The spirit of Generalissimo Franco is alive in Spain. A brigade of bears stalked the bulls at Pamplona, ate them, then ran amuck throughout Spain.
[The Hartford elk had no comment to this reporter.]
By Ambrose Evans-Pritchard
Published: 10:28PM BST 24 Sep 2009
The Madrid research group RR de Acuña & Asociados said the collapse of Spain's building industry will cause the economy to contract for the next three years, with a peak to trough loss of over 11pc of GDP. The grim forecast is starkly at odds with claims by premier Jose Luis Zapatero, who still says Spain's recession will be milder than elsewhere in Europe.
[Ed. note: Sound familiar, Americanos?]
RR de Acuña said the overhang of unsold properties on the market, or still being built, has reached 1,623,000 . This dwarfs annual demand of 218,000, and will take six or seven years to clear. The group said Spain's unemployment will peak at around 25pc, comparable to the worst chapter of the Great Depression.
[Ed. note: This is getting downright spooky.]
Separately, UBS said unemployment will reach 4.8m and may go as high as 5.4m if the job purge in the service sector gathers pace. There is the growing risk of a "Lost Decade" akin to Japan's malaise after the Nikkei bubble.
[Ed. note: OK, the joke's over. We're really talking about the United States, right?]
Roberto Ruiz, the bank's Spain strategist, said salaries must fall by 10pc in real terms to regain lost competitiveness, replicating the sort of wage squeeze seen in Germany after reunification.
There is no sign yet that either Spanish trade unions or the Zapatero government are ready for such draconian measures. Talks between the unions and Spain's industry federation (CEOE) broke down in acrimony in July.
[Ed. note: I hate to mention this, but - this is happening in the United States too.]
The Spanish government can do little to cushion the downturn. "The room for manouvre in fiscal policy has been exhausted," said Mr Ruiz.
[Ed. note: Bernanke, Geithner - did you catch that?]
Combined private and corporate debt reached 230pc of GDP, funded by French and German savings.
[Ed. note: Swap that for Japanese, Saudi Arabia, and of course - China.]
The Bank of Spain made heroic efforts to counter the effects of the bubble by forcing banks to put aside extra reserves, known as dynamic provisioning, but the sheer scale of the problem has washed over the defences.
Spain no longer has the escape valve of devaluation to claw back market share. It cannot resort to emergency monetary stimulus – as Switzerland, Britain, the US, and Japan are doing to prevent the onset of debt deflation. Prices are already falling at a rate of 1.2pc. [Emphasis mine.]
[Ed. note: That would also be known as DEFLATION, for all you inflation hawks out there.]