PP won Andalucia elections. Partido Popular won the regional elections in Andalusia, but fell short of an overall majority, resulting in a coalition government of POSE and IU. PP won 50 seats in the parliament (they had 47 in the outgoing one). PSOE won 47 (previously 56) and Izquerda Unida obtained 12 seats in the new parliament against 6 previously.
PP took 8 seats in the province of Malaga, against the socialists’ 7; IU took 2. Almeria sent 7 PP deputies to the regional parliament, the socialists 4 and IU 1. In Granada Province the distribution was 6 – 6 and 1. In Cadiz PP took 7, PSOE 6 and the leftist IU, 2.
37.5 working hours in administration. The Government has extended the hours of work in the public Administration from 35 to 37.5 hours. The decision was taken based on a proposal from the Spanish Federation of Municipalities and Provinces, with the aim to save cost.
The Government has decided to cut the budgets of all Ministries by between 14% and 15% and make ‘partial reforms’ to some of the main taxes, in an attempt to contain the budget deficit to 5.3%.
Bank of Spain: Economy down – Unemployment up. The Bank of Spain believes the economy will fall further into the recession in the first quarter of this year and unemployment will increase. However, as we have not yet reached the end of the quarter, the Bank did not give specific numbers, but did confirm the downward trend.
First 1,000 million to municipalities. The Treasury has decided to pay out the first 1,000 million euros of the 2,000 million intended to pay the debts of the municipalities to their suppliers. The distribution, between 8,116 town halls, will be not be even; Madrid getting 86.5 million, whilst Castillonuevo in Navarra will have to do with 43.5 cents.
Mortgages down 41.3%. The number of mortgages granted for the purchase of dwellings fell 41.3% from the same month, of the already low, 2011. This is the 21st consecutive such monthly fall. The value of the loans was also down to a total of 5,833 million euros, 34% less than last year.
Supreme Court against El Algarrobico. The Supreme Court has ordered that half of the ill famous Hotel El Algarrobico in Carboneras (Almeria) which was built in the protected beach zone, must be demolished. The hotel, in the form of a pyramid, has 21 floors and 414 rooms.
Smartphones taken to bed. According to a resent survey, more than half the mobile phones in Spain are smartphones. 64% of their owners say they use them to access the Internet, 55% consult their mobile phone during dinner and 16% take them when they go to bed.
New pilot strike. Iberia’s pilots are going to strike on Monday’s and Friday’s from the 9th April to the 20th of July. The strikes are a protest against the establishment of a low cost carrier by the name Iberia Express.
Saving money by purchasing Chinese. The crisis is increasing sale of Chinese products to European consumers. Spaniards are saving 300 euros per year buying products from the Asian giant. Exports from China to the EU increased from 75,000 million euros in 2000, to 248,000 million last year. China’s imports of European goods also increased, from 26,000 million euros in 2000, to 113,000 million over the first ten months of 2011.
Board of Banco de Valencia in court. The board of Banco de Valencia, including the previous president of the Generalitat Valenciana, is in court accused of ‘disloyal administration’, including false accounting and manipulation of documents.
El Pais wrote the following on the new law on Open Government. “The plan for a Transparency and Good Governance Law, which the government presented on Friday, is a hopeful statement of good intentions which, however, suffers from a certain disturbing vagueness. The proposed law, which is not yet even in draft form, will demand that public administrations and public companies give full information on their accounting, including the awarding of contracts and subsidies; oblige them to answer questions asked by citizens within one month; establish a “pay scale” to control the salaries of mayors and councilors; and set stiff sanctions for officials who fail to comply with their obligations, especially those connected with the handling of public funds.
The plan is now being set before the citizens for two weeks, so they can give their views. This is a law that has long been wanting in Spain, the only major EU country that lacks rules of this type. However, only its later development will show whether the resulting law will be in line with those that exist in the rest of Europe, and in the United States.
For the moment we may note that the Spanish bill has, even in its embryonic form, certain worrying aspects. The first of these is the emphasis placed on the importance of projecting abroad a clear message on Spanish solvency regarding our country’s compliance with its financial commitments. For such an objective, a law requiring a lengthy parliamentary process is hardly necessary. It is enough if those occupying public posts controlled by the Popular Party (PP), an overwhelming majority at all levels of government in Spain, act correctly in the performance of their duties. The harsh sanctions announced for certain forms of conduct call for a number of modifications in the Penal Code, but many others can already be prosecuted in criminal law: all that is necessary is the political will to enforce the law as it now stands.
