Spain’s property fiesta stopped in its tracks
July 15th, 2007 by Dino
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.
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