In less than a decade, the number of Spaniards in debt has doubled, a rate even greater than the UK’s, according to an annual study by Caixa Catalunya. The EU considers the situation grave enough to have declared Spain’s current path as “unsustainable”, and ranks Spain in the top five countries of personal debt. Although EU economists acknowledge that the problem is generally restricted to small sectors of society, they warn that the knock-on effects could be catastrophic for the rest of the Spanish economy.
“Opinions amongst economists, including those at the Central Bank, are divided, but Spanish households are increasingly fragile economically,” Catalan economist Rafael Boix told Metropolitan. “But until there is some sort of economic collapse, people will carry on regardless.”
One thing most observers agree on is that Spaniards have not chosen to save their money in banks. “The financial situation of households has become more and more risky because any savings people have is tied up in property,” said Josep Oliver-Alonso, an economist in the Barcelona Autonomous University’s department of Applied Economics
“People are investing more in property since it offers such a good return compared to interest rates on savings which have declined. In Spain—and in Catalunya—the trend is exactly the same, which is that the amount of household debt has doubled between 1994 and 2005. The signs are that we are heading towards the same levels of debt that you see in countries such as Britain and the USA.”
Whilst application for a credit card involves at least a trip to the bank in Spain, anyone who has lived in the UK can testify to the amount of credit-card offers that come through the post on a regular basis. Easier access to credit has seen more and more people using credit cards or loans to supplement a lifestyle they really cannot afford in the UK. Debt on multiple credit cards can quickly overwhelm people's resources. There’s also evidence of serial debt consolidation with homeowners re-mortgaging their property to the hilt.
“This is an important difference between the debt problem in the UK and Spain,” said Rafael Boix. “Mediterranean countries have a strong tradition of home-ownership, and whilst the problem in the UK is more credit-card consumer spending, the problem here is due to property investment.”
Latest Comments