The Euro crisis - Spain - when in debt grow marijuana.

The Euro crisis - Spain - when in debt: grow marijuana.(Spiegel).In Rasquera, they reckon marijuana is the solution. On Wednesday, the authorities in the eastern Spanish village, population 900, announced that the residents had agreed to an unsual plan that the municipality has come up with to fight the crisis. In the future, Rasquera will lease several fields to a Barcelona association that plans to grow hemp there. The revenue is intended to help the municipality reduce its debts of €1.3 million ($1.7 million). Around 500 kilometers (300 miles) away in Madrid, the national government is also worried about money. This week, Spain found itself in the financial markets' crosshairs again. On Tuesday, the government had to pay significantly higher interest rates of almost 6 percent on its 10-year bonds. Italy's borrowing costs have also risen. The rate that the country pays for one-year bonds more than doubled to 2.84 percent from last month's rate of 1.40 percent at an auction on Wednesday, while yields on three-year bonds hit 3.89 percent at an auction on Thursday, up from 2.76 percent last month. It looks like the euro zone is getting sick again -- this time with a case of Spanish flu.
For a while, it looked like the patient was recovering. The situation in the euro zone had stabilized at the beginning of the year. The head of the European Central Bank (ECB), Mario Draghi, even said that the worst of the crisis had passed. So why is the situation heating up again? There doesn't appear to be a single, unambiguous reason for the concerns about Spain. But a speech by newly elected Spanish Prime Minister Mariano Rajoy on March 2 played a key role in fuelling renewed uncertainty about Spain's ability to service its debts. The conservative prime minister announced that his country would not comply with the planned deficit target of 4.4 percent of gross domestic product for 2012, but would only cut its budget deficit to 5.8 percent. In itself, that was hardly surprising: The original target was somewhat ambitious, particularly given Spain's 2011 deficit of 8.5 percent.
But by revising the target, Spain broke a promise to its EU partners without consulting them first. It was only later that Madrid and its fellow euro-zone states retroactively agreed on a target of 5.3 percent. Spain has actually chosen "the right way," says Nicolaus Heinen, an analyst at Deutsche Bank. "The country needs to strike a careful balance between growth and austerity efforts." The issue of the deficit target being revised was mainly a communication problem, he argues. "It should have been announced earlier, ideally right after the boost provided by the ECB's loans."For Spain, however, generating new growth is at least as important as reducing the budget deficit. The situation on the labor market remains dire, with unemployment at almost 23 percent. As a result, the country is pinning its hopes on exports. "
Over the years, Spain has achieved relatively good export growth," says IW economist Jürgen Matthes, who recently published a new study on the subject. According to that report, Spain reduced its trade deficit -- the imbalance between imports and exports -- over the past four years from 5.8 percent of GDP to just 0.5 percent. Greece, by comparison, only managed to get its trade deficit down from 11.1 to 5.5 percent in the same period. Spain's export success comes despite the fact that Spanish unit labor costs have, unlike in Germany, been rising strongly for many years. Economists such as Hans-Werner Sinn, head of Germany's influential Ifo Institute for Economic Research, have demanded that wages and prices in the euro zone's crisis-stricken countries be reduced by up to 30 percent as a result.
But Matthes disagrees. "We doubt that such harsh cuts are necessary," he says. After all, he points out, Spanish companies are already managing to notch up significant growth. "They are having greater success than the textbooks say they should."
Meanwhile the German Der Spiegel reports that former German Justice Minister Herta Däubler-Gmelin (SPD) has announced that she will launch a legal challenge at the German Constitutional Court on behalf of the ‘More Democracy’ campaign against both the ‘fiscal treaty’ on eurozone budgetary discipline and the ESM treaty establishing the permanent bailout fund. Däubler-Gmelin argued that the EU plans “cross a red line” by transferring too much power away from national parliaments to the EU level, and that "I'm all for Europe, but not for a Europe that is determined only by the governing elites”.Read the full story here.