A juicio de los mejores especialistas financieros europeos, la economía española es muy semejante a la parte visible del Titanic. La madre de todas las fiestas se ha estado pagando con dinero ajeno, en bastante medida…
Financial Times, 14 julio 2007.
Spain’s property fiesta stopped in its tracks
By Leslie Crawford
Since the start of the year, the Spanish economy has felt like a huge party on the Titanic, cruising heedlessly onto an iceberg of corporate debt.
The danger signs were there for all to see: a real estate bubble; corporate borrowing up 37 per cent in a year; frenzied merger snf acquisition activity, and last but not least a current account deficit that has ballooned to become the second largest in the world in absolute terms after the US.
By and large, these are all symptoms of the same phenomenon: Spain is having the mother of all fiestas, paid for with other people’s money. Real estate and construction groups are on a debt-financed acquisition spree, offering overvalued assets as collateral for borrowed funds.
Timid warnings from the Bank of Spain have been ignored. “Spain is different!” the over-borrowed say. There won’t be a property crash – foreigners will always want a place in the sun. And who cares about the current account deficit? We are all in the euro now.
But in recent weeks, the flight from risk in Europe and the US – triggered by turmoil in the US mortgage markets – has brought the Spanish fiesta to an abrupt halt. Banks that freely lent into the Spanish boom are having difficulties syndicating loans. Real estate listings on the Madrid bourse have flopped. Companies once feted as the drivers of the Spanish economy are now treated as pariahs.
“International investors only care about one thing, your exposure to the real estate sector,” laments one Spanish banker.
[ .. ]
The flight from Spanish property risk is affecting other parts of the economy with lots of companies reporting tighter credit conditions. But it is unfair to tarnish all Spanish businesses with the same brush. This is therefore a good time to sort out the good from the bad from the downright ugly.
Some Spanish companies are borrowing to renew plant and equipment. [ .. ] Other companies, notably construction groups, have borrowed to diversify into new businesses and new regions. [ .. ] There is a third group, however, whose balance sheets are looking stretched. [ .. ]
Will it all end in tears? Perhaps not. The Spanish economy is still growing and not all of it is made of bricks. But some of Spain’s biggest companies are no longer the masters of their own destiny; that now depends on the vagaries of share prices, interest rates and the appetite of creditors for more Spanish risk.