Lights go out on Spanish roads
The lights are going out on many Spanish motorways. The privately run roads do not have enough users to maintain the lighting and the Government are busy also trying to save money on public roads. More than half the highways, which have lighting installed, are now either switched it off or have inadequate lighting.
Ten private motorways are in bankruptcy proceedings and the AP 41, linking Madrid with Toledo, is to be sold by public auction.
Labour courses for prostitution
Valencia is offered one-week courses at a cost of 100 euros, to prostitutes or those considering going into the profession, which include information on legislation, economic analysis of the profession and sexual techniques.
More than 7,000 years to pay debt
Many municipalities have accepted a plan under which the government will pay their suppliers for them. The municipalities will re-pay, with interest added. For some town halls, the period of repayment will be long. A municipality in Guadalajara has accepted the offer and will pay back over a period of 7,058 years; another in Teruel will be paying for 462 years.
Police arrest ‘Indignant’ demonstrators
Last weekend witnessed demonstrations across Spain against the Government’s economic and social cuts. In Valencia and Palma police fought with demonstrators. At the Puerta del Sol in the very centre of Madrid, 17 people were arrested for resisting the order to leave an area. The demonstrators pledged to return. They did so, but were moved on again.
Widespread corruption
The ex mayor of Casares (Juan Sanchez of the leftist federation IU) together with another 3, one of them a lawyer in Estepona, have been arrested and appeared in court in Estepona accused of urban planning corruption and money laundering. 165 accounts in 19 banks have been frozen; 19 cars and 236 properties seized.
The ex-president of the Mallorca parliament, Maria Antonia Munar, has been in court in Palma de Mallorca on a number of corruption allegations.
The leaders of the corrupt organisation ‘Gürtel’ Francisco Correa and Pablo Crespo, have appeared in the Supreme Court of Valencia, to answer charges on the irregular financiering of PP during the elections in 2007 and 2008 and the visit by the Pope to Valencia in 2006.
Less employed in tourism
Unemployment in the tourist sector increased in the first quarter of the year to 19.9%, from 16.2% in the same period last year. Of the 1,958,329 workers registered in the sector, 487,433 are currently unemployed. The number employed in the Valencia Region declined by 12.1%, Baleares 9.3%, Andalusia 6% and Catalonia 3.3%. The Canary Islands increased their tourist sector employment by 0.1%.
5 of every 100 unemployed
The ‘Observatory of the Crisis’ has found that 5 out of every 100 workers (20%) lost their job in the first quarter of 2012. Last year 40% of employees lost their jobs. Only 10% of new labour contracts are permanent, 90% are preliminary, and thus easy to discontinue.
‘The property bubble was good..’
Gonzalez Pons, Vice Secretary for Studies and Programs in PP, in an interview declared that ‘the property bubble was good’ because it made it possible for many people to get a house or a second home……
400 foreign owners face financial ruin
An organisation called Landsbanki Victims Action Group reports that 400 foreign property owners face financial ruin after joining an ‘equity release scheme’ promoted by the now defunct Landsbanki Luxembourg. The owners were given loans of 25% of the market value of their property, withthe remaining 75% being invested in an investment portfolio managed by the bank.
It is now being demanded that the property owners pay back the loans plus interest within 30 days, or have their property seized.
Industry slows down…..
The turnover in the industry fell 6,7% in March, compared with the same month of last year. The orders in the sector diminished 4,1%, according to the National Institute of Statistics.
……so do services
The service sector saw a drop in March of 5,3% compared with same month in 2011. This is the seventh consecutive month with a negative balance.
The crisis of the week:
On Monday, the Country Risk of Spain reached 478 points, the highest level since the introduction of the Euro. On Wednesday morning, it had moved up to above 500 points
The interest on 10 years public bonds reached 6.28%, as near to the intervention point as is possible. On Wednesday morning: 6.40%
The IBEX fell 2.66% on Monday, and a further 1.6 on Tuesday. The value of Bankia fell 8.74%, followed by another 4% on Tuesday and 9,77 on Wednesday morning. The share value of Santander and BBVA dropped more than 3%.
Paul Krugman, Nobel Prize winner in Economics, warned that Greece will leave the Euro in June and deposits in Spanish banks will be frozen (have you moved your money?)
