So, what is there to say about debt in Spain – or, at least, what can we believe and what really is the situation? Frankly, I really do not know and I am not at all sure that the recent stress tests of EU banks provide much of a clue. Certainly, when the ‘same’ banking stress tests were undertaken last year no-one in their right mind believed that they were rigorous or properly reflected the truth. This year, of the eight European banks that failed the stress tests set by the European Banking Authority five were Spanish banks and were (predicatably) CaixaCatalunya, Unnim, Caja de Ahorros del Mediterráneo, Grupo Caja 3 and bank Banco Pastor. But are these the only Spanish banks ‘at risk’ and does it mean that all is well elsewhere with the Spanish economy and the Spanish banking system – or is Spanish debt so high that it is unsupportable? Certainly, I am concerned not least because I do not think the full truth has been told by a long way. Indeed, as I pointed out in a recent Post (Are the Autonomous Regions of Spain bankrupt?) Spanish debt is rampant wherever you look. Indeed, as good an example of debt in Spain as any you are likely to find relates to my own town of Gandia. This, evidently, has a debt of 180 million Euros. Now, with a population of 80,000 people that equates to a massive ‘debt’ of some 225,000 Euros for every man, woman and child in the town! Meanwhile, Valencia City (from memory) has a debt of some 890 million Euros equating to some 98,000 Euros of debt per person there. My goodness – these are huge figures, by anyone’s standards, and are probably, more or less representative of towns and villages right across Spain. Of course, the really shocking thing about the monstrous scale of the debt in Spain is that the debt has come after the biggest boom in Spain since galleons were bringing tons of gold over to the country from Central and South America in the 16th Century. Logically, the country should have a surplus but the extreme reverse is true, although I doubt anyone who has been living in Spain over the past few years is surprised. Indeed, one of the really striking things over the last ten years is the scale of spending on public projects in Spain that has been undertaken by local villages, town and city governments. They have always seemed profligate – and so it has turned out to be. Unfortunately, much of the spending has not always seemed to make sense and there are good grounds for thinking that much had been initiated corruptly to benefit local politicians and businessman. This may be the reason why some 86% of Spaniards, in a recent poll, believed that corruption in Spain was bad/very bad! Mind you, Spain is not alone in having huge debt. The US public debt is enormous as well and stands at $14,291, 686, 094, 756 (and rising rapidly) at the time of writing. This equates to some $46,543 per person (the population of the US is 311,792, 612) or 129,838 per tax payer! So, Spain is not alone although in being saddled with vast debts. The trouble is that I suspect the nature of the Spanish economy makes it more vulnerable than the US or the UK with any regeneration for Spain that much more difficult to achieve. My point, unfortunately, is that all the evidence appears to suggest that this ghastly recession is far from over and that property prices (for example) in Spain are a long way off stabalising with high unemployment and hard times set to continue – damn it! Incidentally, if you are interested in debt statistics then do have a look at the US National Debt Clock or the World Debt Clock (but avert your eyes, if you are British, from the UK statistics!).
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