Ambrose Evans-Pritchard: Spain admits country faces worst economic crisis in its history!
By Ambrose Evans-Pritchard
MADRID, Spain - July 16, 2008 - Spain's finance minister
Pedro Solbes has stunned the markets with an admission that his country faces
the worst economic crisis in its history as the full effects of the property
crash spread through the economy.
"This crisis is the most complex we have ever lived through given the plethora of factors on the table at the same time," he told Punto Radio in Madrid, breaking with past efforts to put a reassuring gloss on events.
Mr. Solbes said the Madrid bourse had suffered an "earthquake", crashing 27pc since the start of June. He blamed the toxic cocktail of high oil prices, the global credit crisis and the sharp slowdown in the key export markets of North America and Germany.
The comments follow this week's bankruptcy of Martinsa-Fadesa, Spain's biggest corporate failure. The property developer - with an empire of housing estates, shopping malls and hotels - collapsed after failing to refinance €5.1bn (£4bn) of debts. The company's demise was a textbook story of aggressive over-expansion at the top of the cycle, driven by high debt gearing. It has €11bn of assets.
Mr. Solbes has pursued a rigorous "no bailout" policy, saying Martinsa-Fadesa took "excessive risks" and must now face the consequences. He has reportedly clashed with cabinet colleagues, who are now searching for any means to stop the downward spiral in the economy.