Debt to the European Central Bank by banks operating in Spain reached 263,535 million euros in April, an increase of 16% over the preceding month
No new government could be formed in Greece and new elections will take place in 30 days
Minister of Finance, Luis de Guindos, asking the Euro Zone for assistance, said on Monday that the high level of the country risk is unsustainable.
Change of masks
By Per Svensson
Chinese illusionists can change their masks so fast you can hardly see it. In a fraction of a second, a laughing face suddenly becomes a sad one.
Those responsible for Spain’s desperate situation are practising the Chinese illusionists’ trick, changing the mask of a ‘property crisis’ to the one of ‘financial crisis’.
They try to make people believe the crisis in Spain was a result of a worldwide financial crisis caused by an excess of risky financial derivates manufactured in the investment divisions of the great banks in the world and sold to other financial institutions. Suddenly the mask of the property crisis is being replaced by the one of financial crisis.
No doubt, the financial acrobats in the great banks of the world had a major role in the responsibility of the crisis in many countries, but the Spanish banks bought few of the derivatives. Why would they, when they had this wonderful money making machine called ’financing of a booming Spanish property sector’?
Warnings since 2005
Since 2005 we have been warning that the market, comprised of the foreign property buyers, had its limits; that high property prices could reduce it, together with the many sales’ scandals. We warned foreign buyers that, if they borrowed more than their savings and income would permit, they would be trapped when the low interest increased, as it certainly would.
When the speculation moved into high gear, with 800,000 dwellings per year being built, we told the authorities that a dangerous property bubble was being blown up.
Our readers will remember our warnings, and the derision they were producing: Crisis, what crisis? The property market was sound and would recover from a small, temporary dip in sales!
That the property developers ignored all warnings, and even threatened to take us to court for losses due to us telling the truth. They abhorred loosing the market they thought they had cornered and their great investments in bricks and cement.
The same with the local politicians, who had lived well from approving any urbanisation plan coming before their noses, spending the income before taxes and charges reached the municipal treasury, borrowing from the local banks to make up the short falls.
When the leading newspaper El Mundo asked its readers: Do you agree that the politicians and trade unionists should leave the boards of the saving banks? 97% said they should.
110% mortgages
We remember well how the banks and ‘Cajas’ competed to finance the property bubble, paying out huge sums to anyone calling himself a developer for building projects even before the plans had been approved, even while the land was still agricultural. We remember also the offers to foreign buyers of 110% mortgages on the exaggerated valuation of dwellings yet to be built!
We also remember how the banks refused to give mortgages at fixed interest rates, assuring their clients that mortgages at floating interests were completely safe, and moreover that if the interest increased, one could always sell the property at a profit, because property prices in Spain would not go anywhere, but up and up!
And now, as a result of the property crisis that the banks did not see coming, we have a desperate banking crisis. A large number of smaller banks and saving banks have had to merge, albeit without that improving much the situation. The balances of the banks are being dragged down by a mountain of unsaleable and overvalued properties which the banks have had to repossess from bankrupt promoters or from clients with the ’safe, floating interest.’
A number of Spanish banks have gone bust over the last years, first Cajasur, then CAM, followed by CatalunyaCaixa, Unnim, Novacaixagalicia and Banco de Valencia. The government, through its agency FROB, has had to inject substantial sums.
BANKIA
Bankia was the result of amalgamating Caja Madrid (the biggest saving bank in Spain) with Bancaja, La Caja de Canarias, Caja de Avila, Caixa Laietana, Caja Segovia and Caja Rioja. Most of the participating entities were already close to drowning, dragged down by a huge number of rotten property loans, especially Bancaja, and to a lesser degree Caja de Avila.
The smart bankers concentrated the bad assets in a mother company, Banco Financiero y de Ahorros (BFA), leaving the normal banking business to be conducted through Bankia.
But the trick did not work, and wonder over all wonders, the foreigners did not come back to Spain to buy the unsold properties, the millstones on the assets of the Spanish banks!
Last week the government decided to take over BFA (the mother of all banking messes) and thereby 45% of Bankia, providing the funds ‘strictly necessary’ to clean up the group. The government believes that this operation may amount to between 7,000 and 10,000 million euro (from the pockets of tax payers). When the auditors look seriously into the value of the real estate assets, it may prove to be considerably more.
