The Spanish Financial System Completely Collapses And Spain Is About To Reboot With A 100 Percent Decline In GDP And 100 Percent Unemployment. It’s Absolutely Terrifying!!!
October 10th, 2012
The Horrific, Worst-Case Scenario For Spain
Spain is in trouble.
The macroeconomic outlook continues to deteriorate as unemployment rises. Angry citizens are protesting austerity in the streets.
At the same time, Spain has just unveiled its 2013 austerity budget, but the overly-optimistic macroeconomic assumptions underlying the plan foreshadow missed deficit targets in the coming quarters, which will likely force a new round of austerity measures, further worsening the economic contraction.
Meanwhile, the Spanish region of Catalonia is threatening to secede.
Technically, the “worst-case scenario” for Spain would be something along the lines of a 100 percent decline in GDP and 100 percent unemployment. No one is calling for that.
Presented here are all of the things that could go wrong, though. The recent work of Citi economists and strategists is heavily cited because they seem to be consistently more bearish on the Spanish situation than other shops
The Spanish Financial System Completely Collapses
…By itself, Spain is the 12th largest economy in the world, and right now it is a complete and total mess with no hope of recovery in sight.
The national government is broke, the regional governments are broke, the banking system is insolvent and Spain is in the midst of the worst housing crash that it has ever seen.
On top of everything else, the unemployment rate in Spain is now over 25 percent and the unemployment rate for those under the age of 25 is now well above 50 percent.
An astounding 9.86 percent of all loans that Spanish banks are holding are considered to be bad loans which will probably never be collected. Before it is all said and done, probably ever major Spanish bank will need to be bailed out at least once.
Manufacturing activity in Spain has contracted for 17 months in a row, and the number of corporate bankruptcies in Spain is rising at a stunning rate.
Five different Spanish regions have formally requested bailouts from the national government, and the national government is drowning in an ocean of red ink.
Meanwhile, panic has set in and there has been a run on the banks in Spain. The following is from a recentBloomberg article….