Same Spanish Data – Different Stories
May 26th, 2009
This week, the article concerning the relative optimism voiced by OCED chief, Angel Gurria, stands in stark contrast to the pessimistic forecast expressed by Moody’s – which, in turn seems to conflict with the article entitled ‘Spanish Bad Debt Abating’.
In fact, all three stories describe the same picture – but from different angles and considering different time frames.
In Spanish Bad Debt Abating, we read this comparatively sunny outlook:
“Spanish bad debt rose at the slowest rate in 15 months in March .. in the latest sign the country’s recession may be finding a floor.”
However, bad debt is still increasing in Spain, and the rate of increase has only slowed because banks are now even more cautious about lending. Plus, the government has taken steps to underpin mortgage defaults for the growing number of Spanish people out of work.
This article looks to the longer term and interprets the latest bad debt data to support: “The European Commission expects Spain .. to exit recession, probably in 2011″.
In Spanish Building Society Downgrade Risk, we read:
“Moody’s put half of Spain’s regional savings and loans institutions on notice of possible downgrades because it expects asset quality to deteriorate further during the country’s deep recession.”
In the short term, Moody’s sees the bad debt problem in Spain increasing and spreading to other sectors of the economy. This is, of course, consistent with the time frame of the previous article.
Even though the rate of increase of bad debt is slowing, total bad debt is still growing. Both articles agree about this.
Moody’s is concerned with the short term effects of the growth in bad debt, while the first article interprets the deceleration in bad debt as a positive sign for the longer term.
OECD: Global Recovery by Year-end deals with a much broader perspective and interprets a number of worldwide economic signals in a positive light.
In terms of time frame, this article is actually looking at the longer term, but has chosen to describe it as a short-term event: Global recovery by year-end.
In fact, both this and the first article use the same logic:
- Things are still getting worse
- But they’re getting worse more slowly than before
- This means we’re nearing the bottom of the curve
- After reaching the bottom, the only way is up
Whether you prefer short term pessimism, long term optimism or a combination of both, we are still a long way away from things getting back to ‘normal’ in Spain, and elsewhere in Europe.
Finally, I hope that the fact that Spain continues to suffer will not deter the European Parliament from imposing financial sanctions on the country.
In MEPs Wave Financial Stick at Spain we learn that the only leverage MEPs have over Spain is financial. Their only method of coaxing Spain to reform its draconian laws about property ownership and demolition is to withhold European funding.
The fact that the Spanish property market is already struggling means that reforming these shoddy laws could be achieved with minimal negative impact – if undertaken in the near future.
I hope that the MEP’s involved are smart enough to press the advantage while they have it, and force Spain to clean up their property laws. Who knows? in doing so they might even accelerate the recovery of the Spanish property market – stranger things have happened.
Martin Dell, Kyero.com
