Spain has received a 100 billion euro ($125 billion) after denying it needed it for several weeks. Although the announcement of the bailout originally had the global markets opening high, the uncertainty surrounding the details and implications of this bailout have caused the enthusiasm to disappear. Investors are still worried about spending money on Spain and they are also worried about what this bailout means for Italy.

The rating agency, Fitch downgraded Santander and BBVA – two of Spain’s largest banks – from As to BBB+s. This downgrade, in addition to uncertainty in the markets has caused investors to sit on their money rather than risk spending it. Fitch claimed the lower rating was caused by its worries that Spain will “remain in recession through the remainder of this year and 2013 compared to the previous expectation that the economy would benefit from a mild recovery in 2013 which directly affects the banks’ volumes of activities in Spain.”

The exact amount of emergency funds for Spain are still unknown, but the amount will be announced later in June after the Spanish banks have been audited. Many Spaniards were surprised about the bailout after their government insisted it did not need the money. There were several demonstrations on June 10 against the bailout after the announcement was made.

The Spanish government insists that the banks are the ones that need the bailout and are receiving the bailout, not the government itself. However, the bailout money cannot go directly to the banks, as Spain wants it to be, and must go through the Spanish government. A troika will also be created to oversee the financial management of the money in Spain just like in the bailouts for the Republic of Ireland, Greece and Portugal.

The bailout was meant to alleviate the concerns within financial markets that Spain itself was unstable and would go down with its banks. According to Richard Hunter of Hargreaves Lansdown stockbrokers, “some much-needed time has now been bought in Spain, which will allow the market an – at least temporary – sigh of relief.” However, the bailout seems to be its own worst enemy. The uncertainty surrounding the exact amount, the outcome and the mechanism of the bailout have not led to more investing.

Most of the bailout funds will come from the newly founded European Stability Mechanism that was formed specifically to help alleviate the Eurozone crisis. The funds are considered a loan that the Spanish government will eventually have to pay back, meaning this bailout makes Spain even more in debt. However, the fund itself will be considered a “senior” creditor which means that it will be paid back first if Spain defaults on its loan. Many investors are worried that they will not get paid back if they invest in Spain by buying its government bonds because everyone would be second to the Mechanism fund. Therefore, the Spanish bonds that were over 6% previous to the bailout are now almost up to 6.5% after the bailout according to the BBC.

Spain was still unsure about receiving a bailout but European finance officials pushed Spain into receiving help for its banks.

Moody’s rating agency has also said that Spain’s banking problem, “is not likely to be a major source of contagion to other euro area countries, except for Italy.”

 Italy

Many are now worried that if Spain’s bailout does not succeed, Italy may be next to need help – if it’s not already too late. Italian bonds are up to 6%, meaning that investors see these bonds as high risk. The Italian GDP dropped 0.8% in the first quarter of this year whereas Spain’s only dropped 0.4%. Most predictions show the Italian economy shrinking at least another 1.5% this year. This is Italy’s fourth recession since 2001 and consumer spending and exports are down.

The Italian government has recently been practicing austerity measures under the government of Prime Minister Mario Monti. The Italian Economic Development Minister, Corrado Passera stated, “this great discipline that we have imposed on ourselves in terms of public finances makes us one of the countries best equipped to confront the financial turbulence that Europe finds itself in today.” Passera also claimed, “in the past months, Italy has done, from a financial point of view, everything that needed doing to save itself.”

Italy currently relies heavily on funding from the European Central Bank, which could hurt it in the long run. However, Italian banks have not suffered as much as Spanish banks because they did not suffer from the same housing bubble. Italy’s unemployment rate is also half of Spain’s and its borrowing costs are lower. Italy’s deficit for this year is lower than Spain’s but its overall debt is higher. Still, Italy is in a fragile position.

Sovereign debt expert Nicholas Spiro has warned that too many are linking Spain’s problems to Italy. “Where Spain goes, there is the perception that Italy will follow, which is terrible because it is like comparing apples and pears.” Spiro claimed that Italy’s economy was “infinitely better” than Spain’s, particularly because Italy did not have to deal with the same housing crisis as Spain.

Although it looks as though Italy may save itself, investors are still too skittish. Currently many reforms are still necessary and will have to be passed over the next year. Prime Minister Monti had the support to push through these reforms but he seems to be quickly losing it.

Monti and newly elected French President Francois Hollande are both in favor of Eurobonds, bonds that are guaranteed by all of the Eurozone. These Eurobonds would help alleviate Italy’s debt and would mean its bonds would not be as high a risk to investors. Hollande and Monti will meet on June 14 to discuss the possibility of Eurobonds. However, Merkel has already announced that she is against them and Germany’s support will be necessary for Eurobonds to be successful at all.

