Spanish bankruptcies climb to record high

The ongoing slump in the property sector and the persistent weakness of the economy after Spain's worst recession in living memory have driven a record number of households and companies to seek protection from creditors.

According to figures released Monday by the National Statistics Institute (INE), the number of individuals and firms in bankruptcy proceedings climbed 5.9 percent in the first quarter of the year from a year earlier to 1,803, the highest figure since the INE began compiling the current series in 2005. The previous high was 1,762 in the second quarter of 2009, when the country was still in the throes of recession.

Spain left behind negative quarterly growth figures at the start of last year but a clear recovery has yet to take root. The Bank of Spain last week estimated GDP was up 0.2 percent in the first quarter, the same pace of growth as in the previous three months, while the INE said the ranks of the unemployed swelled to an unprecedented 4.9 million as the jobless rate hit 21.3 percent.

According to figures released yesterday by the Organization for Economic Cooperation and Development, the Spanish economy looks set to take a renewed turn for the worse. The OECD's composite leading indicators, a forward-looking measure of activity, declined to 103.13 points in March from 103.23 points the previous month.

A breakdown, however, of the INE's latest bankruptcy figures showed that it was the corporate sector whose economic woes increased the most. The number of companies under receivership climbed 8.3 percent to 1,552, while the number of individuals unable to service their debts dropped by 7 percent to 251.

Among the companies, three out of every five in bankruptcy proceedings were small, with annual turnover of undertwo million euros. The real estate sector continued to show the most problematic face of the Spanish economy, accounting for one out of every four bankruptcies. If the construction sector is included, that figure rises to one out of three. After those two sectors, industrial and commercial firms were those most feeling the pinch.

Another feature of the INE report was a jump in the number of compulsory bankruptcies, which jumped almost 20 percent. The INE also said that only 1.6 percent of bankruptcy proceedings initiated in the first quarter were accompanied by a viability program and plan for eventually repaying creditors, suggesting that many companies will eventually be wound up.