Concern grew for the stability of Spain's place in the fragile eurozone economy after reports of a rise in the level of bad loans on the books of its banks and word from the government Friday that it may have to revise its 2011 budget deficit upwards for a second time.
Reuters reports Eurozone Unemployment Reaches Near 15-Year High
Unemployment in the euro zone reached its highest level in almost 15 years in February, with more than 17 million people out of work, and economists said they expected job office queues to grow even longer later this year.
One of the mysteries surrounding the insolvent, and already once bailed out Spanish banking sector, has been why are reported bad loans - sharply rising as they may be - still as low as they are currently. Courtesy of the just completed bank earnings season, and a WSJ report, we now know why: it turns out that for the past several years, instead of accurately designating non-performing loans, banks would constantly "refinance" bad loans making them appear viable even though banks have known full well there would be zero recoveries on those loans.
(DAVOS, Switzerland) — The fragile state of the world economy, along with the relentless turmoil in Syria and the rocky fallout from the Arab Spring, dominated discussions during this year’s annual gathering of the global elite at Davos, leaving many participants uneasy about what lies ahead as they left for home Sunday. Even broad agreement that there are some positive signs on the economic front, at least in emerging markets, was coupled with a warning from the head of the International Monetary Fund. “Do not relax,” Christine Lagarde said.
It's time for another roundup on Spain. Every day is time for another roundup on Spain. Today's report is on bad loans, and complete foolishness at Bankia buying its own shares hoping to stabilize its price.
Spanish Bad-Loans Ratio Hits 8.37 Percent
The Wall Street Journal reports Spanish Bad-Loans Ratio Hits 17-Year High
Until recently, the received wisdom in the city was (a) was that the steep rise in the oil price would be temporary and (b) that it would only cause serious problems if it went to $150 a barrel. At least one of those two beliefs is now being tested. Possibly both.
From a technocratic point of view, I agree with the idea that it makes sense to pair short-term stimulus (i.e., bigger deficits) with measures that reduce the long-term deficit. In practice, however, I don’t think it makes sense to spend 2010 & 2011 worrying about what the deficit may or may not look like in 2047.
On an exciting phone call with progressive internet writers earlier this evening, a senior administration official outlined the Obama administration’s plan to call for a freeze in non-security discretionary spending spending starting with the Fiscal Year 2011 budget.