As far as can be seen, the planned law sets forth no mechanism to determine the quality of the information to be made available to the citizen. Also up in the air is the question of whether an independent public agency will be created to oversee compliance with these new obligations, or to demand simplification in the procedures that the citizen must follow to obtain the information he wants. Nor are any convincing reasons given for leaving the Royal House outside the remit of the Transparency Law.
These are serious gaps in a proposed law that is perceived as crucial to restoring the credibility of Spanish political conduct — a law which the Zapatero government toyed with, but did not venture to push through to a conclusion.
Withal, this initiative of the Rajoy government is a positive first step, which must not be allowed to shrink into an impotent dead letter during the stages that remain before its final enactment. This would constitute a poor service to Spanish democracy, and a very negative move on the part of the PP — a party gravely affected by cases of corruption and bad government, of the very sort that the law is intended to curb.”
The crisis this week:
– Last Friday, due to the delay of Rajoy in presenting his budget and the disagreement with the European Commission on the cuts needed, the country risk fell to 351 points. On 27th it was 350 points
– Shares of the companies on the Spanish stock index, IBEX, has continued its fall, to 8.121 points
– The public deficit stood at 20,668 million euros at the end of February, equivalent to 1.94% of the Gross Domestic Product
– Spain has to adjust 55,000 million this year and not the 34,000 million foreseen by the Government, declares Funcas, the Spanish saving banks think-tank
– The European Commission will send a new inspection commission to Spain at the end of April
– Main economist of City, Willem Buiter, has declared that Spain is closer than ever to default
The value of your dwelling
If you want to know approximately what your dwelling is worth, we recommend you visit:-
http://www.elmundo.es/suvivienda/sv/tasaciones/ Where the sale prices obtained in most municipalities and regions of Spain over the last month ids recorded.
Happy Easter! Next report will come on 13th of April. The mood of the Spanish. By Per Svensson
Difficult times for the Spanish population:
Almost a quarter are without a job, and many families have no one working and are surviving on public assistance. More and more are unable to meet payments to the banks for their home loans, which they acquired during the decennium of greed. The new government is increasing working hours for those with employment and slashing many social benefits. Young people (50% without a job and the hope of finding one) are being forced to emigrate.
The Spanish know who the main culprits are. The property speculators, the bankers and the socialist government who were unable to see the growing crisis. The party of Rodriguez Zapateero lost the resent general elections.
In Andalusia’s regional elections last weekend, again the socialists, who have ruled and mismanaged the southern region since democracy was introduced in the general elections of 1982, were punished. Their share of seats was reduced from 56 of the total of 109, to 47. A thundering defeat, especially as Partido Popular, increased their number of seats from 47 to 50.
But the relative winner was the leftist federation Izquerda Unida, going from 6 to 12 seats in the parliament, blocking the PP from taking over government and forcing a coalition between them and PSOE. This coalition will hold a majority of 9 seats, and as IU pushes for a radical opposition against the anti-social financial policy of the Rajoy government, the coalition may not survive long.
Rajoy has not yet presented a budget for 2012, waiting for the outcome of elections in Andalusia before revealing his hand. Now he is in a worse situation, having lost the absolute majority needed to govern but having to come up with some harsh decisions in his budget.
Spanish property prices at all time low
Amanda Payne , World
Home-owners in Spain received yet another blow when figures released by the National Statistics Institute (INE) show that house prices fell even further in the last quarter of 2011.
House prices in Spain have been in free-fall since the start of the economic crisis, with the construction industry coming to a virtual standstill. The figures show that the price of new build properties dropped by 8.5 percent in the final quarter of 2011 compared to The equivalent period in 2010. Those trying to sell their used homes are suffering even further with a drop of 13.7 percent.
Analysts are blaming the recession, unemployment and uncertainty about Spain’s economy as major factors, according to a report in El Pais. Property expert Julio Gil said:
“We have been surprised at the magnitude of this down slide. We thought it would be around 10 percent.”
With more and more people defaulting on their mortgages, the banks are being left with huge stockpiles of homes that they can’t sell, even at knock-down prices, whilst the immigrants from Northern European countries that helped create the property boom in Spain have all but disappeared. This is the worst quarterly drop since the INE started recording the statistic, with Madrid the worst affected region.
The Wall Street Journal reports that Spanish banks now hold «more than €400 billion worth of loans to the construction and real estate sector, » an amount that is equivalent to 40 percent of gross domestic product for Spain. Early figures show that the price drop is continuing in this first quarter of 2012.
