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Spain the First European Elephant to go down

Everyone is aware of the problems in Europe. The first countries succumbing to this systemic crisis were Greece, Ireland and Portugal.

Please notice EU has never recognized the existence of a systemic crisis. On the contrary, European policymakers have been in denial.

Italy, Spain and France are Elephants. These countries are not immune to this crisis, quite the contrary. Obviously, in a systemic crisis the weakest link is the first to melt. – say bye-bye to Greece and Portugal.


In our opinion Spain is the first Elephant to go down. Let’s analyze the following facts:




Spanish Banks Stuck ‘Unsellable’ Real Estate, 50% of Real Estate Loans are Troubled


Bloomberg reports Spanish Banks Have $41 Billion of Unsellable Real Estate

Spanish lenders hold 308 billion euros of real estate loans, about half of which are “troubled,” according to the Bank of Spain.

Land in some parts of Spain is literally worthless, said Fernando Rodriguez de Acuna Martinez, a consultant at Madrid- based adviser R.R. de Acuna & Asociados.

Funds demand 70% discount over banks real estate assets. Why would they offer more? To hope for has never been a lasting profitable business.

Banks have already provisioned for a 30 percent loss, but if you are selling at 70 percent discount, you have to take another 40 percent loss. No small and medium size banks in Spain can take such a hit. Period.

Spain is likely to be left with only four large banks in the future.


 Huge Structural Problems


If you add together all debts - government, corporate, financial institution, and household - Spain is a much more indebted country than Italy.

Spanish businesses took on huge amounts of debt. The leverage is unsustainable without continuous growth.

Italy's private sector, from the point of view of indebtedness, is in much better shape. The indebtedness of Italian businesses is just 81% of GDP and the indebtedness of households just 45% of GDP


What about the consumer?

The indebtedness of households rose to 82% of GDP.


How has been the government doing?

Government debt increased to 71% of GDP


The disaster is Imminent.


Unemployment rate: a staggering 22%. 

A new government will be elected this weekend in Spain.

Will it raise taxes? They said no. We say they will have to. It’s not their decision.  

We say it is too late. Bond markets reveal the truth.

This week Spain borrowed €3.6bn of new ten-year loans, well it had to pay 6.975%, the highest rate for 15 years.

Government's ability to service and repay debts depends on the overall size of debts, and on the health of the private sector that pays taxes.

Are you following the algorithm?


The Confirmation of Denial – Market wins by KO


Spain's finance minister Elena Salgado on Cadena Ser radio, Spain is "absolutely not at risk of a bailout," after rates for the government to borrow money rose to dangerous levels.

"The sustainability of our debt is beyond all doubt.", said Salgado.


Our response to Salgado is

Your irresponsibility is beyond all doubts

Beyond Trading has abandoned plans to remain and to conduct business in Spain since December 2010