Best of the Week
Most Popular
1.Bitcoin War Begins – Bitcoin Cash Rises 50% While Bitcoin Drops $1,000 In 24 Hours - Jeff_Berwick
2.Fragile Stock Market Bull in a China Shop -James_Quinn
3.Sheffield Leafy Suburbs Tree Felling's Triggering House Prices CRASH! - Nadeem_Walayat
4.Bank of England Hikes UK Interest Rates 100%, Reversing BREXIT PANIC Cut! - Nadeem_Walayat
5.Government Finances and Gold - Cautionary Tale told in Four Charts - Michael_J_Kosares
6.Gold Stocks Winter Rally - Zeal_LLC
7.The Stock Market- From Here to Infinity? - Plunger
8.Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - MarketsToday
9.Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom - Stewart_Dougherty
10.Finally, The Fall Of The House Of Saud - Jim_Willie_CB
Last 7 days
Evidence of a Stock Market Top Mounting - 10th Dec 17
Bitcoin Doesn’t Exist – Forks and Mad Max - 10th Dec 17
Bitcoin Doesn’t Exist – Putting the Banks Out of Business - 9th Dec 17
China’s Struggle for Market Economy Status - 9th Dec 17
Is Gold Really Strong? - 9th Dec 17
Bitcoin Parabolic Mania - 8th Dec 17
SPX Make a 61.8% Retracement - 8th Dec 17
Gold, Stocks and Bonds - The 3 Amigos Update - 8th Dec 17
Gold Stocks Break, Gold to Follow - 8th Dec 17
4 Charts That Show How Trump Tax Cuts Will Trigger A Recession - 8th Dec 17
Precious Metals Breaking Down! 3 Amigos to Abort? 4 Horsemen to Ride? - 7th Dec 17
Bitcoin Just Smashed Through $12k… Wait, $13k… Now $14k… This Is Getting Ridiculous! - 7th Dec 17
Stock Market Tops Look Like This - 7th Dec 17
Crude Oil, Oil Stocks and Invalidation of Breakouts - 7th Dec 17
Bitcoin Doesn’t Exist – 2 - 7th Dec 17
British Pound Sterling Volatility In Crucial Week of Brexit Talk - 6th Dec 17
Day Trading vs Swing Trading: Which One is the Better Strategy? - 6th Dec 17
Crude Oil and Negative Divergences - 6th Dec 17
EU Bailins Coming – 114 Italian Banks Have NP Loans Exceeding Tangible Assets - 6th Dec 17
Bitcoin Doesn’t Exist - 5th Dec 17
Advantages of Car Insurance to Protect a Vehicle - 5th Dec 17
How High Will Gold Go? - 5th Dec 17
The Loonie Takes Flight -- BUT a "Labor Miracle" is NOT the Reason Why - 5th Dec 17
The True Meaning of Bitcoin's 'Success' - 5th Dec 17
Gerald Celente: Middle East Wild Cards Could Bring Down Markets, Drive Up Gold - 5th Dec 17
Silver’s Positive Fundamentals Due To Strong Demand In Key Growth Industries - 4th Dec 17
Stock Market Positive Expectations, But Will S&P 500 Continue Higher? - 4th Dec 17
Bitcoin Achieved What The Gold Market Never Could & Never Will? - 4th Dec 17
Stock Market Top Distribution Starting - 4th Dec 17
Understanding Real Time Forex Trading - 4th Dec 17

Market Oracle FREE Newsletter

Traders Workshop

Spain Mortgage Nightmare; Why Spain is Guaranteed to Leave Euro

Housing-Market / Spain Dec 28, 2012 - 04:03 AM GMT

By: Mike_Shedlock

Housing-Market

Looking for a synopsis of the problems facing Spain? A summary of bullet points I gathered from the Spiegel article Evictions Become Focus of Spanish Crisis shows just how hopeless the situation is.


  • There were a record number of evictions in 2012, foreclosures are expected to increase in 2013.
  • Some 400,000 eviction proceedings have been opened in Spain since 2007, with roughly half of the families involved having already lost residential properties due to foreclosures. That means Spain is only half-way through the crisis.
  • There are now 1.7 million Spanish households in which not a single family member still earns a salary.
  • 4 million people have lost their jobs since 2007
  • 27 percent of the population lives below poverty level
  • Evictions now affects pensioners, who have used their own homes as collateral to take out loans for their sons and daughters
  • A joint study by UNICEF, Oxfam and Doctors Without Borders concluded that the country will need over 20 years to regain the standard of living it attained in the prosperous, pre-crisis years.
  • In the Catalonia region, unemployment is 26 percent
  • Youth unemployment is over 50%

Social Trap

Spanish Prime Minister Mariano Rajoy has issued a moratorium on foreclosures for "extreme hardship" cases. The definition of "extreme hardship" is "families with two children and an annual income of less than €19,000, more than half of which has to be used for mortgage payments." Single parents with children under the age of three also qualify.

Notice that the hardship rule still requires over half of income to go to mortgage payments. Meanwhile interest accrues indefinitely.

There is no way for these families to ever pay back debts accumulated at or near the height of the bubble.

If there are evictions people are thrown out on the street. If there are no evictions, then there is no way for banks to sell the properties to someone who is able to afford mortgage payments.

Euro Trap

In mid-December, Spain received nearly €40 billion ($53 billion) from the European Stability Mechanism (ESM) to restructure its ailing banks. Yet every day Spanish banks acquire more properties not marked-to-market.

Moreover, moratoriums delay the process as interest accrues.

The longer Spain tries to stay on the euro, the deeper Spain goes into debt to the rest of the EU. This is what happened to Greece, and the result was the rise of "Golden Dawn" a neo-Nazi group.

Constitutional Crisis

There are no sign of Nazism in Spain. However, Pro-Referendum Parties Won 87 of 135 Seats in Catalonia and a constitutional crisis is brewing as Catalans wish to secede from the rest of Spain.

Every day, bad debts mount at Spanish banks.

Catch 22 of Sorts

On December 19, I reported Loan Default Rate Hits 11.23% in Spain, a New Record; Construction Defaults Hit 26.4%; Credit Plunges 5%

Can anyone tell me how Spain can possibly exit their trap that does not involve Germany pouring vastly more money into Spain?

The only way I can come up with is default with Spain leaving the Euro.

Sooner Spain Leaves the Euro the Better for Everyone

Note that the ECB, IMF, and the rest of Europe (including Spain), threw money at Greece, turning a relatively small problem into a much bigger one. As Greece has shown, the sooner a country leaves the Euro, the better off everyone will be.

So when does Spain, or Germany come to its senses? Either one will do.

In the meantime, politicians will kick the can for as long as they can, making the situation messier and messier along the way.

Pick Your Poison

The bottom line is Germany will pony up (and by pony up I mean "give" not lend) massive amounts of money to Spain, or Spain will have no choice but hard default.

  1. Ultimately, a charismatic politician in Spain will blame Germany, blame the euro, and pledge to default. That politician will be elected.
  2. Alternatively, a charismatic politician in Germany will get tired of making handouts to the club-med states and promise to put Germany back on the Deutschmark. That politician will be elected.

This is a clear case of pick your poison, and Germany will take a hit one way or another. Timing is the only uncertainty.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2012 Mike Shedlock, All Rights Reserved.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Shedlock Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife