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Business Over Tapas (May, 2nd- 2013)

By Lenox Napier and Andrew Brociner

miércoles 22 de octubre de 2014, 11:21h

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 http://businessovertapas.blogspot.com - email: [email protected]

Note: Underlined words or phrases are links to the Internet. Right click and press 'Control' on your keyboard to access.

Business Over Tapas (May, 2nd- 2013)

Editorial:

Now things are beginning to look bad – even the top Spanish football teams are losing their international matches...

 

Housing:

A useful article at ExPatica tells us about the new Energy Performance Certificate and how it must be used for selling or renting a home:    'Understanding EPC housing regulations in Spain - The Energy Performance Certificate (EPC) is mandatory for Spanish properties that are for sale or rent from the 1st July 2013. Here's a guide to what your property requires.

The purpose of the EPC, also known in Spain as the Certificado de Eficiencia Energetica (CEE), is to ensure that homes are able to run more efficiently and in turn reduce carbon dioxide emissions. This stems from the Kyoto Agreement, which is a worldwide treaty in which the participating countries will do their best to reduce greenhouse gas emissions. Each property will be tested and scored on a scale ranging from A to G, with ‘A' being extremely efficient and ‘G' being particularly inefficient.

The outcome of the test will not require the owner to change anything (although it is encouraged) within the property. However, if changes should be made they will often allow the owner to save money in the long term'...

From Diario Sur: 'The province of Málaga leads the population growth in Spain thanks to 'residential tourism' -  according to data from the National Institute of Statistics.  Málaga grew in population by 8,510 people between January 1, 2012 and January 1 of this year. In total, Spaniards and foreigners together, the province is home to 1,649,608 people.

The reason for this increase, just when, for the first time in 15 years, the national population has fallen as a consequence of the economic crisis that plagues the country, is because 'residential tourism' in Málaga continues to rise. In particular, the foreign population of the province increased by more than two thousand people last year, which explains the increase in the numbers'...

Full of clichés, and perhaps a little bit too enthusiastic, here's a piece about the booming Murcia property market which begins:     'While it is easy to get bogged down in doom and gloom news about the Spanish property market, there are some areas that are going from strength to strength. Murcia is one of these lucky locations and figures have shown the destination is still drawing in overseas buyers. The National Institute of Statistics revealed sales of Murcian property were up by 24.1 per cent in February 2013 year-on-year, ending the month on 1,169 transactions. This is well above the national figure of 17.3 per cent'...   The story from Property Showrooms.

Unfortunately basing its story on information gleaned from 'a perusal of a selection of English ex-pat newspapers', The Guardian asks:   'Does Spain's housing crisis offer us a glimpse of the future?:  Though Spanish law is more sympathetic to tenants than the UK judiciary, it offers creative ideas for coping with housing pressures'...

The Daily Mail says that property prices will fall some more:   'Spain's collapsing residential property market is still overvalued, banking experts have warned.

Goldman Sachs analysts said that house prices in the embattled European Union economy need to fall another 10 per cent, according to a Telegraph report.

They added that that would pose fresh problems for the country’s troubled banks.

As well as claiming that Spanish property is still overvalued despite a 30 per cent collapse, the bank called for a restructuring of the country’s lenders.

The warning comes hot on the heels of dire news on the Spanish economy last Friday. The government said it expects the economy to contract by almost three times more in 2013 than it had previously forecast, forcing Madrid to extend its deficit reduction programme by a further two years.

Deputy prime minister Soraya Saenz de Santamaria said GDP would shrink by 1.3 per cent, up from its previous 0.5 per cent contraction estimate'...

From last week's Sur in English, comes this story of unpaid community fees: 'Lawyers chase up British property owners in the UK to recover their unpaid community fees - Due to the amount of unpaid community fees, property administrators have signed an agreement with a law firm in London to find the debtors.

A development of terraced houses on the beach front, with a swimming pool and spacious gardens. This sounds like a place in many people’s dreams, but for about 50 people who live in La Borboleta development in Manilva the maintenance of this residential complex is becoming a real nightmare.

So many people have failed to pay their community fees that, after already having had to cut back on the number of hours spent on maintenance work and gardening, the water supply could be cut off within a few days, says property administrator Rafael Mena.

Five British owners are responsible for the largest part of this debt, because between them they owe more than 25,000 euros. A debt recovery company in the United Kingdom is now looking for them so they can be brought before the courts'...

Perhaps it's a good time to buy a disused train station. ADIF, the Spanish railway administrator, has 423 of them for sale, starting at 65,000€.

Finance:

The Local has a report titled: EU hands Spain stark warning on debt.

