Courtesy of Mish.
Looking for a synopsis of the problems facing Spain? A summary of bullet points I gathered from the Spiegel article Evictions Become Focus of Spanish Crisis shows just how hopeless the situation is.
- There were a record number of evictions in 2012, foreclosures are expected to increase in 2013.
- Some 400,000 eviction proceedings have been opened in Spain since 2007, with roughly half of the families involved having already lost residential properties due to foreclosures. That means Spain is only half-way through the crisis.
- There are now 1.7 million Spanish households in which not a single family member still earns a salary.
- 4 million people have lost their jobs since 2007
- 27 percent of the population lives below poverty level
- Evictions now affects pensioners, who have used their own homes as collateral to take out loans for their sons and daughters
- A joint study by UNICEF, Oxfam and Doctors Without Borders concluded that the country will need over 20 years to regain the standard of living it attained in the prosperous, pre-crisis years.
- In the Catalonia region, unemployment is 26 percent
- Youth unemployment is over 50%
Social Trap
Spanish Prime Minister Mariano Rajoy has issued a moratorium on foreclosures for “extreme hardship” cases. The definition of “extreme hardship” is “families with two children and an annual income of less than €19,000, more than half of which has to be used for mortgage payments.” Single parents with children under the age of three also qualify.
Notice that the hardship rule still requires over half of income to go to mortgage payments. Meanwhile interest accrues indefinitely.
There is no way for these families to ever pay back debts accumulated at or near the height of the bubble.
If there are evictions people are thrown out on the street. If there are no evictions, then there is no way for banks to sell the properties to someone who is able to afford mortgage payments.
Euro Trap
In mid-December, Spain received nearly €40 billion ($53 billion) from the European Stability Mechanism (ESM) to restructure its ailing banks. Yet every day Spanish banks acquire more properties not marked-to-market.
Moreover, moratoriums delay the process as interest accrues.
The longer Spain tries to stay on the euro, the deeper Spain goes into debt to the rest of the EU. This is what happened to Greece, and the result was the rise of “Golden Dawn” a neo-Nazi group.
Constitutional Crisis …
