Spanish Flu Worsens

spain-retail-sales-annual

Spain Recession Scars Exposed as Jobless Seen at 6 Mln – Bloomberg.

For about two months, I have been writing about the “recovering Eurozone meme” that has become prevalent in the Mainstream media. I debunked the Spanish last month here:

https://dareconomics.wordpress.com/2012/12/10/recovering-eurozone-meme-adopted-by-spanish-businesses/

so I thought it would be a good time to examine the true Spanish economic picture. Conveniently, Bloomberg published an article detailing the worsening conditions in Spain. The piece is excellent but makes a standard mainstream media error. It attributes lower bond yields with investors jumping back into the Spanish debt markets, but this is untrue. Foreign holdings of Spanish bonds plunged from 54% at their peak in 2010 to 34% in July where they have remained despite the rally.

Spanish banks have been borrowing money from the ECB and purchasing the bonds in a lucrative carry trade. While this has brought temporary relief, it has also strengthened the dynamic between distressed banks and a shaky government.

The Spanish economic situation is getting worse in every single way:

  • Unemployment continues to rise with 6mm people out of work.
  • Every month brings a new non performing loan record. For November the number rose from 10.71 to 11.38%.
  • Bank lending decreased 3% from October to November.
  • Economists predict a further 1.5% decrease in GDP for 2013.

Don’t believe the hype. I have been of the opinion that Spain could continue without requesting a bailout indefinitely, but I am beginning to change my mind. The ECB’s money printing was not enough to keep smaller Greece off the dole, and Spain’s economic situation is rapidly deteriorating along the same lines.

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s