The economic downturn continues.
Spain's finance minister Pedro Solbes has stunned the markets with an admission that his country faces the worst economic crisis in its history as the full effects of the property crash spread through the economy.
http://www.telegraph.co.uk/...
More below:
From the US to the UK to Spain and elsewhere, this economic downturn is rattling the global economy.
From the Telegraph:
"This crisis is the most complex we have ever lived through given the plethora of factors on the table at the same time," he told Punto Radio in Madrid, breaking with past efforts to put a reassuring gloss on events.
And it is declining property values leading the way.
The comments follow this week's bankruptcy of Martinsa-Fadesa, Spain's biggest corporate failure. The property developer - with an empire of housing estates, hotels, shopping malls and hotels - collapsed after failing to refinance €5.1bn (£4bn) of debts. The company's demise was a textbook story of aggressive over-expansion at the top of the cycle, driven by high debt gearing. It has €11bn of assets.
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The Martinsa-Fadesa collapse has sent tremors through the whole property and construction sector. The share price of giant developer Sacyr has halved over the past month.
The two banks with most exposure to the Martinsa-Fadesa are Caja Madrid, at €900m, and Banco Popular, at €400m.
Goldman Sachs has issued "sell" recommendations on a clutch of Spanish banks, including Bankinter, Banco Popular and Banco Sabadell, warning that the sharp turn in the credit cycle could prove worse than the recession in the early 1990s. "The consumer is more leveraged today than in any of the previous cycles," it said.
I'm sure there's more to come in the following months.