'The European Commission warned on Wednesday that Spain and Slovenia pose Europe's biggest economic risks at present and must quickly tackle excessive imbalances, giving them just weeks to show they can deliver the changes needed.

Spain, where the banking system has already been bailed out, and Slovenia, favourite to become the sixth euro-zone country to need a debt rescue, had "built up excessive macroeconomic imbalances," the worst rating of 13 EU countries reviewed, the Commission said.

With more bleak data out of Spain, the Commission said the imbalances in debt, unemployment and growth were doing long-term damage, with more than 50 percent of under-25's unable to find a job.

"Our citizens are still paying the price for the unchecked development of imbalances in the past," said a Commission statement, noting especially "very high domestic and external debt levels" in Spain.

These, it said, "pose serious risks for growth and financial stability," calling on Spain to deliver a "decisive" reform programme by the end of the month for EU approval in late May'...

The Economist on Spain's problems: 'Mortgaged to the hilt':   'SPANIARDS used to complain that housing cost too much. Now they fret that, with unemployment at 26% and incomes tumbling, they can no longer afford it at any price. The Spanish are among Europe’s keenest owner-occupiers, with 83% living in their own homes. A culture of immobility means that, once a home is bought, it is expected to be for life. For Mariano Rajoy’s government, the problem of repossessions is thus a big headache.

The pre-crash bubble saw Spaniards borrow merrily, owing almost twice as much in mortgages as Italians by 2010. The total debt is falling gradually, but is still around €600 billion ($780 billion). Some 8% of mortgage-holders are now jobless. Last year 80 families a day had mortgages foreclosed, with their properties usually valued far below the purchase price. Many owe money on homes they no longer own or live in. Passions are running high. A vociferous protest movement blocks the doorways of houses due to be repossessed. It obtained 1.4m signatures on a petition demanding a retroactive law to allow American-style mortgages, where the keys (and ownership) can be dumped on the banks'...

From The Atlantic: '...Andalucía is Spain's Spain. In other words, it's an unimaginable tragedy that makes the rest of the unimaginable tragedy that is Spain look a bit less bad.

Spain is in a great depression, but its most populous autonomous region, Andalucía, is in a greater one. Unemployment hit 27.2 percent in Spain in the first quarter of 2013, but it was 36.9 percent in Andalucía. It seems like this must be a misprint, but 26.2 percent of the total workforce in Andalucía has not had a job in 6 months; 21.4 percent have not in a year; and 13.9 percent have not in two years'...

An interesting comparison with other countries and territories versus Spanish regions here throws up the fact that Andalucía has the same unemployment figures as the Gaza Strip!

'The debt of the Spanish seafood-processing group, Pescanova, which is in voluntary receivership, is at close to four billion euros in short- and long-term debt, more than double the amount declared as of September of last year.

The company, which has admitted operating a dual accounting system, has yet to publish its revised balance sheet for last year despite repeated requests to do so by the National Securities Commission (CNMV). However, the figures it has released show that debts of 1.522 billion it had previously declared were only the tip of the iceberg.

The company has now acknowledged that the parent company alone has debts of 1.850 billion euros, while its Spanish subsidiaries owe 350 million, and the foreign units that it consolidates between 650 and 700 million. The group has also issued a further 400 million euros in bonds. In addition, the company also owes money to suppliers and the public administrations'... (From El País in English)

We might want to title this one 'The ugly face of capitalism'. The Catalonian businessman who operated a 2,000m2 floor in the Bangladesh building which collapsed last week with 307 deaths and 1200 wounded said in an interview in 2009 and in reference to the low wages and poor working conditions of his employees that 'I operate a business, not a charity'. David Mayor is now being sought by the police to share his current thoughts on his Bangladesh operation, and to answer a charge of negligent homicide.  El Diario has more.

Tax:

La Información runs a piece called 'Europe reveals the Spanish fiscal chaos: high taxes, low collections' – 'The Spanish tax system is something to see. According to Eurostat, Spain is home to some of the highest tax rates in the European Union together with one of lowest collections.

How is this possible? Basically because the Spanish tax system is the closest thing to a Gruyère cheese that exists in the European tax landscape and the amount of tax loopholes offered to certain groups, whether they are private individuals or companies, is so high that massively penalise the whole tax collection.

But let's talk about figures. According to the European Statistical Office, which has just published its annual report on the European tax systems, Spain has one of the highest levels of income tax (IRPF) in the European Union.

The maximum rate that the Government applies to the payroll of Spaniards, at 52%, is surpassed only by that of Sweden (56.6%), Denmark (55.6%), Belgium (53.7%) and Portugal (53%). Of course, that if we take into account the regional section of the tax, then the citizens of Catalonia would appear second in this ranking, since their maximum rate is 56%.

