Mike Shedlock

Spain and Ireland have economies in shambles over housing bubbles popped long ago. Damage continues to mount. Here are a pair of stories highlighting problems.

Bloomberg reports Irish Home Loans At Least 90 Days In Arrears Rise to 9.2%

Irish home loans in arrears for more than 90 days rose to 9.2 percent at the end of last year from 8.1 percent at the end of the third quarter, according to the country’s central bank.

A total of 107,708 home mortgages, or 14 percent of the total, were either 90 days in arrears or had been restructured and were performing at the end of December, the central bank said in an e-mailed statement today.

Spain Lending Shrinks at Record Pace

In the wake of Spanish real estate collapse, Spain Lending Shrinks at Record Pace as Defaults Rise

Lending fell by 3.3 percent in December from a year before, the biggest drop since Bank of Spain records started half a century ago, the regulator said on its website today. Bad loans as a proportion of total loans rose to 7.61 percent from 7.52 percent in November as borrowing considered “doubtful” jumped to 136 billion euros ($179 billion) from about 11 billion euros five years ago, before Spain’s property crash.

The prospect of a protracted recession in Spain is curbing the appetite for loans and making banks more cautious about lending. The economy may shrink 1.5 percent this year, according to central bank forecasts, while unemployment stands at 23 percent. Exane BNP Paribas predicts an economic contraction could stretch through 2013.

Banks piled up apartments and building land on their balance sheets as loans to property developers and mortgage borrowers soured during the crash. The government is talking to banks to try to reduce the number of people evicted from their homes for failing to pay their mortgages, Economy Minister Luis de Guindos said in an interview with state radio RNE late yesterday.

Deposits gathered by Spanish lenders declined 4.6 percent from a year earlier, the Bank of Spain said. Deposits increased 0.5 percent from November, the regulator said.

Misery in Spain

Various austerity measures, tax hikes, and cuts to regional governments ensure that the recession in Spain will be both long and deep.

For more on the misery in Spain, please see ...

Japan Posts Record Trade Deficit in January, 4th Consecutive Deficit Month

At some point, I suggest now, Japan needs to stop blaming the earthquake and tsunami for its collapse in exports. Furthermore, Japan is going to have difficulty financing its debt unless its turns the situation around quickly.

That may not be likely as Japan logs record trade deficit in January

Japan posted its biggest ever trade deficit in January, topping the previous record seen during the financial crisis in 2009, Ministry of Finance data showed On Monday, underlining concerns that a persistent trade gap may undermine the country's ability to finance its debt.

The trade deficit stood at 1.475 trillion yen ($18.59 billion), against median market forecast for 1.468 trillion yen, marking a fourth straight month of deficit, as weak global demand and a strong yen hurt exports and robust fuel demand boosts imports.

Exports fell 9.3 percent from a year earlier, down for a fourth straight month. That compared with a 9.5 percent drop expected by economists, following an 8.0 percent decline in the year to December.

Japan logged an annual trade deficit in 2011 for the first time in 31 years as the March disaster, a global slowdown and a strong yen dealt a blow to an export-reliant economy.

Imports Up Exports Down

Imports rose 9.8 percent from a year ago and energy prices are one of the reasons. Japan needs alternate energy sources following the shutdown of its nuclear reactors.

While rising imports may still be blamed on the tsunami, the collapse in exports has a different reason. Europe is in a major slowdown and more US consumers are happy with GM and Ford autos.

This doers not bode well for Japan.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com


Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.