Well, here I am presenting two of what I consider to be the most important charts in understanding the mechanics of the current Spanish crisis. The rate of growth in lending to households and the rate of growth in lending to corporates.
We now have the May 2008 data from the Bank of Spain, and as we will see, in each case they continue to slow. But first, why do I say "the most important charts". Well simply because they sum up the core of what the problem is in a very simply nutshell. The Spanish banks are struggling to find liquidity, and as a result they are unable to maintain the pace of lending expansion to individuals and to households that they previously could. This is what is provoking the severity of the problem, and in comparison with this everything else is a mere detail (although of course some of the details will soon be becoming big problems in and of themselves). Basically, as we know, more houses are still being built this year than ever. So construction at this point hasn't slowed that much. The thing is though the builders are accumulating unsold homes (which will soon be passed on to the banks as the builders go bust one by one), since individuals don't have acces to sufficient mortgage finance to buy them.
Thus the rate of new lending to households has been dropping steadily:
And then we see that corporate Spain is having the same problem, which is why so many people are busy out there trying to sell subsidiaries, and such like, since they are having problems borrowing sufficient money, and of course sales and profits are now steadily going down.
Now if we look at the next chart, you will see that Spanish companies and households are much more indebted than their average eurozone neighbours, and companies especially - at around 120% of GDP.
Now you might say, well isn't it a good thing that all this is slowing, since so much lending and debt was hardly healthy? And I would have to agree with you. But nothing is so simple, since after so many years of debt indulgence the economy is badly structurally distorted, and relative prices are way out of line with most competitors, so as domestic consumption drops exports can't take over and down the whole edifice comes.
Those of you who can speak Spanish can probably read Italian too, and I just found this comment from one of the readers of this blog on an Italian financial forum:
"L'euro ha ucciso (finanziariamente parlando) la Spagna: una moneta troppo forte, ed un tasso di interesse troppo basso, hanno distorto il mercato del credito, provocato una colossale bolla immobiliare, finanziata con capitali esteri che adesso non arrivano più o peggio stanno tornando da dove sono venuti. Inoltre, visto che la politica monetaria si fa decide a Francoforte, e non a Madrid, la BC spagnola è totalmente priva di mezzi macroeconomici per fronteggiare la crisi bancaria:"
I don't know about the idea of hiring people to give economics classes to Zapatero, but if they are looking for someone, this guy gives effectively a master class in one short paragraph. What he is really saying is that the absence of independent monetary policy meant you had no way to stop yourselves going up, you were simply shot out of the cannon, and now you have no way to stop yourselves coming down just as quickly as you went up. I remind everyone: interest rates at the ECB just went up, not down, and deflation - and possibly a very whopping dose - not inflation, is about to become Spain's problem.
Spain Real Time Data Charts
Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Spain related comment. He also maintains a collection of constantly updated Spain charts with short updates on a Storify dedicated page Spain's Economic Recovery - Glass Half Full or Glass Half Empty?