In comparative terms, the Spanish maximum rate exceeds by fifteen points the average of the 27 countries in the EU and by nine points those countries that use the euro.

However, if we speak of real income, the tax burden on labour income is 33.2% and thus lies below the average of 27 and the countries of the euro.

The explanation for this can be found in the extensive inventory of deductions that exist, both at the state and regional level – from the contribution to pension plans, the purchase or rental of housing plans, home-repair, lottery discounts and so on which, just for 2013, will reduce better than 16,000 million euros from the tax collection.

Something similar happens with company tax. At first glance, the Spanish corporate tax framework is the most demanding in Europe with a legal tax rate of 30%, in the higher European range, where the average rate is 23.5% (26.5% in the countries of the euro).

Then there are the various tax loopholes, which allow the contributor to save a good handful of tax through (for example) research and development, or by reinvesting profits, contributing to an event of special public interest (such as the celebration of a sporting or cultural event) and so on, which subtract annually some 3 billion euros from the revenue to the State and which situate the actual type of tax at around 17% across the board'...

The Worldwide Asset Declaration is now made (or otherwise) and it falls to the Daily Mail (a newspaper which has a traditionally poor opinion of Britons living in foreign parts) to have the final word (Tuesday): 'People fear a Cyprus-style grab: Ex-pat exodus from Spain as deadline for Britons to declare property and savings at home arrives' – 'New Spanish tax laws affecting an estimated 200,000 British ex-pats, have sparked panic, prompting some to leave the country or hand in their residence cards at town halls before today's deadline, fearing a Cyprus-style money grab.

Opponents, including Spanish politicians, have branded the new asset declaration law discriminatory, and fear an exodus of EU residents from the fragile economies of the coastal towns'...

Tax Havens:

Gibraltar is in El País in English this week with a story titled:  'Spanish tax office starts monitoring the Rock around the clock', which begins with - 'Gibraltar has almost as many firms as citizens: around 30,000. Widely considered a tax haven until a short while ago, Gibraltar has in recent years signed agreements with around 20 countries to exchange fiscal information, as well as introduced changes to its financial system to get its name scrubbed from the blacklist.

But Spain continues to regard the British territory as an offshore centre owing to the hundreds of millions of euros that still escape its control there. Important businessmen along the Costa del Sol continue to move their businesses and part of their assets to The Rock in order to elude Spanish taxes. Which is why the tax office has decided to tighten its net around the territory'...

Politics:

From El País in English comes news of Esperanza Aguirre with an alternative way forward:    'In the face of Prime Minister Mariano Rajoy’s insistence that there is no alternative to austerity, former Madrid premier Esperanza Aguirre, who remains the leader of the regional branch of the Popular Party (PP), on Wednesday said there is another way out of the crisis, which is to impose even more spending cuts instead of tax hikes.

Aguirre made her remarks amid growing concerns among some circles within the PP about the impact of Rajoy’s policies on the public ahead of local elections. A poll carried out by Metroscopia for EL PAÍS and published on Wednesday showed that if regional elections were held in Madrid today, the result would be a hung parliament for the first time in 10 years, with the PP losing its absolute majority.

In an entry on her personal blog entitled “Yes, there is an alternative,” Aguirre, a lightning rod for the views of the liberal faction of the ruling party, and a politician who has had a number of run-ins with Rajoy, urged the government to return to the path laid out in its campaign for the November 2011 general election, in which the party won an absolute majority.

Rajoy had pledged not to increase taxes during that campaign, but subsequently hiked both corporate and personal income taxes as well as value-added tax rates in a series of austerity plans, arguing that there was no other way to reduce the public deficit. The government also took an ax to the public sector, cutting wages, freezing pensions and laying off workers, as well as imposing drastic cuts on regional health and education spending.

While agreeing that reducing public services should be a priority for the government, Aguirre, who is noted for speaking her mind in a way that often attracts headlines, argued that the “experience of the past few months has shown that these [tax] hikes have not served to increase revenues.”'...

From Esperanza Aguirre's speech in Estoril on May 1st (found on her blog): '...what politicians in power must do, unavoidably, is to guarantee law and order, to respect and to make respect for private property, and to bear in mind that the best place for money, in order to produce and innovate, is in citizen’s hands and pockets, rather than in politicians’ and bureaucrats’ hands'...

A small clutch of Spain's major building company directors have now been invited by the judge investigating the Luís Bárcenas papers to explain why their names (and large amounts of cash) appear as political donations on the 'B accounts' from the ex-treasurer for the Partido Popular. Judge Pablo Ruz has asked to see the eight of them later this month. It's a major step forward in the Bárcenas inquiry. El Huffington Post has more.

