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Spain's Delinquent Loans: The Next Greece?
Sitting on the horizon, not far off are dark, ominous clouds, casting shadows on all of Spain that resemble the US housing and bad loan crisis. Germany has said it will not bail Spain out, at least as of April 2012. Spain has spent most of its money buying its own debt to bring down interest rates to issue bonds. Now, the rates are going up again and after three years of this, Spain now has $188 billion of bad loans defaulting. These are mostly housing loans that started to fail starting in 2008 and housing prices continue to dive into the abyss. Home sales are dropping and new construction is too expensive and risky. The government is also to blame for its costly expenditures, just as it was in Greece. Unemployment is above 20%, wages are low. Delinquent loans are at a 17-year high.
It sounds like the US dilemma.Spain is now trying to sell bonds to make gains, yet, the country has been in the red zone for a very long time and it will need a bail out from Germany later this year to avoid being "Greeced".