29 May 2012

Spanish woes continue

Retail sales in Spain fell drastically during April amid fears that a huge bailout of Bankia, the country's second largest bank, is a sign of a deepening crisis

Figures released by Spain's National Statistics Institute show that retailing is down almost 9.8% compared with April 2011, and has fallen 11.3% over the past month, on top of a 3.8% fall in sales in March.

The figures are the poorest in Spanish retailing since statistics were first collected in 2003, and follow nearly two years of consecutive decline in sales.

British retail sales have also suffered with reports from the Office of National Statistics showing a total fall of 2.3% in April, with fuel sales falling over 13%, the largest since the research began in 1996. Data from the British Retail Consortium also show Highstreet shopper numbers declined 12.6% compared with April 2011.


Spain's retail woes continue amid the larger Spanish banking crisis, which saw BFA announce yesterday that nearly half of its restated 2011 losses - €3.3bn - come from subsidiary Bankia.

Bankia, which has already been bailed out to the tune of €4.5bn, is to receive a further €19bn bailout, the Spanish government announced last week. The deal will see Madrid issue government-backed debt to Bankia for equity. The bank, the second largest in Spain, is said to be sitting on an estimated €40bn of bad real estate assets, compounded by the presence of the around €180bn of bad loans held by all Spanish banks.

The Spanish bond market has also reacted badly to news of worsening economic conditions, with 10-year bond yields climbing to highs of 6.5% yesterday, almost at the 7% that led to government bailouts in Ireland, Greece, and Portugal. Bonds are still sitting at 6.48% at the time of publishing.


Tom Steveson