Business Over Tapas
By Lenox Napier and Andrew Brociner
A digest of this week's Spanish financial, political and social news aimed primarily at Foreign Property Owners: with Lenox Napier and Andrew Brociner. For subscriptions and other information about this site, go to businessovertapas.com - email: [email protected]
Note: Underlined words or phrases are links to the Internet. Right click and press 'Control' on your keyboard to access.
Mariano Rajoy 'walked' last week, after his appearance in front of the Senate. Such a state of affairs in any Northern European democracy would be impossible. Here, it happens. But what about the confidence and trust in Spain from abroad, and, more importantly, what about the confidence and trust in this Government from the people of Spain?
'According to data collected by the real estate portal Fotocasa.es, and analysed by the IESE business school, the average price of resale housing in Spain increased by 0.7% in July over the previous month, to stand at 1,773 euros per square metre, after 41 consecutive months of declines.
The analysts warn though that “it is too early to talk of a turnaround” and although they believe that this slight increase “gives some hope to the housing market,” they state: “Until three or four months of no declines are registered, we cannot say that the price of housing has hit bottom”'... More at Kyero.
'Spain's "bad bank" Sareb said it closed its first property portfolio deal, with investment firm H.I.G. Capital taking a 51 percent stake in a package of close to 1,000 homes around Spain, known as Project Bull. Sareb said the deal priced the portfolio at 100 million euros ($133.10 million). Sareb said in a statement it retained a 49 percent share. Sareb is an asset management company set up by the Spanish government as part of a multi-billion-euro rescue of the country's banks, to take on soured real estate assets and property related loans'... From Reuters.
An interesting take on living costs in Spain, with comparisons to UK prices: - 'People frequently enquire about living costs in Spain and the correct answer is, well, it all depends on your own chosen lifestyle and exactly where you would like to relocate to actually. Nevertheless, for your research, we've put together a listing of the expenses of some day-to-day goods that will help along with your budgeting'... From Google
'Seventeen rent-a-car companies and two allied associations must pay a fine of more than 35 million euros for acting as a cartel by fixing prices and commercial conditions especially in Catalonia, Valencia, Andalucía and the Balearic Islands. Thus the national competition Commission has ruled after an investigation opened in January of last year with Solmar being 'let off' for collaborating in the enquiry. The stiffest sanction has fallen on Goldcar which the CNC has fined 15.5 million euros. Other large fines went to Centauro Rent-a-car, with 5.6 million; Record Go Alquiler Vacacional with 4.9 million and Automotivecars Málaga with a fine of 2.9 million euros'... More at Preferente
Spain has received a recommendation from the IMF to drop wages across the board by 10% as a method for stimulating new jobs. The same agency nevertheless anticipates unemployment rates here for next year of 27% and, by 2018, of 25%. The call for wage moderation was echoed by Olli Rehn, whose full title is European Commissioner for Economic and Monetary Affairs and the Euro. Those in work in Spain are against the suggestion, those out of work, naturally, are more in favour. See Thursday's question from El Mundo – would you be in favour of a 10% drop in salaries if it helped create jobs significantly? – which this morning stood at 'for' 36% and 'against' 64%.
How are the Spanish energy companies doing? Pretty well, with profits double those of other European power companies, according to a report in El Economista. '...This means that from every 100 euros of income generated by companies in the sector, in Europe they make 2.6 euros and in Spain, 6.8 euros. But this situation is not just peculiar to 2012, but is the general trend of recent years and everything indicates that it will continue in the next. Thus, forecasts by analysts for 2013 expect to see margins of the electric companies 'Made in Spain' to stand at around 6.23% while that of the Europeans at just 3.49 percent, according to the consensus of market analysts FactSet'...
'Despite escalating public dissatisfaction with Spain’s banks over the bailout, abusive mortgage clauses, evictions and mismanagement, individual account holders are not finding their lenders in conciliatory mood. Last year 43,647 cases were lodged with the Bank of Spain’s complaints department, a 20.7 percent rise over 2011 and an historic high, according to the department’s annual report'... From El País in English. Worse still, The Bank of Spain sided 2,838 times with the customer, but only 519 cases (that's just 18%) were then resolved.
Following Mr Rajoy's appearance last Thursday in front of the Senate, 60% of Spaniards think he should resign and 72% think that he lied. More here.
'President Mariano Rajoy brazened it out last Thursday; all lies and photocopies, said the Supreme Leader. Rubalcaba (the equally inept PSOE honcho) answered that the PP have been financing themselves illegally for twenty years. All we need now is a further statement from Luis Bárcenas from his jail cell. What a mess.