Spanish banking system bankrupt
The leading news magazine in Europe, German ‘Der Spiegel’ wrote that ‘The Bundesbank has no idea what is happening in Spanish banks….’
We can add: Do not worry, Bundesbank, neither does the Spanish government. When taking over CatalunyaCaixa, investing almost 3,000 million euros, it hoped to find private investors willing to take over. They found none, not even at 0 euros!
New investigations have found that the exposure of Spanish banks to the property sector is 320,000 million euros, of which 180,000 is ‘toxic’.
The European Commission has now demanded that Spain put its cards on the table, reporting on the situation of the Spanish banks. Grumbling, the Spanish government has accepted, forcing the banks to transfer their toxic assets to specialised companies, setting off more money as provisions for failing loans, and accepting the hiring of outside experts to verify the reports of the banks. Strong medicine, so strong that the patient may die…..
Prime Minister Rajoy pleaded last weekend with the European Union to urgently make it clear it will not let any of the union members fail and would avoid any of the countries participating in the Euro having to leave the group. Do you think he had Greece in mind ????
The Spanish banking system is bankrupt, going down as the result of their half baked directors placing all their funds on the great property gamble. The remarkable side of this tragedy, however, is that the conservative PP government, presumably defender of the free capitalist market economy, is spending enormous sums of tax money trying to save private banking entities, that have proved to be utterly incompetent, from going bankruptcy. They are now risking bankruptcy for the country.
The Spanish crisis is home made by greedy promoters, incompetent bankers and many corrupt politicians, trying now to pass the bill to the Spanish citizen under
the mask of ‘we are all victims of the international financial crisis.
Lack of new cash disappoints in Spain bank reform
By Julien Toyer and Jesús Aguado
MADRID, May 11 (Reuters) – Spain’s government tried to plug a gaping hole in the country’s banking system on Friday, but the fourth such attempt to tackle the fallout of a property crash fell short of expectations.
The centre-right government offered high-interest loans to banks on the brink in a crisis which is shaking the euro zone, and ordered an independent audit of lending across the entire banking sector, as the European Union had asked.
«This is not the definitive clean-up framework that the market is clamouring for,» said Nicholas Spiro from Spiro Sovereign Strategy. «Spanish bank restructuring is a moving target: the deeper the economic downturn, the greater the uncertainty about the size of the sector’s provisioning needs.»
Spain’s troubled banks, with more than 184 billion euros ($238 billion) in problem loans and assets after the property bubble burst four years ago, lie at the core of the euro zone debt crisis due to fears that a massive rescue could push Spanish public finances to breaking point.
The immediate market reaction to Friday’s government announcements was negative. But later the gap between yields on Spanish and German benchmark government bonds – a measure of how risky investors judge lending to Spain to be – narrowed somewhat to 450 basis points and Spanish bluechip shares moderated their fall to 0.76 percent.
Banks have until the end of the year to move their holdings of repossessed property into asset management firms for a fire sale, Economy Minister Luis de Guindos told a news conference. All banks must do this, he said.
The state will put less than 15 billion euros into the latest of the four separate bank rescues that Spain has enacted over the past three years, de Guindos estimated.
«The market was bracing itself for at least 50 billion euros in new cash. You can’t put out a number as low as 15 billion without an explanation,» said a London-based banking analyst who did not want to be named.
Spanish lenders must set aside 30 billion euros, on top of 54 billion euros ordered in February, as provisions against loans which are still performing as well as bad ones while defaults rise in an recession which has sent unemployment to 24 percent.
For banks unable to raise the necessary funds, the government will provide five-year loans, convertible into shares with an interest rate double the rate on government bonds.
The state will have to raise money on debt markets for the loans to the banks, which will be made through an instrument known as contingent convertibles, or CoCos, which carry the risk that the state ends up with ownership of still-troubled banks.
TOUCHY SUBJECT
The reform will foster credibility and build confidence in the financial sector, increase credit flow and lead to home sales at reasonable prices, said Deputy Prime Minister Soraya Saenz de Santamaria.
Rescue money for banks, crippled after a 10-year building bubble burst in 2007-2008, is a touchy subject in Spain where public spending cuts have eaten into education and health services.
