For Spain to avoid default in its national debt two unrelated events must happen: one is that EU guarantees Spanish national debt lowering country risk, and the second one, which is even harder,is that Spain regains competitiveness.
Regaining competitiveness is the biggest challenge for Spain. To achieve this the country must focus on liberalizing its growing companies. I propose that all start ups be given 3 years in which their employees do not pay social charges nor receive forced severance pay in order for government to recognize the risks that VCs and entrepreneurs take in investing in new companies. This would be applied in start ups of up to 10 people and only while they are not profitable so it would have a negligible effect in the social security system overall initially and hopefully a very positive effect when start ups begin contributing. For those unfamiliar with the system Spanish social charges plus all other taxes, these can take up to 45% of what a person who costs €3000 per month to a company takes home. But so far PP, the conservatives now in power, has done little for new and growing companies focusing instead on measures that make firing, not hiring, cheaper.
I am normally quite an optimistic entrepreneur but right now I am sorry to say, I am not. We can still avoid the perfect storm, but it looks harder every day. Still as we know markets do turn around, and if Spanish unemployment numbers turned around, so would financial markets.
Follow Martin Varsavsky on Twitter: twitter.com/martinvars