It is good news to say that no Spanish bank has reported any difficulties. Financial services make up 38.3% of iShares MSCI Spain Index (EWP).
Government forecasts state that recovery will start toward end of 2009. Economists and businesspeople say the government was slow in responding to the swift economic descent into recession. They claim recovery will not begin until another two years while true pessimists believe a harsher economic environment will involve even more rises in unemployment and years of stagnation.
The pessimists state that instead of a V-shaped recession, with a swift recovery, the Spanish economy could face an L-shaped depression.
But officials rebut that compared to 1993 budget deficit of 7% of GDP, in 2007 it had surplus of 2.2% with public debt down from 68% in 1996 to just 36.2% of GDP. There is also the matter that over the past 15 years a larger amount of powerful Spanish multinationals has emerged.
The impending prolonged recession may be reflected in the growth or lack thereof in EWP, which is down 42.7% year-to-date.