Letter dated 11 April 2005 from the Permanent Representative of Spain to the United Nations addressed to the Secretary General

The decade following the oil crisis of 1979 was marked by a spike in unemployment, fiscal paralysis, and, indeed, frozen accession negotiations for Spain and Portugal.

By mid July, however, the cost of borrowing for Spain and Italy was nearing four points, and France s borrowing conditions were rapidly deteriorating.

Apparently, now it s the turn of Spain, France, Britain, Germany, and, many analysts argue, even the United States.

Moreover, fiscal and sovereign debt strains are becoming worse as interest rate spreads for Spain and Italy have returned to their unsustainable peak levels.

NEW YORK The risks facing the eurozone have been reduced since the summer, when a Greek exit looked imminent and borrowing costs for Spain and Italy reached new and unsustainable heights.

While Greece and Portugal face the need for deflation totaling 30 and 35 , respectively, the figures for Spain and Italy are high enough to justify fears about the future development of the eurozone.

Here the old dictator can take some credit, for by re establishing the monarchy under King Juan Carlos just before he died, Franco provided Spain with a foundation on which to build anew.

With political constraints in Germany and elsewhere preventing further strengthening of fiscally based firewalls, the ECB now plans to provide another round of large scale financing to Spain and Italy (with more bond purchases).

For starters, the European Central Bank s outright monetary transactions program has been incredibly effective interest rate spreads for Spain and Italy have fallen by about 250 basis points, even before a single euro has been spent to purchase government bonds.