The Spanish government is creating a “Bad Bank”, or “Banco Malo”, in which to put all the toxic property assets.

The idea is to progress from the current building crisis by drawing a line under the current woes in the construction sector.

Basically, the Government of Spain issues debt and buys from Spanish banks all their bad investments, which are accumulated in a “bad bank”.

Presumably, the acquisition takes place at a significant discount relative to the actual value, so that in the long-term, taxpayers could even win when the assets are re-sold.

At Property Works, we beleive that this measure, although not without its risks, could be of some help to help the Spanish economy overcome the deflation of its recent property bubble.

Time will tell…