With one of those articles of comparisons, El Mundo points out that Andalucía is currently the Spanish region with the highest number of political and economic corruption cases (at 541), followed by the Valencian Community with 200. Figures from the General Council of the Judiciary (CGPJ).

It's rare to find any news or comment about the European residents in Spain, despite the gigantic amount of money transferred into this country regularly, to be spent here. Here's a negative piece in a blog called Chau Chau: 'The British residents in Spain consider themselves to be 'persecuted' by the Government's efforts to pursue fraud carried out in Spain by foreign nationals residing in our country, such as the ban on renting apartments to tourists for less than a month or the obligation to declare tax assets abroad and they have complained to the European Parliament. Some British residents have launched a campaign against the policies of President Rajoy and Tax Minister Montoro. Led by Russell Thompson, a retired diplomat who lives in the Costa Blanca, they have presented to the European Parliament a protest, asking the Chamber to review the "unjust" measures taken by the Spanish Executive'.

Another story hitting the Spanish press is the apparent low opinion of Spain enjoyed by the Germans. Here's a piece from Málaga Hoy - 'A majority of Germans consider Spain to be a corrupt, unreliable, poor, traditional country populated by lazy citizens. As reflected in a recent survey of the 'Marca España' produced by the Elcano Royal Institute, that highlights the "enormous" damage done to the image of Spain in Germany. The result of this opinion study compared to a similar survey held in Germany in 1996, shows the vertiginous fall in the reputation of Spain among the Germans in the last 20 years'...

Finally, on this topic, here's a study from the Elcano Royal Institute on the use of the image of a stricken Spanish bull in many articles or even magazine covers (particularly The Economist).

The Guardian has an article about Los Indignados - '...It is nearly two years since the indignados ("the outraged") took over public squares around the country to protest against the economy being run for the benefits of the banks and not the people. Now, from the Mortgage Victims' Platform (Plataforma de Afectados por la Hipoteca) to the Citizens' Tide – (Marea Ciudadana) a coalition of 350 organisations, from health workers to trade unions and youth groups, that have mobilised hundreds of thousands against privatisation and austerity – more people are making the journey from private sadness to public indignation'...       ...and yesterday was May Day with protests in all Spain's major cities.

No doubt taken slightly out of context, but a female Catalonian politician was explaining to a journalist late last week during a bank-sponsored tennis event about how 'you need both rich and trendy people around to buy stuff and keep the economy going'. (more, together with video, at a rather indignant left-wing Publico.es)

Essay:

A writer called Miguel Torrija asks in his blog 'And if High Unemployment was the Whole Point?' -   'In that case, it would be understandable to witness the pats on the back that the Spanish Executive doesn't cease to receive from the higher economic spheres. In just one year, the Government of Rajoy has managed to bring more than one million Spaniards into the abyss of unemployment, reaching the unbearable number of 6,202,700 unemployed. We have gone from an alarming rate of 20% of people below the threshold of poverty to an unsustainable 30%. Quite an achievement in so short a time.

They say that we have already hit rock bottom. I think what they mean by that is that we will soon be ready to assume a change of status, a new change. We have gone, in recent decades, from being citizens to being consumers, from consumers to customers and from customers to becoming subjects, like something out of an old French drama with Marie Antoinette passing by in her coach The final metamorphosis in this evolutionary experience will be reached soon as we pass from being subjects to becoming slaves.

The level of desperation – docile despair, but despair nevertheless – that has been reached by a large part of the 'working classes' (or rather, 'not-working': the long-term unemployed, the young people who at 25 years old have still not managed to obtain their first job and those who are 45 years or older who are still being told not that they will soon return to work...) will oblige them to accept any condition in exchange for getting back to work.

Already there is talk of establishing contracts "without social charges", i.e., jobs that are not listed on the social security register, that are not counted towards a pension, that do not guarantee health coverage... These mini-jobs will appear as a panacea next to our current scarcity of proper employment.                   

The Welfare State is in the spotlight, as it begins to be clear that it has been the target of this crisis. Europe created it after an enormous effort and has shown that it was possible to sustain it. But now its spread is seen as a threat. What would happen if exploited workers around the world knew that it were possible to have a social model such as European workers enjoy? If those workers started to claim a similar model, it would be a catastrophe for the income of multinationals who base their profits on the exploitation of third world labour. That is why, with the promise of reducing the deficit, neo-liberal policies are to reduce social rights to bring everything back to the starting point.