A definitive clean-up of troubled banks, as well as early presentation of draft budgets for 2013 and 2014, are among reforms that could win Prime Minister Mariano Rajoy more time from the EU to hit tough deficit targets, euro zone officials told Reuters, although Spain says it is not asking for leniency.
The European Commission published new forecasts on Friday showing Madrid will have to make big additional savings this year and next to meet its promise of cutting the public deficit to 3 percent of national output in 2013. The EU executive said Spain would have deficits of 6.4 percent in 2012 and 6.3 percent next year unless policies change.
The government reiterated on Friday its aim to bring the shortfall down to 5.3 percent this year from 8.5 percent in 2011, saying that it has taken additional cost cutting measures and tax hikes not included in the commission’s outlook.
Rajoy has already reformed the banking sector once this year, in February, but his promises not to use public funds to bail out the banks made investors lose faith in the plan, which forced the banks to finance their own losses by selling assets and raising capital.
Under pressure from the International Monetary Fund and the European Central Bank, Rajoy backtracked and opened the door to public aid for the banks.
On Wednesday, the government took over Bankia SA, one of the country’s biggest banks and sources say the state could inject about 10 billion into the lender, which is heavily exposed to the property market implosion.
De Guindos said the government would announce full plans for Bankia in a few weeks.
Home prices have been falling in Spain for four years, making it hard for the banks to sell off billions of euros of property that they repossessed from bankrupt builders.
To try to stimulate the moribund home sales market, the government also announced changes to rules on rental contracts and offered a 50 percent tax break on future profit for anyone who purchases a home this year whenever they may sell it.
Associated Press:
At least 100,000 march in Spain over austerity By ALAN CLENDENNING
At least 100,000 Spaniards angered by grim economic prospects and the political handling of the international financial crisis turned out for street demonstrations in the country’s cities Saturday, marking the one-year anniversary of a movement that inspired similar pressure groups in other countries.
Tens of thousands of protesters in Madrid flooded into the central Puerta del Sol plaza in the evening and aimed to stay for three days. But authorities warned they wouldn’t allow anyone to camp out overnight, and up to 2,000 riot police were expected to be on duty.
«I’m here to defend the rights that we’re losing and for the young people who have it so tough,» 57-year-old middle school teacher Roberto Alonso said. «They’re better educated than ever. But they don’t have work. They don’t have anything. They’re behind and they’ll stay that way.»
At least 20,000 people demonstrated in Barcelona. Marches were also held in Bilbao, Malaga and Seville. Sympathizers held protests in other European cities.
The protests began May 15 last year and drew hundreds of thousands of people calling themselves the Indignant Movement. The demonstrations spread across Spain and Europe as anti-austerity sentiment grew.
Spain is in deep economic difficulty, prompting fears it may need a bailout similar to those helping Greece, Ireland and Portugal. It is in recession, and unemployment stands at almost 25 percent – the highest among the 17 countries using the euro. One in two Spaniards under the age of 25 are out of work.
Prime Minister Mariano Rajoy’s conservative government has enacted deep spending cuts to reduce the national debt, but many people blame those measures for deepening families’ financial plight.
Javier Colilla, a 27-year old university student, said he showed up to protest in Madrid because Spain’s economic situation seems like it will spiral into chaos.
«We’ve had this crisis for four years, but it feels like it’s just starting,» the fine arts major said.
Colilla lives with his parents, sees zero prospect of getting a menial job after graduation and thinks he may never be able to buy an apartment.
«Right now I’m thinking my best option will be to go to Germany where I can wash dishes, make a little money and learn German,» he said. «The prospects of getting a job in Spain are practically inexistent.»
He said the government austerity cuts targeting «health and education, but rescuing banks are wrong. They need to find other places to cut.»
A year ago, the «indignados» pitched tents and occupied town and city squares across Spain for weeks. Demonstrators clashed with police who eventually moved in to evict them.
«We are here today to celebrate one year since the … movement started and though we have achieved some things the situation is much worse now, so we need to keep fighting to get things better and that’s why we are here today,» said 40-year-old activist Ana Pancorvo, who was hooking up with one of four Madrid marches due to converge on the Puerta del Sol.
Antonio Barroso, a London-based Europe analyst for Eurasia Group, said he doubted the Spanish protests would force Rajoy’s government to change its policies.
The demonstrations «will probably have no impact on the government’s strategy,» he said in a written analysis.
