From The Daily Business Review (Nov. 4, 2012): commentary by Robert Kiss, Diaz Reus & Targ associate attorney, on the impact of further Eurozone bailouts for corporations doing business in Europe.
Despite the best efforts of the Spanish people and Prime Minister Mariano Rajoy, the European Union will almost certainly need to bail out Spain, the fourth-largest Eurozone. Rajoy is reticent to join the ranks of other member states bailed out by the European Union, European Central Bank and International Monetary Fund, together known as the Troika. However, this potential government rescue follows the Spanish bank bailout by Brussels this past June. Brussels recapitalized the Spanish banks as reduced confidence in the Spanish economy led to an increase in capital transfers from Spain to safer locations such as London and Germany.
UNEMPLOYMENT IN SPAIN
Currently, Spanish unemployment is around 25 percent and more than 50 percent for Spanish youth. Along with dismal employment numbers, Spain is suffering from a double-dip recession and is weathering a banking crisis akin to the U.S. crisis in 2008. Recent economic forecasts indicate Spain will not return to growth until 2014, and all indicia point to a global economic slowdown, while Germany is predicted to enter recession this coming January.
Since the 2008 global financial crisis, Spain implemented numerous reforms, including its labor laws and banking regulations. Those reforms are necessary for long-term solutions to right the Spanish economy. However, a bailout will provide much needed near-term relief.
COOPERATION AND INTEGRATION
Until EU and European leaders push for greater integration and cooperation, countries will continue to face instability which greatly implicates corporate interests in the region. To mitigate potential legal issues in Spain and other Eurozone countries, corporations should review existing contracts involving business partners within the Eurozone. If possible, renegotiating these contracts would address issues such as currency and interest rate fluctuations, changes in financial and banking regulations, and the potential exit of a member state.
For more information, read the entire Daily Business Review commentary here.
Robert Kiss is an attorney practicing international law from the Miami headquarters of the global law firm, Diaz Reus & Targ. Contact Robert Kiss or Michael Diaz Jr. if you have questions or seek further advice.