Spain′s mortgage crisis lingers on as bad loans soar | Business| Economy and finance news from a German perspective | DW | 18.06.2013
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Spain's mortgage crisis lingers on as bad loans soar

Spain's real estate crisis continues to rankle as bad bank loans skyrocketed in April. Although institutions are dumping their toxic assets into bad banks, defaulting customers might force them into higher bailout debt.

The total from dubious loans held by Spanish banks rose to 167.1 billion euros ($222.9 billion) in April from 162.3 billion euros in March, according to figures released by the Bank of Spain on Tuesday.

Compared with the volume of all credits, the bad loan ratio rose from 10.47 percent to 10.87 percent within those two months, according to the central bank.

According to Bank of Spain data, nonperforming loans reached a record high of 11.23 percent of all credits in November 2012, and then fell in December for the first time in 17 months, just to rise again in January.

This was the result of the country's banks offloading of troubled assets to Sareb, which is a mostly state-funded bad bank charged with ridding the national banking sector of toxic assets.

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Spanish banks are struggling ever since the collapse of a decade-long real estate bubble which burst in 2008 in the global financial crisis. In 2012, the European Union agreed on 100-billion-euro banking rescue plan for Spain from which the country's banks have so far withdrawn funding to the tune of 41.3 billion euros.

As the Spanish banking crisis lingers on, the government in Madrid on Tuesday was forced to pay substantially higher interests on its debt.

Short-term borrowing costs for six-month Treasury Bills had risen to 0.8 percent from 0.4 percent at the last similar auction held in May, the government announced. For 12-month bills, investors had demanded an average yield of 1.3 percent - up from 0.9 percent in May.

Spain has seen its borrowing costs drop since the European Central Bank announced last September that it would help debt-stricken eurozone countries by buying unlimited amounts of their debt in secondary markets, thus providing urgently needed state funding.

In recent weeks, however, the yields of Spanish bonds have edged up again reflecting renewed investor concern about the country's ability to repay its debt amid a worsening recession and the ongoing crisis in the banking sector.

uhe/mkg (AFP, dpa)

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