Protests also took place Saturday in other European cities, and were planned in South American countries including Brazil and Chile.
In Britain, several hundred anti-capitalist protesters from the Occupy movement marched peacefully through London’s financial district, rallying outside the offices of major banking groups such as Merrill Lynch and Santander.
Hundreds also took to the streets in Brussels and Lisbon, Portugal, where the turnout was lower than last year.
The protesters called for governments to enact a host of measures, including a global tax on financial transactions and more democratic international financial bodies.
Off plan buyers, take CAM to court
FINCA PARCS ACTION GROUP v CAJA DE AHORROS DEL MEDITERRÁNEO (CAM BANK) & SPANISH DEVELOPER, CLEYTON GES SL – 4 DAY TRIAL TO COMMENCE ON MONDAY 21 MAY 2012
70 GROUP MEMBERS SUMMONED TO APPEAR IN PERSON AT THE TRIAL FOLLOWING A REQUEST TO THE COURT AT THE PRELIMINARY HEARING BY THE CO-DEFENDANT – CAM BANK.
FINCA PARCS ACTION GROUP
● No legally required Bank Guarantees for Off-Plan deposits totalling 1.5 million Euros
● Lawsuit against CAM Bank & developer Cleyton GES SL filed in February 2011
● First Instance Court Preliminary Hearing held on 12 January 2012
● Trial scheduled to last 4 days commencing on Monday 21 May 2012
OUR MISSION
To recover our Off-Plan Deposits paid in good faith to Cleyton GES SL & Caja de Ahorros del Mediterráneo (CAM Bank), which according to Spanish Law, in particular, LEY 57/68 Article 1.2, «must be deposited in a Special Account, with separation from any other funds belonging to the promoter, which may only contain funds deposited for the construction of dwellings. For the opening of these accounts or deposits the Banking institution or Savings bank (in this case CAM Bank), under its responsibility, will demand the bank guarantee to which the previous condition (Article 1.1) refers”.
THE TRIAL
A 4 day trial will commence on 21 May 2012 in the First Instance Court in Hellín following the filing in February 2011 of a 1000 page Lawsuit against property developer Cleyton GES SL and the funding bank, Caja de Ahorros del Mediterráneo. The Lawsuit was filed in order to recover the off-plan deposits paid to CAM Bank between 2005 and 2007 by FINCA PARCS ACTION GROUP members, in relation to their Sales Contracts for the Las Higuericas Finca Parcs development.
70 group members are scheduled to travel at their own expense from various parts of the UK and Ireland to attend the trial at the First Instance Court in Hellín after being summoned to appear in person as a result of a request to the Court by the Co-defendant, CAM Bank.
Group Co-ordinator, Keith Rule, says “It is our inalienable right under Spanish Law, LEY 57/1968, to have our off-plan deposits held in a Special Escrow Account and protected by way of individual Bank Guarantees. Contrary to Spanish Law the developer, Cleyton GES SL together with CAM Bank, who funded the project and accepted the off-plan deposits, failed to protect our money”.
“We have been demanding our Bank Guarantees since 2007 and even visited the CAM Bank branch to which our deposits were transferred and also the CAM Business Offices in Murcia and London, however they failed to deal with our complaint. Finally in 2009 before commencing legal action we took our complaint to the CAM CEO, Roberto Lopez Abad and CAM President – Modesto Crespo. They replied by email which stated: “If you do not have a Bank Guarantee then you have no relationship with this Entity”.
“Despite abandoning the project in 2009 neither the developer nor CAM Bank returned our money. For the past 3 years the developer has been declared on various Court Judgments as ‘whereabouts unknown’. Therefore we were forced into this lengthy, expensive and very stressful legal battle”.
Keith continues, “It has been a huge logistical exercise arranging flights, accommodation and airport transfers for the 70 group members; however with all plans finally in place we are now ready to face the developer and Bank in Court. The First Instance Court in Hellín is relatively small and will need to provide interpreters and special facilities to cope with such a large number of claimants appearing at the trial”.
BACKGROUND INFORMATION
The group members paid their Off-Plan deposits totalling 1.5 million Euros between 2005 and 2007 for properties at the Las Higuericas Finca Parcs development to CAM Bank accounts opened by the developer Cleyton GES SL.
