As Spanish 10Y bond spreads break back above 350bps over Bunds for the first time in three weeks (having jumped over 10% so far this year alone), it is clear that its not all sangria and siestas in the land of the bull...and matador. With unemployment at record levels (youth unemployment at over 40%), industrial production back at record lows - along with retail sales, and a still collapsing housing and construction space, we agree with JPMorgan, in their 2012 Outlook, that there is no doubt that there are large budget deficit and current account deficit adjustments still to come. The pain in Spain is plain for all to see in the following six charts and as Michael Cembalest notes: "If there are socioeconomic limits to how much austerity a country can take in order to remain in a currency union, we are likely to find out in Spain."
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Source: JPMorgan, (c73) Markit, J.P. Morgan Securities LLC, November 2011, (c74) Eurostat, October 2011, (c75) Instituto Nacional de EstadÃstica, Haver Analytics, October 2011 (c76) Oficemen, October 2011, (c77) Eurostat, J.P. Morgan Securities LLC, October 2011, (c78) Instituto Nacional de Estadistica, Haver Analytics, Q3 2011