Spanish home loans slump to record low

28th December 2011, Comments 0 comments

New Spanish home loans collapsed to the lowest number in at least eight years in October, official data showed Wednesday, as the economy battled a feared recession.

People took out just 22,193 loans in the month, down 43.6 percent from a year earlier, said the National Statistics Institute.

It was the lowest monthly figure since the data were first collected in the current format in 2003, a period that includes the 2008 property bubble collapse, which wreaked havoc on Spain's economy.

Although not directly comparable, the number was also lower than any month in the previous series dating back to 1994.

The value of the October home loans slumped 46.5 percent from a year earlier to 2.356 billion euros ($5.9 billion).

Looking at all urban and rural real estate as well as homes, the total number of loans plunged 36.9 percent from a year earlier to 39,199 in October and their value plummeted 40.6 percent to 4.497 billion euros.

Spain's new economy minister, Luis de Guindos, warned this week that the economy had likely contracted in the last quarter of 2011 and faced a bleak start to 2012.

"Make no mistake, the next two quarters are not going to be easy, neither from a growth nor a jobs point of view," he said Monday.

Many analysts believe the economy has already slipped into recession with economic output set to fall in the final quarter of 2011 and the first quarter of 2012.

Spain only emerged in 2010 from an 18-month recession, triggered by the global financial crisis and the end of the property bubble, which destroyed millions of jobs and left banks with a huge pile of bad loans.

A new right-leaning government led by Prime Minister Mariano Rajoy won power in November 20 elections and has set a tight timetable for reforms to fix the slumping economy and reduce the public deficit.

Its priority is to cut Spain's unemployment rate, which is the highest in the industrial world at 21.5 percent.

Rajoy has said he will slash Spain's deficit by at least 16.5 billion euros in 2012 through sweeping cuts, with only pensions escaping the knife, as well as cleaning up banks and reforming the labour market.

© 2011 AFP

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