The euro slid in value against other major currencies yesterday as credit ratings agency Moody’s said it may downgrade Spain’s rating.

Spain immediately countered by saying that it would not require a bailout from the European Union or the International Monetary Fund, a sentiment that was echoed by Moody’s. The credit rating agency seems mostly concerned about Spain’s banking sector and burst property bubble.

Spain’s credit rating has already been downgraded once. One must realise that while Germany is the real force behind the euro as a currency, Spain is the linchpin that will make or break it.

To put it into context, Greece and Ireland are small economies. The EU and the IMF always maintained that it could afford to bail out Greece and Ireland. When the gravity of the situation in relation to contagion came to light, Portugal was tipped to be the next domino to fall, while doubts were also being raised about Italy – more in terms of public debt, rather than its deficit.

The EU and IMF conceded that there was probably enough cash in the kitty to bail out Portugal, but Spain was out of the question. The economy is, quite simply, too big and too expensive.

Portugal has moved to dispel any notions of it needing a bailout, but the markets are not convinced. The government is struggling to implement austerity measures as they are being blocked in parliament. In addition, there have been multitudes of strikes organized by trade unions.

Still Portugal claims it can raise the capital it needs to pay off pending debts which are due to be settled in mid-2011. So far, the EU has resisted the temptation to bully Portugal into accepting a loan to calm market fears, as it did with Ireland.

But if the Portuguese government cannot pass legislation to implement austerity measures, then that may well be what is on the cards. And so, on to Spain. Spain, with a deficit rate of 11% and a staggeringly high unemployment rate of 20 per cent, needs to raise some €170bn in order to remain solvent. A number of austerity measures have been implemented, but by far, it is the creaking and groaning welfare state. With a high portion of single mothers, dependent on the state and, as we have already mentioned, a staggering 20% unemployment rate, what needs to be done is clear.

Spain must properly benchmark its social security system and boot off all freeloaders and ‘takers’. It must also strive to create employment and attract foreign investment. Failure to do so would mean failure of the common currency. It has been said time and time again, if one country goes bust, then the euro goes bust. Where would that leave us? With no basket of currencies, our currency would be totally worthless once the vultures swoop in. And by saying our currency, we do not only mean Malta, but the 16 nations that share it. What a let down. Malta strove hard to meet the criteria for entry. We barely enjoyed four years of it. Thanks to others it might yet all come crashing down around us.