If we take a step back, away from the heat, and have a look at the bigger picture for Europe, then the real problem and threat for Europe lies within Europe, namely Spain. Spain is for Europe what Florida is for the US: one gigantic foreclosure mess! And guess what, prices of Spanish homes are still dropping, just like oversees.

The problem with the Government’s data is it tends to understate price falls, which have been more like 30pc or more (peak-to-present) in coastal regions like the Costa Blanca and the Costa del sol.”

We wouldn’t be surprised if a second leg down happens in Spanish property prices. The latest unemployment figures from the peripheral country are devastating. Last month (February ’11) the number of unemployed citizens in Spain stood at 4.3 million, more than 20 percent of the working class and above 40 percent among the youngster!

And we expect the unemployment numbers won’t come down, on the contrary. So we guess there won’t be a rush on Spanish property any time soon, but only more pain to come for the housing sector in Spain. And we all know by now what that means for the already insolvent Spanish banking sector…

So when the dust settles in the Middle East, the financial hit men will return blowing up those European CDS premiums to unprecedented levels, and the time for ‘tricky’ Trichet to fire his bazooka at Spain will once again be upon us: QE3 EU-style!

Property quality in Spain is some of the worst you've ever seen. Generally low quality builds, crappy materials, amateurish finnishing. 20% drop from peak prices won't make these garbage houses bargains.

Most of my extended family is in Spain. I spent several months there in the past year. The situation is far worse than here. The entire country was turned into Florida or Vegas. The ghost towns are everywhere. We are talking about a huge economy entirely driven by speculative investment. They've got 20% acknowledged unemployment that is actually closer to 25%. They thought the bubble would never burst and began paying themselves irrationally. Air traffic controllers in Spain averaged $300,000 euros a year. Spanish real estate NEEDS to drop not just another 20%, but 50-60% to get back in line with what people can afford. That will take years and over the course of those years, the ghost towns will sit empty and decay and be predated upon so much that they will be worthless. The losses from this kind of bubble always take years to work their way through the system. For Spain, it will mean collapse and 10-15 years of stagnation.

Iniciado por paquidermo

The snow in Spain falls mainly on the plain.

Property quality in Spain is some of the worst you've ever seen. Generally low quality builds, crappy materials, amateurish finnishing. 20% drop from peak prices won't make these garbage houses bargains.