The downward correction in real house prices in the years after the construction bubble was fairly minor, at least by US standards. This has accelerated in recent months, and the renewed recession in 2012 is causing concern that the country’s largest banks, which the Bank of Spain has repeatedly said are in good shape, may after all, require further injections of new capital.

CBS Money Watch:

COMMENTARY: Spain’s economy is in the worst shape of any European nation and it still has a lot of falling left to do. Its condition is at least as bad as Greece’s was two years ago when the debt crisis began. There is one critical difference between the two though, and it is not a good one. As Spanish Prime Minister Mariano Rajoy said Thursday: “It’s not possible to rescue Spain.”

The nation is in a recession, has an unemployment rate of 23 percent, and most of its banks could be cast as extras in “The Walking Dead.” That is basically what the head of Spain’s central bank said earlier this week. “If the economy worsens more than expected, it will be necessary to continue increasing and improving capital as necessary in order to have solid entities,” Miguel Angel Fernandez Ordonez told a conference Tuesday. The most optimistic forecasts have the nation’s GDP shrinking about 1.7 percent this year.

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