The Government has apparently been reading Orwell's 1984: - 'The new Transparency Law "Made in Spain". For when the name means quite the opposite.
-Public institutions will not have to show financial information or statistics (such as the Palace, the Congress, the Senate, the Constitutional Court, the General Council of Judicial Power and the Bank of Spain).
-Certain private entities that handle public money are now outside the law (political parties, the unions, big business and so on).
-The Council of Transparency is born, an agency completely dependent on the Government'... An article called 'The new Transparency Law vetoes the access to the public of information as well as citizen participation' from the blog Que Hacen Los Diputados
'...Several weeks ago Transparency International in a survey reported 86 per cent of Spaniards believed their politicians to be corrupt. Now the latest poll from Egopa covering Andalucía suggests they are fast giving up on democracy too. If you remove democracy, what do you have left: a dictatorship?
The Egopa study carried out by a division of the University of Granada showed that the people of Andalucía take a negative view of politics. Indeed in July 74.5 per cent voiced a negative view of politicians and their parties, the highest level since the surveys began in 2007. It is also very close to the Transparency International findings for all of Spain.
The most serious problem is that the disenchantment on the part of the public with their politicians has now transferred to a disapproval of how democracy itself functions. Of those questioned 83 per cent say they had little or no satisfaction with the functioning of democracy, a level that has grown significantly since 2008 when the figures was just 35 per cent'... From David Eade's Looking to the Left
Possible new candidates and leaders (in the happy event that the current ones are eased from their seats): El Publico, quoting a survey from TNS Demoscopia, reports that supporters of the Partido Popular would consider Esperanza Aguirre as a suitable leader while PSOE supporters would like to see either Carmen Chacón, Eduardo Madina or Patxi López heading up the socialists. Neither Mariano Rajoy (PP) nor Alfredo Pérez Rubalcaba (PSOE) fared well with Rajoy at 8.5% and Rubalcaba at 14% of support.
Almería is getting left out, according to reports in local newspapers, with the half-finished AVE route suddenly mothballed until at least 2020. - 'Then there's the Almerían agriculture, frozen out of the credits which have been agreed for other Spanish regions. Furthermore (says the article), the Junta de Andalucía is embarking on an expensive tourist campaign, without Almería. The port of Almería has no railway, not even one planned. The airport is losing passengers hand over fist (a Spanish decision taken in Madrid). Then, when foreigners try and move to the Almanzora Valley to live, bringing in foreign exchange, creating jobs and bringing life to the moribund villages up there, the Junta de Andalucía waits until the cheques clear, and then declares their homes illegal and sentences them to hosepipes and generators'... From The Entertainer Online
I should own up and say The Entertainer Online is my own blog on local Almería (Mojácar) news. Lenox.
The new plan from the Ministry of the Interior regarding driving rules is draconian and, yes, insane. The four main points under debate are as follows: To increase the minimum fine for driving 'over the limit' (two or three beers will do it) to 1000 euros. To breathalyse and drug-check pedestrians who commit any offence on the road – such as littering or jaywalking, or, of course, jumping in front of a bus. To force under 18s to wear a helmet when cycling in urban areas and, lastly, to prohibit radar detectors (unless you have a GPS with a basic memory). Think of all that extra income for the State! The carrot in all of this is so silly and obscure – to allow in certain rare and controlled stretches of motorway... drivers to accelerate briefly up to 130kph! The plans are criticised in El Huff Post here.
From El País in English: 'Madrid's announcement that it will get tougher on Gibraltar elicited a response from the British government, which will "use all necessary measures to safeguard British sovereignty" over the Rock, according to a Foreign Office spokesman who talked to EL PAÍS'... The tensions, high over the past weekend, began to relax late Monday afternoon. On Tuesday evening, the British Ambassador, Giles Paxman, 'formally protested to the Madrid government over "disproportionate" checks at the border with Gibraltar at the weekend, the Foreign Office (FCO) said. Giles Paxman visited Spanish foreign secretary Gonzalo de Benito to lodge his protest and to seek an explanation over comments made by his colleague foreign minister Jose Garcia-Margallo'... From The Huff Post with video. Here a Spanish 'Gibraltar Español' propaganda video. Finally, a humorous (?) piece from the London Mirror called 'Naff Off, Juan, Gibraltar is Better British'.
