The markets have concluded that the eurozone crisis has ended. Several politicians said that they, too, believed that the worst was over. Complacency is back. I recall similar utterances in the past. Whenever there is some technical progress – an umbrella, a liquidity injection, a successful debt swap – optimism returns.

If you think the European Central Bank’s policies have “bought time”, you should ask yourself: time for what? Greece’s debt situation is as unsustainable as ever; so is Portugal’s; so is the European banking sector’s and so is Spain’s. Even if the ECB were to provide unlimited cheap finance for the rest of the decade, it would not be enough.

In Spain, most of the toxic debt is held in the private sector. The debt level of the private sector, namely households and non-financial corporations, was 227.3 per cent of gross domestic product at the end of 2010, according to Eurostat. Last year’s data are not out yet, but the number will be down only a little. One of the areas where adjustment is happening is in the housing market. The best index for Spain is the new series by the National Institute of Statistics, which shows the overall index for house prices fell by 11.2 per cent last year alone, but was only down 21.7 per cent from the peak in the third quarter of 2007. We should remember the Spanish bubble was much more extreme than others, but prices have only come down by around a fifth. In the Madrid region the movements have been more vigorous, with a peak-to-trough fall of 29.5 per cent.