! 'Spain''s Real Estate: Decoupled from the USA?'

• 2 min read

  • Economy
  • Real Estate tags:
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    It looks like the Spanish Real Estate market is the next victim of the "decoupled" USA economy.

    Spain is suffering collateral damage from the collapse of the U.S. market for mortgages to the riskiest borrowers and the swoon in U.S. real estate. Spanish banks have exceeded their European peers in tightening lending standards, prompting a plea from the Prime Minister José Luis Rodriguez Zapatero - facing national elections early next year - not to strangle growth.

    This, of course will have consequences for the EU who may be forced to cut interest rates in the face of higher inflation to stablize markets dependent on credit.

    "The end of Spain's 'fat' years will hit the whole region," Ralph Solveen, an economist at Commerzbank in Frankfurt, said. Spanish economic growth is outpacing the euro region for the 13th year, in part because of the spending boom spurred by soaring property prices. Consumer debt surged to 130 percent of incomes in June, from about 70 percent in 2000. With home values rising by 176 percent during the same period, construction has accounted for one in every five new jobs. The current-account deficit demands €2 billion, or $2.9 billion, a week to finance. [via IHT]

    A foreign country like Spain, who should've been "decoupled" from our economy, sure sounds a lot like a "mini me" version of the United States. You can't fart nowadays without having some global impact, and to think that the world's largest economy could simply decouple itself from the rest of the world is idiotic. If that were true then why did we have this "coordinated action" (aka intervention) yesterday by several global banks?

    Is it me or do I see cracks in the foundation of the house of financial cards?


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