Late-2000s Recession in Europe - Eurozone - Spain

Spain

Further information: 2008–13 Spanish financial crisis

Spain's Martinsa-Fadesa, a construction company, has declared bankruptcy as it failed to refinance a debt of €5.1 billion. The two banks with most exposure to Martinsa-Fadesa are reportedly Caja Madrid, at €900m, and Banco Popular Español, at €400m. Spain's finance minister Pedro Solbes has said it would not bail out the company. In the second quarter in Spain house prices reportedly fell 20 percent. In Castilla-La Mancha some 69 percent of all houses built over the past three years are still unsold. Deutsche Bank said it expects a 35 percent fall in real house prices by 2011. Spain's premier, Jose Luis Zapatero, blamed the European Central Bank for making matters worse by raising interest rates. More than 98 percent of home loans in Spain are priced off floating rates linked to Euribor, which has risen 145 basis points since August. Housing accounts for over 10 percent of Spain's economy. The Bank of Spain is concerned about the health of smaller regional lenders with heavy exposure to the mortgage market.

Although Spain has avoided recession in the first half of 2008, unemployment in the country has risen by 425,000 over the past year, reaching 9.9 percent. Car sales in Spain fell 31 percent in May. Spain's factory output slumped 5.5 percent in May. The country's business lobby Circulo de Empresarios warned of a "high probability" that Spain's economy would fall into recession in the second half of 2008 due to the housing collapse. Spain had a 7.9 percent decline in retail sales in June compared to the previous year, the largest drop since Spain began registering the results and the seventh consecutive monthly decline. This included a 17.9 percent drop in retail sales of household goods. June food sales in Spain fell by 6.8 percent.

Morgan Stanley issued a major alert on the health of Spanish banks and the Spanish economy in a report, saying, "A momentous economic slowdown is now under way. We believe the deterioration in Spain is just in the beginning stages. The bulk of the pain will be suffered in 2009." Morgan Stanley also warned there was 40 percent chance of a 0.5 percent contraction of the Spanish economy in 2009, with a risk of an even more extreme 1.4 percent contraction in 2009. According to Spanish automobile manufacturers' association ANFAC new car sales fell 27.5 percent in July from the same time in 2007, the third consecutive monthly drop of over 20 percent. Spain's government forecast the unemployment rate would rise to 10.4 percent in 2008 and to 12.5 percent in 2009. Spain's second largest bank BBVA predicted the unemployment rate could reach 14 percent in 2009. Spain's Purchasing Managers Index for the manufacturing sector in July fell to a new low suggesting a deep recession. In the second quarter Spain's economy grew by 0.1 percent, the lowest gain in 15 years.

As of December 2009, Spain's government forecast the unemployment rate would rise to 20 percent in 2009. It's predicted a 25% rate, due to the way the tally is carried out by the government. According to Spain's Finance Minister, the "Spain faces its deepest recession in half a century".