SPANISH BANKS currently have some astronomical €325 billion ($456 billion) in non-performing loans by real-estate companies (link in Spanish). That's about a third of Spain's GDP, and the companies are alerting they're not going to be able to repay that.

So far, banks have been able to keep a brave face because the law allows them to buy back the property at face value when the loans become delinquent, thus avoiding the lender's bankruptcy (as the link sidebar says, 25% of all real-estate deals in the country are now of that kind) and without having to write down any loss in value to make their balance sheet reflect the real value (as you know, prices have skydived). But that means they have lots of skeletons in the closet. They're not going to be able to do it much longer, and when that happens it's gonna get ugly. Very ugly.

(Previously at Barcepundit, sadly confirmed by this: here, here, here, and here)