Bank warns national spending spree must end
22 March 2006, MADRID — The Bank of Spain has urged people to cut spending, warning rising of levels of personal debt are unsustainable.
22 March 2006
MADRID — The Bank of Spain has urged people to cut spending, warning rising of levels of personal debt are unsustainable.
Household debt stands at 110 percent of gross disposable income – which means people are spending more than they earn.
This was largely as a result of Spain's massive property boom and the spiralling prices of homes in recent years.
Jose Luis Malo de Molina, head of the Bank of Spain's research department, made the remarks as the Euribor, which is the key mortgage loan reference point in Spain, rose to over 3 percent for the first time since 2002.
But Malo de Molina said private households are not yet in what he called a "delicate financial situation" because wealth had increased because the property boom had acted as a buffer.
Over 80 percent of Spanish homes are owned by householders.
The Bank of Spain has estimated property prices are overvalued by 35 percent, but signs of a slowdown have started to emerge.
Spanish growth last year stood at 3.4 percent – more than double that of the euro-zone.
But this was driven almost entirely by domestic demand.
The contribution of Spanish trade – exports minus imports – was negative, meaning the country imports more than it exports.
This was partly due to high inflation, making Spain less competitive abroad.
[Copyright EFE with Expatica]
Subject: Spanish news