None of the group members received the legally required Bank Guarantees in accordance with Spanish Law, LEY 57/1968.
The inland development, close to the village of Agramón, is around 15km from Hellín and 80km from Albacete and Murcia. Despite marketing the development for 5 years as a self contained sports and leisure resort, the developer Cleyton GES SL abandoned the site in May 2009 stating that the project was ‘financially unviable’. The site with 617 plots divided into 5 Phases still remains abandoned with just 50 Phase 1 properties completed, however due to site defects no property was issued with a First Occupation Licence by Hellín Town Hall.
BANCO DE ESPAÑA & CAJA DE AHORROS DEL MEDITERRÁNEO
At a press conference in September 2011, Bank of Spain Governor Miguel Ángel Fernández Ordóñez called the behaviour of the Banco CAM executives «scandalous» and said the bank was «the worst of the worst» (Lo Peor de lo Peor).
CAM was bought in 2011 by Banco Sabadell for One Euro with future losses being underwritten by the Spanish Government.
FAILURE TO ISSUE BANK GUARANTEES – HUGE PROBLEM IN SPAIN
The situation in which members of the FINCA PARCS ACTION GROUP find themselves is similar to that being experienced by many off-plan purchasers in Spain.
More than 500 victims of Off-Plan Property Bank Guarantee Abuse have so far provided detailed evidence to the Bank Guarantees In Spain Petition which can be found on the BANK GUARANTEES IN SPAIN website at: www.bankguaranteesinspain.com
There are now several instances of Provincial Court Judgments (Santander, Cantabria, Burgos, Alicante, Murcia etc.), the Supreme Court of Navarra and various First Instance Courts in which Judges have ruled on the liability of the Banks according to LEY 57/1968
Property under the counter……
What will happen to Spain now in view of the new revelations concerning the desperate situation of Bankia – the 3rd largest banking group? It is reported today that a government cash injection of €10 billion is close to being agreed to save the institution, despite all recent assurances from the Spanish government that no bail outs for banks would be considered.
There is no doubt that the property market is the cause and will be the first to be affected, despite all the attempts over the last couple of years to hide the issues causing the problems. The biggest problem of all has been the over-valuation of properties on the banks books which conceals the scale of the matter and this in turn distorts the market.
So, the property market will not be able to move until banks approach pricing in a sensible manner. Nobody will admit this is a problem as it would wreak havoc in the present system. It’s a catch 22! The banks high prices artificially underpin the general market and very few sales are generated. Reduce the prices to sell and it will bring down the whole property market. And the question arises – will properties sell at any price in Spain at the moment in view of the parlous state of the Euro and Spain’s well known reputation for corruption, erratic planning and construction laws and most of all the terrible press it has received over the past few years concerning land-grab and sub-standard buildings?
Property values are dictated by the buyers – not the sellers or their unqualified estate agents (apologies to many long established and very helpful individuals and firms – they know who I mean), and many, many properties on the market are so overpriced it would be comical if it were not so serious.
In general, the income levels in Spain only allow a small mortgage, and as mortgages are scarce (unless you buy from bank stock) it is very difficult to understand who will buy and WHY these houses are on the market with a snowball in hells chance of selling.
Some are predicting a fire sale in the market-place, similar to the situation Ireland was in some time ago, either way it looks like something has got to give soon. If by way of bail-outs, the toxic debts of some or all the banks are adopted by the state, then it may become likely that Spain would require an EU bail-out but we know that is impossible in view of the weak euro, the size of the Spanish debts and the problems in Greece and now France threatening to upset the apple-cart.
An earlier posting on this forum encouraged ex-pats to buy now and one advocated the use of Banks property websites………… several of which are only in Spanish!
It appears that mainly apartments are advertised on these sites with the odd town house.
Does this mean that no villas or fincas ever get repossessed? Surely that horrid, unfair rumor that all villas and country properties are sold to bank staff friends, officials and dealers can’t be true can it? They wouldn’t buy at knock-down prices and then resell through the agents…….would they? They might, as it appears on the internet that every man and his dog in Spain, is ‘authorized’ to sell ‘bank distressed and repossessed property’.
Things will get better in Spain, but a massive change in attitude, laws and procedures must be adopted for this to happen and attract the investors back to Spain.
Woodbug
