If you thought Greece was bad...
From Mindful Money:
One of the themes of this blog has been concern over the economic situation in the Iberian peninsula where both Spain and Portugal have serious problems to address. This is not as clear-cut as you might think as whilst the situation is opaque and apparently not recorded well they seem to trade together less than you might assume. However there has been an increase in trade in the Euro era, which I record as it is rare these days to read of a benefit from the Euro.
I expressed my fears for Portugal back on the 17th of January when I described the decline of her economy thus.
Indeed this reminds me so much of back in 2010 when I was writing that the Greek experience was likely to be much worse than projected. Unless something unexpected happens for the better I expect 2012 and probably 2013 to be dreadful years for Portugal and her economy. I wish that their previous finance minster had taken some note of the alternative strategy that I sent him.Since then financial markets have begun to catch up with the reality of Portugal’s economic situation. Her ten-year bond yield went above 15% yesterday and even intervention by the European Central Bank has helped little as it has been above 15% again this morning. Even worse she has exhibited one of the signals that Greece exhibited as her spiral downwards accelerated and that is that shorter-dated bond yields rise above (eventually significantly above) the ten-year yield. For example her three year yield has risen above 20%. I fear for her.......SpainThe official story is that Spain’s government is working hard to reduce her fiscal deficit and that austerity is being applied which means that everything is under control. However this mantra was holed below the waterline by this as I reported on January 3rd.The previous Spanish government told us that it was on target to hit a fiscal deficit of 6% of Gross Domestic Product in 2011. However a spokeswoman for the new Spanish government Soraya Saenz de Santamaria told us late last week that the deficit would now be 8%.The oddly familiar tone which of course was repeating what happened in Greece after her election now has a further echo of that experience. As Bloomberg reports.Spain’s 17 regions owed pharmaceutical companies 6.37 billion euros at the end of 2011, lobby group Farmaindustria said today in a statement. That debt has risen 36 percent from a year earlier as payments were delayed by an average of 525 days, according to the group.Those who followed my articles on Greece in 2010 will recall how unpaid medical/phamaceutical bills were used as a way of claiming reduced spending when instead it had merely been deferred. This not only weakened the economy as a side-effect but meant that next-year the fiscal position declined again.Spain’s Unemployment levels continue to riseThis morning Spain’s National Statistics Institute has announced that the unemployment rate rose in the fourth quarter of 2011 from an already very high 21.5% to 22.8%. This means that the number of unemployed has now risen above the 5 million mark to 5,273,600. Adding to the grim picture is that employment fell by 348,700 in the fourth quarter.The unemployment picture in Spain has become symbolised most by the high rate of youth unemployment which has now risen to 51.4% for the 16 to 24 age group compared to 45.8% before. More than one in two is a chilling statistic which frankly is more akin to an economic depression than a recession....MORE