Spain-Europe’s pink elephant in the room about to implode
Finally reality is knocking on the door. The Teflon market, churning higher on no volume, is taking a pause. The no volume, low volatility market has attracted many new “smart” and confident longs. Even Bank of Israel is now engaged in trading Apple (according to ZH).
The markets have shown signs of “strange” behavior lately. The “secret” GLD and SLV seller surprised many when hammering the metals last week. Yesterday’s mini flash crash in Apple, has suddenly reversed investor sentiment across the markets. Meanwhile, the credit markets have continued underperforming.
People still talk about Greece (and about Alex Hope, the FX trader), but the elephant in the room, Spain, is still neglected given the size of the potential problems arising in Spain. Remember how it all started in Greece? Yes, Spain is following the same path. Having spent another 90 billion Euros more (that it doesn’t have) than projected in 2011, things will start heating up in Spain. With unemployment sky rocketing, the property bubble about to implode for the second time, Spain does not need a credibility problem. Espana, everything under the sun. More on the Spanish Economy and the (in)famous ghost towns of Spain below;
From El Pais;
Prime Minister Mariano Rajoy on Monday ruled out the idea of affording the country’s regions some leeway on their contribution to reducing the shortfall in the state’s finances.
At the same time, Economy Minister Luis de Guindos on Monday estimated the government would have to find budget savings of 37.9 billion euros this year to meet the deficit figure of 5.8 percent of GDP. De Guindos insisted that the higher-than-agreed overshoot complied with the terms of the European stability pact.
The regions, which were largely responsible for the blowout in the country’s finances last year, will have to contribute 15.6 billion euros to the total estimated by De Guindos. The country’s two biggest regions, Andalusia and Catalonia, on Sunday called on Rajoy for some slack in the target in order not to have to cut back on essential services such as health and education. (Full reading here).
Remember those ghost towns? From Huff Post;
Towering apartment blocks, complete with swimming pools and playgrounds, loom over empty streets, weed-filled lots and gaping excavation pits. The lone bank in this mega-development nicknamed “Manhattan” closed two years ago and most storefronts are bricked up.
Apartments galore are for sale here and prices are plunging.
More than 13,000 apartments were supposed to go up to create a mini-city for 30,000 people just 45 minutes outside of Madrid. But only 5,100 were built, many are uninhabited and regular Spaniards who bought them as investments are now competing to offload them for huge losses.
Spain’s real estate crash and economic implosion have turned what was supposed to become a vibrant suburban paradise for young Spanish couples and their children into one of the most visible monuments of the country’s boom gone bust. Such modern-day ghost towns have become a familiar part of the Spanish landscape, abandoned shells left to slowly decay. (Full article here).
Austerity creates Spain’s ghost towns: selling off unused houses amid crisis from joe mcevoy on Vimeo.
Good grief!
It wasn’t the government that caused this mess, it was negative-real interest rates caused by finance which lent the money to build all this crap. The derivative-fed shadow banking pushed debt as well as the money-center banks all looking for the same ‘easy’ yield.
The real problem is energy shortage papered over w/ debt. Spanish and other Europeans borrowed to buy fuel, then borrowed more to roll over the loans. The EA states are ALL dependent upon external credit including Germany. Surprise! There is now a credit shortage. Nobody can afford the fuel and nobody can repay the debts which were never intended to be repaid.
Solve the problem: get rid of the cars. This is what is taking place anyway: energy conservation by other means … by way of bankruptcy.
Steve…of course the banks pushed debt, and greedy politicians took the bait!! It IS the govt’s fault – they added too much debt, certainly didn’t practice sound safe fiscal management. The banks are evil – that is true…but govt’s are corrupt, inefficient, and in the end, just as evil.
iTs every bodies fault as we were only too happy to fund our own greed at the expence of our own children and grand children so FACE IT WE ARE ALL TO BLAME and insist your goverment sets standerds like china for housing (30% deposits for first homes 50% for second) but that would mean housing price falls and we cant have that even though this would make it cheaper for our children and would mean that we might have to invest in bussiness that create jobs for our chidren- no no i want my house price to go to the moon screw them.