The personal tragedies behind the stark figures are very sad. An action group, called ‘Stop Desahucios‘, has been formed to try to stop people being forcibly evicted from their homes. With unemployment rising at an alarming rate, many more people are finding themselves unable to pay their mortgages, and discover that the banks are less than sympathetic to their plights, despite the fact the banks themselves are overloaded with properties they can’t sell. The action group tries everything to help the families, and if that fails they literally stand in front of the homes preventing officials from getting in to evict the families, many of whom have small children.
Many foreigners with homes in Spain, whether permanent or holiday, just hand in the keys to the bank and head home leaving huge debts behind them.
What is certain is that property prices in Spain will continue to spiral downwards and it will be some years before the property market begins to recover.
Economists: Europe stuck on bailout merry-go-round. By SHAWN POGATCHNIK
Throughout the deepening debt crisis, European Union leaders sought to portray Greece as a unique case in special need of aid. They were proved wrong when Ireland and Portugal required bailouts in 2011.
They’re likely to be proved wrong again. And this time, the stakes are higher for the rest of the world.
Economists are confident that Portugal will follow Greece and seek a second bailout, and many expect Ireland to do the same. They agree that if both countries do need further funds in 2013, Europe can comfortably underwrite their cash needs.
The far greater risk to Europe’s financial system would be if Spain or Italy — with their vastly larger economies and debt loads — are forced to take a bailout. At stake would be the very survival of the euro, the currency shared by 17 countries known as the eurozone.
Spain and Italy suffer many of the same kinds of problems that inspired creditors to flee Greece, Portugal and Ireland.
Italy’s public debt level is not much better than Greece’s and worse than Portugal’s. Spain, like Ireland, faces a rising tide of business and household red ink tied to spectacular collapses in property prices since 2008 — and could find those crippling private losses transformed into public debt.
At the height of the debt crisis last winter, borrowing costs for Italy and Spain on bond markets hit highs that would have been unsustainable without a bailout.
New austerity-minded governments in Rome and Madrid have helped calm fears, but of far greater significance was the European Central Bank’s decision to provide banks more than (EURO)1 trillion ($1.3 trillion) in bargain-basement loans. This unprecedented injection spurred banks to snap up battered government debt, driving up the bonds’ value and driving Spanish and Italian borrowing costs down again.
Economists warn such relief is only temporary. The eurozone’s weakest economies must convince investors they can repay their debts without special help.
Yet the economies of Spain, Italy, Portugal and Greece are forecast to shrink this year, while Ireland alone might eke out a small gain. All are expected to cut spending and raise taxes — sucking money out of their cash-strapped economies.
«Portugal is the next great litmus test for the eurozone,» said Constantin Gurdgiev, an economist who teaches finance at Trinity College Dublin. «We know it cannot avoid a second bailout. And Portugal offers a sneak preview of what is going to happen in Spain.»
To maintain investors’ confidence in the euro, economists say Europe must build a financial «firewall» exceeding (EURO)1 trillion, a figure big enough to provide credible aid in the event that Spain and Italy are priced out of the bond markets.
Europe’s future rescue fund due to come into force in July, the European Stability Mechanism, as envisioned barely cracks (EURO)500 billion — and some (EURO)200 billion of that is already earmarked for use in the existing Greek, Irish and Portuguese bailouts. Much of what’s left could be hoovered up by a second bailout for Portugal and Ireland and a further bailout for Greece.
European finance ministers meet next week in Copenhagen to discuss plans to raise the firewall by up to another (EURO)240 billion, a move being resisted by Germany. But even a firewall claiming a headline figure of (EURO)740 billion seems too small to reassure the markets about Spain and Italy, whose government debt stands at a combined (EURO)2.6 trillion ($3.4 trillion).
«If we had a rescue umbrella over the whole eurozone for Italy and Spain, which is clearly not the case now, this would reduce the risks involved,» said Ulrike Rondorf, a Commerzbank economist in Frankfurt.
Below is a look at the European countries — other than Greece — that economists are watching closely for signs of distress.
SPAIN: The private debt nightmare
Unlike the eurozone’s other troubled economies, which have too much government debt, Spain’s core problem is the debt lurking in the books of its banks, businesses and households.
The origins of Spain’s troubles can be traced to the euro’s creation more than a decade ago. The new currency came with eurozone-wide low interest rates. Spanish banks and families binged on cheap loans, which fueled a real-estate boom that came to dominate the economy.
