Supranational Government in Europe?

The facts are that:

  • Spain's construction sector dominates the national economy.

    The trouble with Spain is that its construction sector is enormous relative to the overall economy, as large as the manufacturing sector. By contrast, America's construction sector at the height of the real estate bubble was only a third the size of its manufacturing sector. In Germany, construction is just a fifth the size of manufacturing.Exhibit 1: Why Spain is in trouble - construction contribution to GDP as % of manufacturing contribution to GDP

  • Source: Eurostat.This distortion in Spain's real economy -- the massive misallocation of resources to the construction sector -- is reflected in an enormous expansion of the banking sector. Spanish banks' debt on the international bond market grew twice as fast as in the United States during the past decade, and several times as fast as in Germany.