Greece is yesterday's news, Spain is tomorrow's

Spanish mortgage leader declares real estate industry is bankrupt
According to Santos Gonzalez Sanchez, president of the Spanish Mortgage Association who speaks on behalf of the country’s mortgage lenders, there is so much debt in the industry that finance for property development has effectively dried up.

‘The real estate sector is bankrupt,’ he said, pointing out that Spanish developers had a combined debt of €324 billion in the third quarter of 2009, the equivalent of around 30% of Spanish GDP, according to figures from the Bank of Spain. The interest bill alone is around €15 billion a year.

More than 50% of the debt was used to buy land for which there is now no market. ‘Whilst those plots of land are not properly valued, the financial system can’t start afresh and won’t be able to finance new homes,’ Gonzalez told the Spanish press.
Santander Faces Scrutiny After BBVA Property ‘Shock’
BBVA fell the most in 10 months on Jan. 27 after fourth- quarter profit was almost wiped out as it made writedowns in the U.S. and reassessed its Spanish property holdings. Bad loans as a proportion of lending in Spain and Portugal leapt to 5.1 percent in December from 2.6 percent a year earlier, as the bank reclassified 1.82 billion euros of property and consumer loans as doubtful in the fourth quarter. Santander Chief Executive Officer Alfredo Saenz said in October he expects a default rate of 3.3 percent on Spanish loans by year-end.
Investors will compare Santander’s provisioning to BBVA’s when it reports earnings tomorrow, said Andrea Williams, who helps manage about 1.2 billion pounds ($1.91 billion) at Royal London Asset Management in London and described the plunge in profit at BBVA as a “shock.”

Five Things: Spanish Real Estate and the No Good, Horrible, Very Bad Bank Solution
Still, few Americans realize Spain is larger than the state of California. Most, if they think of the country at all, think of it as little more than a subsidiary of the Club Med franchise, basically just a resort, or a small section in the back of their local wine store. But it has the ninth or tenth largest economy in the world, so when the head of the country's mortgage industry declares the entire real estate industry bankrupt, it's "worrying," as the local news there puts it.

After all, real estate is nothing if not a religion, and when the chief pope-in-charge of doling out mortgage loans declares the very backbone of that religion bankrupt, students of history know that bloodshed is likely close at hand.

On Tuesday, while the world was nervously eyeing Greek and Swiss bankers for any furtive movements, Santos Gonzalez Sanchez, president of the Spanish Mortgage Association, the man who speaks on behalf of the country’s mortgage lenders, essentially had a nervous breakdown in public, declaring the country's entire real estate industry bankrupt. Which is true, but beside the point. This is the man who heads up the whole gig. It would be similar to the pastor at your local church painting the sanctuary red and sacrificing a bull... just for fun.

My gut tells me that the problems in Spain are just starting to come to light and this still has a ways to go before it's finished.

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