16th September 2008

The troubles on the financial markets around the world leads the Spanish papers today.

El Mundo headlines that the virus of a lack of confidence has extended across world markets and that the Spanish Bank has trembled following the earthquakes on Wall Street.
The paper says that Madrid lost 8.17 billion of its value in a day – the same amount as the annual defence budget, and that the Dow fell by 4.42% yesterday despite messages of support and assurance.
El Mundo says that Zapatero was meeting with the cabinet to discuss the crisis, concluding that the main risk was a lack of confidence among the population, so a policy of education is being established.
The paper has a photo of a worker looking out of the window of the Lehman Brothers offices in New York.
El País headlines that the largest bankruptcy in history has put the banking system in Wall Street in check. The paper says Lehman leaves a black hole of 430 billion € and notes that all central banks were injecting cash to avoid a bigger disaster.
ABC headlines that the financial markets plummeted following the bankruptcy of Lehman Brothers. It notes Madrid was down 4.5% taking it to levels last seen in 2006. Solbes has called for calm, but experts say there could be solvency problems in Spain, according to the paper.
Público says the world economy is on the edge. It says the largest insurance company in the world AIG has lost 60% of its value amid the rumours that it could be next, and that the European Central Bank injected 30 billion to protect European banks.

In the Spanish mortgage market these difficulties experienced around the world are manifesting themselves in a general tightening of terms and conditions. Margins above the Euribor base rate are being widened, and LTV's (loan-to-value) rates are falling. Many banks in Spain will only lend 60-70% of the purchase price or valuation of property in Spain. This can be more difficult for borrowers, but they have had to put more investment into their purchases, compared to the US or UK, so the Spanish banks are more comfortable with the element of risk. Property prices could fall an unprecedented 20% and the lenders in Spain would still be covered by equity in the property.

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