Perhaps it is true that we are already at the rock bottom and that we are reaching the turning point of the crisis. But if we carry on like this, it will not be the lowest point on the curve, but the launching point for a new slide south where we shall sink the mud no more social protection and rampant inequality. We are now at the turning point and we have to decide between thanking those who would turn us into slaves or rebel, and to regain our rights, our equality and our dignity'.

Various:

From The Round Town News comes an interesting article about the European Health Card: STRICT RULES over accessing Spanish healthcare for British residents and visitors are being clearly explained in key question and answer sessions.

The new European Health Insurance Card (EHIC) Outreach Campaign is a unique partnership between the Department of Health team based at the British Consulate in Alicante and Spanish Colleagues at the Valencia Health authority. And the campaign is aimed at outlining the correct use of EHIC for visitors – while encouraging those who live mainly in Spain to register for healthcare in other ways to insure they are fully protected'...

 

The Spanish Economy

By Andrew Brociner

No Surprises

Some statistics came out last week and all of them are pretty bad. We have done enough analysis now that the new statistics should come as no surprise, and we can, in fact, sit back and watch them roll in and place them into context. This week we’re going to do just that and so let’s take a look at them in turn.

The IMF lowered its forecast for Spanish growth to a dismal -1,6% (from -1,5%) for 2013. This follows on growth of -1,4% for 2012, so the situation went from bad to worse and is accumulating. Note that the Spanish government followed suit, lowering its own forecast from -0,5% to -1%. Yes, that’s right, they actually had the nerve to announce -0,5% growth for 2013, which you can choose to interpret as either being grossly incompetent at forecasting or preferring to practise deception. This downward revision comes as no surprise to us since we examined each component of GDP and found there was very little there: consumption has a steep downward trend as Spaniards are out of work and have very little to spend; investment exhibits a downward slump as businesses lack the confidence about the future to take on any long-term commitments; government spending has been reduced due to the austerity measures and net exports have increased, but, this is, in part, due to a reduction in imports –  along with the reduction in consumption in general –  and, in part, due to a rise in exports, but as mentioned, not enough at present to pull the whole train along.

The IMF’s forecast of Spain’s debt-to-GDP is now 92% for 2013, 98% for 2014 and then to keep on growing and reach 111% in 2018. Well, well. As we have seen, the austerity measures lead to a decrease in growth and as the denominator of that ratio is growth, austerity will raise debt-to-GDP. We have seen that in every single country that has adopted these measures – Greece, Portugal, Ireland, Spain and Italy – growth has fallen and the debt has increased. In fact, as we have also seen, the stronger the austerity measures adopted, the lower the growth and the higher the debt-to-GDP. It comes as no surprise, therefore, that debt keeps on growing.

Spain’s Instituto Nacional de Estadística has reported that unemployment has increased to 27,16% and affects 6,202,700 people. This number is staggering, especially considering that youth unemployment is now at a massive 56%. Here too, this, sadly, is a continuation of the scenario we have been seeing, with downward consumption and declining growth.

Unemployment will probably peak sometime this year, but, unfortunately, for the wrong reasons: not because of a healthy growth picture or because government policies are oriented towards the labour market deficiencies, but rather because people – foreigners and Spaniards alike –  are leaving Spain, and as many of these people are young, they are taking away much of Spanish productivity along with them. As the IMF forecast for Spanish unemployment in 2014 is 26,5%, just slightly lower than for 2013, it is clear that, as we have been seeing, the reduction in unemployment will be painfully slow and implies that large portions of the population, especially among the young, will be trapped in this situation for much time to come.

Unfortunately, these statistics only confirm what we have been saying about the Spanish economy. There is nothing to drive growth, and external demand is too weak to compensate for the lack of internal demand. Unemployment will remain very high for years to come and will only come down only slowly. Spain has to make more of an effort to make its labour market more flexible and to increase its competitiveness. The debt is high and continuously growing. The austerity measures have only added to this situation and, here too, it will be a long time before we can talk of reducing debt. It is a grim picture which, for the moment, is only getting worse.

Finally:

Following in the wheels of Amsterdam, Copenhagen and Utrecht, Seville has been outed as the fourth most bicycle-friendly city in Europe by the Copenhagenize Index 2013. Barcelona also makes the World Top 20, coming in at Nº 18. The Association speaks of Seville as a 'new kid' in the modern urban use of the bicycle, saying that, thanks 'to a visionary political will', the use of the bike has gone from 0.5% of the mobile population in 2006 to 7% today. This growth is thanks to a 'fast, intense and positive transformation' of the city that began with the construction of 80 kilometres of cycleway in only one year and was followed by the establishment of the public Sevici bicycle-system.        More at Diario de Sevilla.

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