Bank warns Spaniards of 'unsustainable' debt

15th June 2006, Comments 0 comments

15 June 2006, MADRID — The Bank of Spain has warned again that rising household debt poses a growing problem for the country.

15 June 2006

MADRID — The Bank of Spain has warned again that rising household debt poses a growing problem for the country.

Jaime Caruana, the governor of the Bank of Spain (BCE), said increased household spending and borrowing "could not be sustained".

However, at present, Caruana said families and companies were in a "solid" financial position.

The BCE said household spending was exceeding income.

Families are more exposed to downturns in the economy and the labour market as they plunged further into debt.

Caruana said Spaniards will have to devote more of their income to paying off interest as these rates continued to rise.

But he said moderate rises in interest rates would help the "deceleration of debt and would absorb the overvaluation in the price of housing".

Spaniards have been helped by rising standard of living over the past decade and the average 12.8 percent rise in the price of housing in 2005.

But this explained why they have taken on more debt than their incomes and are borrowing more than ever.

Against this background, Spanish international competitiveness was on the wane, caused partly by rising prices and the increase in imports compared with exports.

And the building boom, which has been the basis of much of Spanish growth, has shown signs of slowing down.

[Copyright EFE with Expatica]

Subject: Spanish news 


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