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The situation in Spain continues to deteriorate [ClearOnMoney]
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The situation in Spain continues to deteriorate

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Commentary

The situation in Spain continues to deteriorate

15 Apr 2012 by Jim Fickett.

Everyone knows that Spain is in recession, and that market worries about a bailout are high. But perhaps it is not obvious from the stream of bad headlines that the economic news from Spain is not just bad, it continues to worsen steadily.

Whereas the housing crash in the US is mostly over, the steep downtrend in Spain's house prices shows no letup:

(All graphs in this post come from a recent Bank of Spain presentation.)

This is very bad news for households, as they have a very large percentage of assets in housing:

And it is very bad news for the banks, because they are already on the edge, loan collateral continues to deteriorate, and non-performing loans continue to rise:

(Click for larger image. “Doubtful loans: Loans in which some installment has not been paid for a period of more than 90 days, and those exposures in which there are reasonable doubts as to total repayment under the terms agreed”)

Finally, the unemployment rate, already at about 23%, continues to rise. See the graph at Early Warning.

Although Spain gave up the headlines to Italy during most of the last year, I think, as I thought a year ago (23-contagion_spain, 04-spain_not_entirely_out_of_the_woods), that Spain is the big risk for the euro zone.