The pain in Spain stays mainly away from the plain

From Reuters via a decidedly dubious post on FT alphaville (which signally fails the ask if the large European retail banks are hiding all the pain in accrual accounted books): the largest Spanish corporate default ever happened yesterday.

Spanish property company Martinsa Fadesa said it would file for administration after it failed to raise funds and meet debt payments, marking one of the biggest corporate failures in the country's history...

The company added in a statement that it would focus on selling assets to repay creditors, which include Caja Madrid, La Caixa, Ahorro Corporacion and Morgan Stanley.

Spain is a classical bursting bubble market with a way further to fall. Speculative building has been rampant, particularly on the coasts, and development controls were lax. Now prices are falling and controls are tightening the construction companies and their financiers are feeling a lot of pain. If Caja wasn't the Spanish version of a GSE, it might well be in trouble. In fact the parallels between the Spanish Caja and Freddie & Fannie are a little too obvious for comfort...