View Full Version : Spain...something you maybe didn't know.

05-30-2012, 12:55 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> Property bubble

But the problems faced by Spain's government and its banks are just symptoms. The real issue is the mess that is Spain's economy.

Believe it or not, before 2008 Spain's government was one of the least spendthrift in the eurozone - unlike Greece. Or Germany.

<span style='font-size: 14pt'>The Spanish government's debts were a mere 36% of its gross domestic product (GDP) (the output of its economy) in 2007, while the German government's were 65%.

What's more, Madrid was in the process of paying its debts off - it earned more in tax revenues than its total spending.</span> In contrast, Berlin regularly broke the maximum annual borrowing level laid down in the Maastricht Treaty of 3% of GDP.

Evidently, this crisis has nothing to do with the recklessness of Spain's government.

Instead, it was other people in Spain who behaved recklessly.

Interest rates fell to historic lows when the euro was launched in 1999. <u>So Spain's banks, property developers</u> and ordinary home-buyers collectively borrowed and fuelled an enormous property bubble.</div></div>

ie, nothing like Greece.

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Between 1996 and 2007, Spanish property prices tripled - comparable to the price rises seen in the UK.

Now the bubble has popped. Those prices are steadily falling - and they look like they have a lot further to go.

The construction industry has collapsed, leaving hundreds of thousands out of work. Overindebted home-owners face financial misery and have cut back on spending. And the banks are staring at a mounting pile of bad mortgage debts.

All of which means that now - just like the UK - Spain's government finds itself borrowing and spending like crazy to stop its economy from collapsing altogether.

In Spain, unemployment has risen to 24% of the workforce - which means fewer people paying income taxes and more people demanding benefits from the government. </div></div>

There's more.

Q......... link (http://www.bbc.co.uk/news/business-17753891)

05-30-2012, 06:41 AM
Teaching the children the value of being frugal and living within their means would go along way all across the globe to keeping things stable.
The citizens of EU is most likely going to receive a painful lesson in the near future on this.

When you give up your independence your fate is tied to all those around your. Brittan was wise in not joining the EU.
And then there are the central banks in the midst of everything. A wolf in sheep's clothing.

It will be interesting to see what happens when Greece goes back to the Drachma and or defaults. If Spain cant compete due to what it considers an the inflated value of the EU currency it could very well return to to the Peseta. That could spell the end of the EU as more domino's begin to fall.

05-30-2012, 10:11 AM
But here we see the opposite of what people claim always happens-- that it was the evil government who overspent, overborrowed, over promised its citizens out of craven electoral considerations.

Not here. The national government was managing its side of fiscal matters very well. It was the private side who blew things up there. It's because of the cult of double digit annual returns on investment and how it reacts in a very low interest rate environment (which SHOULD BE a boon to society, comparable or better than low energy pricing). I think that is the case with Ireland as well-- low debt, positive balance of trade, all key indicators good, and then boom!

Great Britain did not join the Euro, and so what? Did that make them the lone success story in Europe as to their economy? Hardly. They're as broke as they come, or next in line to the most broke. Bad bankers left unchecked by regulations can break any country. And surely, only a national or supranational authority is required to be powerful enough to curb their illegalities and excesses.

05-30-2012, 12:53 PM
I would say that a combination of both private individuals and business through their mutual actions helped blow up the private sector.

I would not be so quick to give clemency to the public sector side.