Roubini : l’Espagne en mauvaise posture (VO)

The United Kingdom that looks - in many dimensions - like the US : housing bubble now going bust, excessive consumer credit creation, unsustainable boom in consumption, large current account deficit, overvalued currency. A recession in the UK is now highly likely.

Spain that is a even worse example of unsustainable housing bubble than the US and the US : in the US residential investment peaked at 6% of GDP ; in Spain at the whopping 19% of GDP. The housing bubble masked for many years - via high GDP growth - the fact that Spain had experienced a real appreciation of its currency and a loss of competitiveness as large as that of the other Club Med countries (Portugal, Italy, Greece). Now that the Spanish housing bubble is busting it is clear that the emperor has no clothes, i.e. Spanish growth was driven by the housing bubble.

Ireland - like the UK and Spain - had a massive housing bubble that is now deflating. The medium term fundamentals of the Irish economy are sounder than those of Spain or the Club Med but in the short run the Irish economic slowdown will be severe and an outright recession cannot be ruled out.

Among the other Eurozone countries Italy and Portugal are at risk.

                    

Sources  Nouriel Roubini