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What the Chief Spain Economist of BBVA called a "perfect storm" in the NY Times (1) might present very interesting investment opportunities. Not only property prices are falling at an accelerated pace, the crisis hit most industries, which range from car sales to plastic surgery. The high leverage of many Spanish companies makes them very vulnerable to the liquidity crisis. Now even Spanish banks fear – as reports El Confidencial (2) – that the generic reserves that the bank of Spain required to establish in boom years would not be sufficient to cover the default rate, which in June reached its highest level since 1999 with 1.61%. This figure does not include credit establishments, which are considered the Spanish sub-prime. Estimates (El Mundo (3)) speak of default rates of around 4% next year. So what are the investment opportunities? Apart from vulture funds, there are some creative products around which bet on Spain's economy. Banco Urquijo (4) for example issued a note that has a maturity of 5 years and pays Euribor + 200bps, but only if less than three of the ten biggest Spanish savings banks go bankrupt until maturity. As soon as the third of any of the group of ten savings banks goes bust, the investor will receive instead of cash bonds from the bankrupt savings banks. That's peer pressure.

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