Concerns over Europe's financial crisis seem to have abated in recent months, as hundreds of billions of euros have been raised to support the system if needed. Spain remains a concern for many, however, despite the assurances of the authorities and the head of the largest bank. (Remember similar assurances in the U.S. at the peak of the housing bubble.)
The condition of Spanish lenders' loan quality and the prospects for home loans are puzzling. Spain has $792 billion of home loans on lenders' books. The current default rate is only 3%, despite a national unemployment rate of 23%. Contrast that with the U.S. and Ireland. In the U.S., delinquent mortgages are 7.6% of total mortgages versus an 8.2% U.S. unemployment rate. In Ireland, the delinquency rate is 9.2% versus a 14.3 unemployment rate.
These comparisons make the reported numbers in Spain highly suspect. I don't think we've heard the last of problems in Spain--and by extension, Europe.