The global credit crunch of 2008 burst Spain’s property bubble, throwing hundreds of thousands of low-skill construction workers on to the unemployment line.
Today Spain’s jobless represent a staggering 22.9 percent of the work force, far and away the highest in the eurozone. The International Monetary Fund estimates Spain’s 2012 economic output, as measured in gross domestic product, will contract 1.7 percent, meaning even less tax and fewer jobs. Spain forecasts unemployment will average 24.3 percent this year.
Yet the EU expects Spain to cut its annual deficits, which last year reached 8.5 percent of GDP, back to the EU limit of 3 percent in 2013. This means two more years of tax rises and spending cuts that, in turn, will depress GDP further.
«There’s a real risk that the Spanish economy will get caught in a downward spiral and need a bailout,» said Simon Tilford, chief economist at the Centre for European Reform, a London-based think tank.
«Unless the EU changes strategy radically and permits Spain to rein in the extent of austerity, all they’re going to do is fuel social tension and destroy Spain’s growth potential,» Tilford said.
Sensing the danger, the new Conservative government of Prime Minister Mariano Roy this month flatly told the EU it couldn’t cut its 2012 deficit to 4.4 percent as previously pledged. It set a new target of 5.8 percent.
For now, Spain’s borrowing costs are under control and the threat of a default is receding. Its (EURO)700 billion in government debt represents less than 70 percent of GDP.
But the debt exposure of Spanish banks exceeds (EURO)2.4 trillion, representing a further 230 percent of GDP. These banks are facing massive write-offs from defaulting construction companies and home owners. This raises concerns because — as witnessed when Ireland’s government had to nationalize five banks to prevent their collapse — privately held debt can end up as public property and overwhelm the state’s ability to finance itself.
ITALY: Land of terminal debt
The level of Italy’s government debt has long appeared to defy economic gravity. In 2010, Portugal and Ireland faced huge pressure to seek a bailout as their national debts climbed toward 100 percent of GDP. Italy, even in good times, has been free to finance itself at a level much higher than that.
Italy’s debt, currently at a dizzying 120 percent of GDP — second only to Greece in Europe — is forecast to keep on rising. Economists agree that something has to give.
The European Union’s fiscal treaty, due to become law next year, binds countries to reduce their debt gradually to below 60 percent of GDP, a goal also contained in previous EU agreements. In Italy’s case, that would mean repaying close to half its current debt of (EURO)1.9 trillion ($2.5 trillion), or (EURO)16,000 per man, woman and child in the country.
The 4-month-old government of Prime Minister Mario Monti is committed to raising taxes, cutting spending, fighting tax evasion and promoting competition in many professions, from cabbies to pharmacists.
Such austerity will ramp up the pressure on Italy’s economy, forecast to contract by 1.5 percent this year, and increase its unemployment rate of 8.9 percent.
Compared to Spain, Italians have been cautious borrowers and stronger savers over the past decade. Still, their private debts exceed (EURO)2 trillion or 130 percent of GDP.
Despite their differences, Spain and Italy are put into the same risk basket by bond investors. This means a credibility crisis for one could mean bailouts for both.
Commerzbank’s Rondorf said this might be unfair on Italy, given the strengths of its banking sector, but the country’s huge debt and weak growth do merit concern.
She said the solution was for the eurozone, chiefly Germany, to finance a European Stability Mechanism firewall big enough to convince creditors that neither Spain nor Italy represented a plausible risk of default. Otherwise, she said, both countries could experience a second round of last year’s aggressive sell-off of their bonds, raising their borrowing costs to unsustainably high levels.
«If you look at each turning point in the eurozone crisis, Italian and Spanish (bond) yields always move together. I cannot imagine a scenario where Spain needs help to fund its deficits and Italy does not. They’re glued together in market dynamics,» Rondorf said.
PORTUGAL: Accelerating in reverse
While many analysts have already written off Greece, they look on Portugal as the next big fight the eurozone’s defenders must win to stop investor panic from spreading to Spain and Italy.
«The Greek economy is the equivalent of sub-Saharan Africa,» Trinity College’s Gurdgiev said. «It’s grossly underdeveloped, never had an industrial age and its agriculture is very inefficient. It’s truly in the periphery.
«But Portugal is deeply hard-wired through Spain and France into the eurozone economy. It matters,» he said.
