The Spanish economy is hitting records daily. Some major indicators have hit near-panic levels. Yesterday defaults on loans granted by banks, savings banks, cooperatives and other creditors reached 8.95%, just two tenths of a point from their maximum historic highs of 9.15% that were registered in February 1994.
The disappointing figures can be explained by high levels of loan defaults in the construction sector (20.6%) and real estate sector (22.9%). The risk premium closed another shaky day at 576 basis points after hitting 588 points midday. This is a new record since the euro was adopted. The main reason for the spike is tightly linked the lack of confidence that the markets have in the Spanish treasury's ability to offer reasonably-priced financing.
The intense pressure that Spanish debt is withstanding was put to yet another, more challenging test today as two-, five- and seven-year bonds were issued in an effort to raise between two and three billion euros.
A vote on the state-backed banking sector bailout is also hurting the risk premium. The vote will be put in front of Germany's congress today. Although Merkel only asked for a basic majority, it would be unwise for the Chancellor to get backing from congressmen from her party. On the contrary, she could end up stiffening her financial policy in order to strengthen southern Europe.
