Analysts warn: Spain has troubles

An economic analysis note from UBS bank said Span's financial situation is of deeper concern than most investors believe. "For the time being, the market has given Spain the benefit of the doubt," the note said. "We disagree with this relatively sanguine view," the note continued. The Financial Times reported Friday UBS said Spain's deficit for the year, previously expected to come in at 6 percent of the country's gross domestic product, is now expected to come in at 6.6 percent. In addition, the Spanish government's plan to rescue its banks means the government is transferring risks from the private sector to the public sector. That step will result in "a surge of liabilities being transferred to the government balance sheet," UBS said. Spain is also vulnerable to a double-dip recession, UBS said. "Spain is more at risk than Italy," Lombard Street Research analyst Jamie Dannhauser said this week. "It is the downward spiral between private debt, fiscal consolidation, low growth and banking solvency that really threatens countries in the (eurozone) periphery," he said. This week, Spain's National Statistics Institute said the country's gross domestic product fell flat compared to the second quarter, although the economy expanded by 0.8 percent compared to the third quarter of 2010. Spain's economy is now expected to fall short of the 1.3 percent growth forecast for the year, the Financial Times said.