PRESS RELEASE
Spanish Banks Prepare for Real Estate Crash
Oct. 5, 2007 (EIRNS)—Spanish banks are beginning to hoard cash, for fear of massive defaults on loans and mortgages, as the Spanish real estate bubble bursts. The London Independent reports that Caja Mediterrane (CAM), one of Spain's largest savings banks, started to hoard cash, after Llanera, a Valencia property developer, went into insolvency a few days ago. Llanera had been unable to make payments on 748 million euros (about $1.05 billion) of loans from Lehman Brothers and other banks.
CAM apparently set aside into its reserves the full 168 million euros (about $235 million) profit it made after selling its interests in property developer Metovacesa.
Of the 800,000 new homes built this year in Spain, one-third remain unsold, while new housing starts have collapsed. One-third of all loans Spanish banks have outstanding, about 280 billion euros ($392 billion), are to property and construction companies. This comes at a point when corporate indebtedness in Spain is 1 trillion euros (about $1.4 trillion), which is greater the country's entire Gross Domestic Product.