The Spanish Economy
By Andrew Brociner
Growth and Demographic Dynamics, Part II
We have been looking at debt, demographics and growth recently and this week we continue with this topic.
There is a very important demographic phenomenon taking place with significant long-term consequences which many people and policymakers do not appear to be completely taking into account. The ramifications of this phenomenon cannot be overemphasized and this is why we are taking some time to look at it. With people of working age leaving the country at an accelerating rate, economic growth will suffer as a consequence. As we mentioned last time, if the labour input declines, only an increase in productivity can compensate. But productivity in Spain, as in advanced nations in general, changes slowly. This is not to say that growth cannot take place, but to achieve the same level of growth as when the population was growing will take much more effort. This is why there will be a lower long-term level of growth in the future.
Unfortunately, the way Europe has chosen to address the debt situation is serving to accelerate a process which has already begun. Spain experienced an extraordinary rise in immigration during the boom years, with its population rising from about 40 million to 46 million between 2000 and 2008. This rate of population growth can only be compared to Ireland, which also experienced a huge inflow during the boom followed by a massive decline when times went bust and the exodus is still continuing there as well.
As we can see in the case of Ireland, the immigrant population more than tripled during the boom years. With numbers ten times that size, the inflow of foreigners just about tripled in Spain as well. With almost one million people arriving in 2007 alone, this represents a huge proportion of the total population and – what is important for growth – of the work force. This immigration helped to fuel the growth which took place during those years. That the high growth rate was attributable to the increase in the working-age population is shown by Spain's productivity rate which was very low and not much more than one percent at best.
It was bad enough that in Spain, the immigrant population which came to work during the boom left in a dramatic fashion in about 2008. But now Spaniards are also leaving and the workforce is diminishing.
Recall also that it is the young who contribute most to productivity, which does not augur well for future growth potential. Similar patterns are taking place, besides in Spain, in a staggering manner in Ireland, and in Portugal and Greece as well, and, to a lesser extent, in Italy.
As we have said at the outset, the implications are quite significant and so we will continue this topic in the next issue.
From the office of Miguel Just, Tax Rises in the Valencian Community: - The new Law carries the label of "urgent measures" and its declared aim is to reduce the deficit, but the Secretary of Finance and Public Administration, Juan Carlos Moragues, despite saying that his goal is to meet the gap of 1.6%, acknowledged that he would be happy enough "to get somewhere close". The Council chaired by the President of the Region Alberto Fabra approved earlier this week a rise in various indirect taxes which, in reality, is a reduction in the payout of those liens maintained until now by the Valencian PP against all odds, despite the gravity of the effects of the crisis on the finances of the Generalitat.
It is to do with taxes for successions and donations, which will drop from 99% to 75%, and property transfer taxes, with the rate increasing from 8% to 10% in the case of real estate, from 4% to 6% for furniture and 4% to 8% in upper range vehicles and boats. Registration acts are up from 1.2% to 1.5%.
In the case of donations, the zero-rate is reduced from 420,000 to 150,000 euros and inheritance extends the exemption to residence or beneficiaries under 21 years of age. For transmissions, there are now greater reductions for 'VPO' housing, large families and persons with disabilities.
Altogether, the Council hopes to raise this year with these tax hikes somewhere between 40.9 and 43.1 million euros. By 2014, the forecast is from between 118.7 to 124.6 million euros. And in 2015 and subsequent years, the increase in revenue will be 127.7 – 133,6 million euros.
The decree was approved only two days after Valencia left the Council of Fiscal Policy with the deficit cap for this year agreed at 1.6%, a figure which, although lower than expected, will alleviate the imbalance in the accounts of the Government. Moragues, who appeared after the Council meeting together with the Vice President and spokesman, Jose Ciscar, stressed that compliance with the deficit would not jeopardize the maintenance of the level in the region's basic education, health and social welfare services.
One area where the Spanish have the upper hand (we think) is in their cuisine. A blogger called Jorge Ruiz who lives and works in London has some fun this week with Spanish tapas, as prepared by the English. He calls his article: 'Atrocities in London under the name of Spanish food' and includes pictures of wounded looking tapas, like Chorizo & Piquillo Pepper Tortilla. We are introduced to '… the 'Hello Paella' restaurant in Greenwich Market, with its namesake dish, made with boiled ingredients such as shrimp, chorizo, mussels, peppers and carrots before adding their secret ingredient: a sack of frozen Chinese three delights rice featuring its ham and everything. The responsible for such a mockery should be shot, or worse yet, forced to eat all of the paella dish'.
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