Spain could be much worse than Italy, warns report

Italy's debt disaster bad as it is, has served to draw attention away from what could be a bigger disaster - Spain, according to analysts.

They say in a few more days markets will take another look at the figures coming out of Madrid to probably see a wider field of fire.

Spanish spreads on 10 year bonds were already at 4.2 per cent yesterday.

They say what has prevented Spain from not ending up with its finance ministry under Brussels-appointed eurocrats so far, like Greece, Portugal and Ireland is its level of public sector net debt relative to GDP, which is still below Germany and the euro area average.

According to analysts by the end of this year, Italy would have the second highest level of public sector net debt, relative to GDP, in the eurozone.

However, in a report released yesterday authored by economist Jamie Dannhauser at Lombard Street Research, Spain, relative to Italy, faced a much bigger task on reduction of its fiscal deficit and getting the debt stock on a declining path.