Global Economic News
Japanese Political Scientist on the Crash
Aug. 24 (EIRNS)Dr. Takeshi Sasaki, political scientist and former president of Tokyo University, referred to the gravity of the financial crisis in his article in Yomiuri Shimbun today. Citing the present economic turmoil and its effect on international politics, as exemplified in discussions at the recent meeting of the G-8 in Japan, he commented dryly: "Given our experience of a series of credit crises in Japan about 10 years ago, we can say this kind of crisis is so extremely burdensome that no early solution can be conceivable. Some experts claim that the world is experiencing a crisis of unprecedented scale. This is not necessarily an exaggeration."
Spanish Current Account Deficit Hits 10.7% of GDP
Aug. 30 (EIRNS)"Spain is the most unbalanced among the large economies," writes the Spanish daily El País, commenting on new data showing that the country's foreign trade deficit has grown to 10.7% of GDP. Among the OECD's 30 industrialized countries, only Ireland shows a worse performance. Spanish imbalances are due mainly to the slowdown of the German and French economies, which are the main export markets for Madrid.
Santander's Mortgage-Backed Securities Are Downgraded
Aug. 29 (EIRNS)A domino piece fell yesterday in the Spanish financial bubble, when Fitch downgraded a chunk of mortgage-backed securities owned by Banco Santander. Santander is allied to Royal Bank of Scotland, so that a Santander crisis has a direct effect on the British banking system, in addition to the Spanish system. Spanish banks have been kept afloat by the European Central Bank (ECB), which has rolled over their debt at the pace of Eu50 billion ($73.2 billion) monthly loans, accepting mortgage-backed securities as collateral.
Over the last year, after the interbank market froze, Spanish banks have been issuing new securities only for the purpose of getting ECB money. Spanish banks get 11% of the entire ECB monthly injections. Now those securities are being downgraded, and the Spanish banking system is headed for a dead-end. The Fitch downgrading concerns six sets of securities worth Eu4.06 billion. Fitch downgraded the lower tier A, BBB, and BB tranches. The upper levels remain stable. Apparently, the security was issued in October 2007. According to Fitch, the loss provisions on the debt suggest a write-off of 35% against book value.
The high levels of default hitting those mortgages concentrate on foreign owners. Fitch said it suspected that British and other North European owners of second homes in Spain were throwing in the towel.