Madness in Spain
If you still haven’t heard about the problems in Spain, here is a great little article of the madness that took place during the boom years. SPain’s Ibex is currently trading down 2%, and about to break the lows. Italy is joining the hung over period after the boom party. It is all about the Med countries. Wonder what happens if Apple starts selling off for real? From Bloomberg.
“Ireland faced up to its problems faster than others and we expect growth there rather soon,” said Cinzia Alcidi, an analyst at the Centre for European Policy Studies in Brussels. “In Spain, there was kind of a denial of the scale of the problem and it may be faced with many years of significant challenges before full recovery takes place.”
Spain, Europe’s fifth-largest economy, is the current focus of attempts to contain the region’s sovereign debt crisis, as Prime Minister Mariano Rajoy struggles to quell speculation it will need a bailout. Developers are showing similar optimism. They continue to build even with 2 million homes vacant around the country, new airports that never saw a single flight being mothballed, and property appraisers and banks reporting values have fallen only about 22 percent, said Encinar, who estimates the real decline is probably at least twice that.
Ireland, where home prices have fallen a record 49 percent since peaking in 2007, is making more progress as it deals with the legacy of a bust that crippled its economy, once the most dynamic in Western Europe. The state purged lenders of 74 billion euros ($98 billion) of mostly toxic commercial mortgages by creating a bad bank, and poured enough cash into the financial system to make it among the best capitalized inEurope. Building virtually halted overnight in 2008 after debt markets seized up globally.
Spain has so far rejected the bad bank model, even afterStandard & Poor’s last week cut the country’s credit rating to BBB+ from A, on concern the government will need to provide further support to banks.
The Trader has written about the absolute denial regarding the Spanish situation. Below is a great example of the “never take the stop” mentality.
Truth About Spain
On the plain below the central walled city of Avila, a world heritage site and a popular tourist destination, the province with a population of 171,680 has about 19,000 apartments and villas empty or unfinished, according to Borja Mateo, the author of “The Truth About the Spanish Real Estate Market.”
Ministry of Infrastructure figures show 23,419 homes were constructed in the decade through 2007, with another 11,000 homes built there since 2008. The sprawling developments are dotted with thousands of empty parking spaces, while streets have makeshift barriers where the money has run out, others simply end in fields.
Miguel Angel Garcia Nieto, mayor of Avila for the past decade, disagrees that his city has been overbuilt.
“When we approved the first urban plan back in 1998 there was an unprecedented demand for homes,” Nieto said in a telephone interview on April 19. “Yes, there is oversupply at the moment because of the financial crisis and everyone’s gone back home to live with their parents, but it’s not because there is lack of demand. When the economy gets back on track I am confident the supply will be absorbed.”
Full article here.