Citibank: Spain could be next in line for bailout

Citibank’s chief economist Willem Buiter says Spain may be the next country in line for a bailout.

Buiter said the European central bank could only keep offering Spain low interest rates to shore up its banks and public finances with support from the ‘troika’ – the three big institutions of the European Union, the European Central Bank and International Monetary Fund.

“Spain looks likely to enter some form of a troika program this year,” Buiter warns.

These three institutions joined forces to bail out Greece, Ireland and Portugal.

The Spanish government is scheduled to detail spending cuts in its budget to be released on Friday.

“The new government has been active in structural reform but has missed an opportunity to address fiscal austerity in its first 100 days in office,” says Buiter.

The Citibank report forecast a 2.7% contraction this year in the Spanish economy.

Spain’s government reported on March 2 it expected unemployment to reach 24.3% in 2012 – the highest in the industrialised world, according to RTE Business.