The mess in La Mancha

Part of Spains bad-debt problem is hidden within its savings banksPESSIMISTS about Spains economy are as oversupplied as flats in the concrete ghost towns on the edge of Madrid. Unemployment could hit 20% next year and common sense suggests a bad-debt problem will eventually hit the banking system. House prices were as barmy as in America and Britain, rising by almost two and half times from 2000 to the peak. And Spains cement mixers were on fire: three-quarters of a million homes were built in 2006, half the number in America, whose population is seven times larger.While debt investors have been giving Spanish government bonds an extra sniff and property firms have tottered, the banks have appeared to be Teflon-coated. The two biggest, Santander and BBVA, have beaten international competitors, partly thanks, if Spains supervisors are to be believed, to good regulation. The bail-out on March 29th of a small savings bank, Caja Castilla La Mancha, could change that perception. The governments liquidity package of up to