of the Swiss in its first game of the World Cup.

The Spanish national soccer team had been the "odd's-on" favorite to win this month's World Cup in South Africa.  Oddsmakers around the world were giving Spain 3.5 to 1 odds - odds that were much better than those afforded for the 2010 tournament to traditional favorites soccer like Germany and Brazil.   It ws treated as a foregone conclusion that Spain would easily dispatch of Switzerland before facing Honduras and Chile in the rest of its division play.

As a result of Spain's loss to Switzerland, it isn't so clear that Spain is going to move on to the second round of World Cup play, much less win the entire tournament. 

Against this backdrop, Spain's credit spreads had begun widening dramatically over the last two days.  It has seemed increasingly likely that Spain will be forced to accept austerity measures in order to gain access to IMF, European or German backstops.

Public dissatisfaction over such a poor performance in a tournament that the country had been so heavily favored to win isn't going to help the government to get the consensus it needs to pass austerity measures that would enable it to avoid a default.

 

Jason Rodgers
Jason Rodgers: Jason Rodgers was an experienced research analyst for a major bank prior to retiring to run his own investment consultancy in beautiful Lihue, Hawaii. Jason contributed articles to BestCashCow from 2008 to 2014.

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Comments

  • W

    June 17, 2010

    totally absurd

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