IS SPAIN the new Japan?

Somewhat lost in all the increasingly hyperbolic rhetoric about Greece is the state of Spain, everybody’s favourite “what-if” country when the idea of sovereign credit contagion raises its ugly head.

Turns out Spain’s credit immune system just might be as bad as everybody thinks it is. And if any lessons can be learned from Japan, it might be even worse.

“The Spanish economy starts in a position at least as bad as that facing Japan in 1990, but it does so without the policy autonomy that Japanese policymakers were able to count on,” Jamie Dannhauser, analyst with Lombard Street Research, said in a report comparing the two countries. “Even without the policy straightjacket, Spain would be facing a difficult future. With it, it has a good chance of following in Japan’s footsteps.”