by Pater Tenebrarum, Acting-Man.com:
Contraction ‘Worse than Expected’
Once again economic forecasters are ‘surprised’ by the depths of Spain’s recession. They really shouldn’t be. After all, one of the most egregious housing bubbles of all time has burst in Spain. The bubble has produced malinvestment on a truly breathtaking scale. Moreover, it has left the banking system in tatters. If not for the doctrine that all banks including their shareholders and bondholders must be bailed out (to be fair, the MoU regarding the ESM bailout of Spain’s banking system does contain provisions that losses have to be taken by these groups), a large part of Spain’s banking system would likely have collapsed.
The banking system is now on artificial life support, but effectively the events have left it ‘zombified’. It is too busy trying to survive to be able to extend credit.