Image Courtesy of   European Council

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Despite Group B containing the likes of Germany, Portugal and Holland, Group C will also show off a number of young stars in Poland and Ukraine this summer. Current holders as well as World Cup winners Spain are the favorites, but they’ll face stiff competition from Italy, Ireland and Croatia in what promises to be a close group.

Jordi Alba (Valencia & Spain)

He is Barcelona through and through, apart from the fact he plays for Valencia. The talented left-back grew up in Catalonia and played for the Barca youth team, but Alba has come to be noticed with his defensive and attacking performances for Valencia in the last couple of years. He’s still only 23 and seems almost certain for a move to Barcelona sooner rather than later.

His international career has only just begun going though, Alba has made 3 appearances for the national team starting last year, but with left-back possibly the only position Spain lacks a definite starter in, it wouldn’t be a surprise to see Alba in that position when Spain kicks off against Italy in June.

Iker Muniain (Athletic Club & Spain)

The little 19-year old is being touted as the next big thing, Muniain’s name was known before this season, but two performances against Manchester United in the Europa League really brought him to prominence. He’s not a prolific goal scorer but the winger is creative and quick. He won’t be a starter for Spain this summer, and he might not even make the squad such is the talent flowing through the Spanish ranks, but he made his international debut this year and definitely has a shot at boarding the plane in a few months.

Javi Martinez (Athletic Club & Spain)

Another one of Athletic’s prodigies, Javi Martinez is a little ahead of Iker Muniain. The 23-year old has already made over 100 appearances for the La Liga side and captained the Spanish U21 side to the U21 European Championship title last summer. The defensive midfielder has been strongly linked with a move to the Premier League and seems destined to become a top midfielder.

His international career is also ahead of Muniain. He’s only made 7 caps, but he made his debut back in 2010, and, like Muniain, may not even make the plane this summer. Cesc Fabregas, Xavi, Iniesta, Xabi Alonso & Sergio Busquets is tough competition to get in on but if Martinez does go to the EURO’s this summer, he’s sure to do himself justice.

Fabio Borini (AS Roma & Italy)

Similar to Portugal, there’s not a great deal of youth flowing through the current Italy squad, but if there is one man who could make an impact in a side looking to recover from an embarrassing World Cup campaign, it’s Fabio Borini. The 21-year old never really got a chance to impress at Chelsea, but he has had 9 goals in 19 appearances for Roma this season and has put himself in contention for the Italy squad this summer.

His impact didn’t go unnoticed by his national side, and Borini made his senior debut for Italy this year against the USA. Like others mentioned so far, Borini’s not certain to be on the plane to Eastern Europe this summer, but if Italy are to look towards a more youthful approach, Borini might be the man.

James McClean (Sunderland & Ireland)

Here’s a name who might be more familiar to the majority of readers. Premier League winger, James McClean, has a real chance of going to the EURO’s this summer. He was bought last summer but didn’t make an appearance until Steve Bruce was sacked, making his debut shortly after 2012 began well for McClean. He started his first game on January 1st, and impressed in the victory over Manchester City.

Since then, McClean has gone on to give many defenders issues and has been key to Sunderland’s climb up the table. Like Borini, McClean has gotten one international cap but has put himself in contention and Ireland would be unwise not to take a chance on him this summer.

Sime Vrsaljko (Dinamo & Croatia)

Football Manager fans rejoice! Vrsaljko may be unheard of in real life to many, but in Croatia he and a few other young players have been making waves and giving themselves a chance at a spot in the squad for this summers tournament. Vrsaljko is one of them. The Dinamo right-back has made 45 appearances for his club and this season has broken into the Croatia squad on three occasions.

He’s definitely one for the future but there’s no reason why Sime can’t make the plane this summer, along with a few other starlets.

Milan Badelj (Dinamo & Croatia)

Milan Badelj is 23 but still has a big future ahead of him. The creativity at the hub of Dinamo’s domestic success, Badelj has already surpassed 150 appearances for his club, and has 30 goals to show for it. Like his younger team-mate, Badelj also has three caps for Croatia, but playing further up the field he’s already scored his first goal for the national side.

Badelj is another one of those who could be on the fringes of the squad this summer, but like many other teams, Croatia could look towards youth sooner rather than later, and if they do, Badelj & Vrsaljko may be at the very top of the list.

Image Courtesy of   DSPA / Shutterstock.com

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