Portuguese unemployment is more than 14 percent. The Bank of Portugal estimates the country’s GDP fell 1.6 percent last year and will drop a further 3.1 percent this year.
Portugal and its more than (EURO)160 billion national debt were bailed out in May 2011 by the EU and International Monetary Fund with a three-year credit line of (EURO)78 billion ($103 billion). Portugal’s government insists it will reassure investors enough to resume medium-term borrowing on bond markets next year.
The bailout terms commit Portugal to deep austerity cuts, trimming government deficits from 2010’s level of 9.8 percent to 3 percent by 2013. Its debt-to-GDP ratio that year is forecast to reach at least 106 percent.
And as in Spain, Portugal’s private debt figure — 248 percent of GDP — suggests a country of tapped-out credit cards and struggling mortgages that yet could fuel its own banking crisis.
Few analysts believe Portugal’s austerity push will do anything other than exacerbate its recession. They argue that Portugal should seek to renegotiate the austerity goals of its first bailout immediately and admit that, if it isn’t given more breathing room, a 2013 bailout is inevitable.
Gurdgiev said Portugal would need to reach around 4 percent growth to avoid a second bailout but, under current deficit-cutting requirements, would be extremely fortunate to reach 1 percent growth in 2013.
«Even at 1 percent growth, Portugal is still dead,» he said.
IRELAND: Exception to the rule?
That leaves Ireland as the EU’s case study of how to grow an economy in the depths of austerity.
Ireland was the first EU country to face a debt crisis when, in 2008, creditors realized just how exposed its six domestic banks were to a property market even more overheated than Spain’s.
As the U.S. credit crisis went global, the Irish government took a huge gamble by promising to guarantee to repay its banks’ foreign creditors in the event of default. The promise failed to reassure investors and, by 2010, five of the country’s six banks were effectively nationalized at a cost that destroyed Ireland’s own credit rating. Ireland’s deficit surged that year to an EU-record 32 percent of GDP and the country was forced to negotiate a (EURO)67.5 billion ($90 billion) bailout.
The property market that roared for more than a decade has left ghost estates of half-developed ruin, most of which are now state-owned «assets.»
And even though Ireland has already transferred the banks’ biggest toxic loans to government books, the country still suffers by far the worst rate of private debt in Europe: (EURO)500 billion ($650 billion), or 340 percent of GDP, in a country of barely 4.5 million.
Despite five austerity budgets since late 2008, Ireland still expects to impose at least four more. It has used the bailout funds to recapitalize the banking sector, but banks remain loath to lend into an economy where unemployment remains stubbornly over 14 percent.
The banks’ reluctance is colored by their fear that Ireland faces a new wave of home loan defaults. Bank of Ireland — the only institution to avoid nationalization — says 55 percent of the properties on its mortgage books are worth less than what customers still owe, and nationally about 10 percent of mortgage-holders are in default on their payments. Both trends are forecast to worsen this year.
Nonetheless, the Irish have won EU plaudits for slashing spending faster and harder than anyone else in the eurozone. Ireland’s GDP grew 0.7 percent in 2011 and is forecast to grow 0.5 percent this year. Yet Ireland’s most recent data, showing falls in GDP for the second half of 2011, means it’s currently back in recession for the fourth straight year.
The country has slashed its 2011 government deficit to 10 percent of GDP and expects to reach the EU-IMF goal of 3 percent by 2016.
The Irish rebound, weak as it is, has little to do with membership of the euro. Ireland is the eurozone member most dependent on trade with Britain and the United States. The Irish may be tied to Europe through its currency, but its economic cycle is Anglo-American.
The 600 U.S. multinationals that have chosen Ireland already generate more than 12 percent of Irish GDP.
«Ireland’s open economy has a real advantage with its strong American exposure, culturally and financially. But it’s also true that when America sneezes, Ireland is the first to catch a cold,» Gurdgiev said.
However Ireland’s buoyant headline GDP figure paints a misleading picture. Unusually, foreign companies operating in Ireland are allowed to transfer their profits back home without penalty.
Economists seeking a more relevant picture of Ireland’s economic health dismiss GDP — which includes the multinationals’ expatriated money — and use a different yardstick: gross national product. And Irish GNP kept dropping in 2011 and is forecast to fall further this year in line with emigration, small business closures, and a property market still searching for the bottom.
«Ireland is not a success story for austerity. Its underlying numbers are dire,» Tilford said. «If any country can dig itself out, it’s going to be Ireland, but at what cost?»