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Spain’s One Trillion € Debt

For the first time ever Government Debt in Spain has reached One Trillion €’s (for the period to June 2014), which means it now stands at 98.4% of GDP (Gross Domestic Product).

To all intense and purpouse Spain owes as much as it produces, and while not (yet) into negative equity territory, there is certainly no capital (or as lenders like to term it security) on Spain’s Balance Sheet.

Hard not to say that Spain is bankrupt!

I have written elsewhere about Spain’s fundamental problem: it only got wealthy on the back of other countries wealth – tourists come on holiday when they have spare cash, people purchase holiday homes when they have spare cash, people purchase luxury goods (red wine, almonds, olive oil) when they have spare cash.

Land sales, construction, tourism, exports: all dependent on other countries doing well enough that it’s citizens have ‘extra cash’.

The bubble burst a long time ago and there is still very little sign of it getting better. Sure the tourists still make a significant contribution, but they aren’t spending as much, and properties are still selling (to long term investors and second home owners i.e. not big spenders to replace the Mercadona Tourists), and the Golf still attracts many.

Last month Spain was urged to sell 50 year bonds (the norm is 10) to secure capital to pay off it’s debt: that is a true sign of just how desperate the economy really is in Spain.

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