Editorial:
Today Thursday is Europe Day. Something which we think is worth celebrating, as we shall at Business over Tapas, with a brave and hopeful smile. Those of us who live abroad know that small and petty nationalisms don't work and aren't worthy of any mature consideration. There are twenty seven countries in Europe and several more wish to join. Just one is seriously chewing over the idea of leaving: The United Kingdom (with or without Scotland). Any plan to push a referendum onto the British voters about staying in the European Union (Britons living abroad will in many cases not be allowed to vote) will be disastrous for Europe, for the UK and above all, for those of us who are part of the British diaspora. The Huffington Post has a report here on some of those personalities, such as Nigel Farage, Nigel Lawson and Rupert Murdoch, who would support a motion to leave the EU.
Housing:
From The Local comes 'Spain's laws may deter ex-pat property buyers': 'Foreign buyers are helping keep Spain’s property market afloat, but new rules including a crackdown on illegal home rentals and a legal requirement to declare overseas assets could hurt the market in years to come.
Foreign buyers continued to take a big bite of Spain's property cherry in 2012 with 26,871 homes — or 8.12 percent of all properties sales — going to overseas investors in the 12-month period.
Brits topped the list of foreign property buyers last year, snapping up 4,469 homes in Spain, figures from Spain's College of Property Registrars reveal.
Meanwhile, the big movers in Spain's property market were the Russians who snapped up 2,585 Spanish homes in 2012, 48.6 percent up a year earlier.
That saw them move into third place behind the French (2,675 homes) but ahead of the Germans (2,127 homes).
“It’s clear that foreign buyers are increasingly important to the Spanish housing market and economy,” property analyst and consultant Mark Stucklin told The Local.
But while Stucklin hailed the 2012 results as positive, he queried why the Spanish government appears "so keen" on discouraging these buyers... (See Mark Stucklin's article 'Foreign buyers kept the wheels on the Spanish jalopy in 2012' here)
A recent property-round-up article from Fly2Let begins with: 'There seems no let up to the Spanish property crisis. With deputy prime minister Soraya Saenz de Santamaria warning that the country’s economy will shrink by more than predicted this year - 1.3 per cent - and that the fiscal deficit will rise - to 6.3 per cent of gross domestic product – Goldman Sachs has pitched in by saying Spanish house prices need to fall by a further 10 per cent.
They have already gone down by an average 30 per cent since the banking crisis began, throwing an estimated 500,000 Spanish home-owners into negative equity.
Goldman said its analysis was based on the relation between rental yields and borrowing costs.
Meanwhile British ex-pats living in Spain have had to comply with a new law requiring residents to declare overseas assets worth over €50,000, including bank accounts and other financial information. Failure to make an accurate declaration can lead to a hefty fine'...
Following from a story in Business over Tapas a couple of weeks ago about whole villages for sale in Spain, here's a BBC video report about an Englishman who bought an entire hamlet in Galicia for 45,000€.
Finance:
...'Rajoy, of the center-right People's Party, is under less pressure than last year after Brussels gave him more time to plug a budget gap. Borrowing costs have dropped to 2-1/2-year lows thanks to a European Central Bank pledge to backstop struggling euro zone countries and to cash from investors flush after an increase in global money supply.
He defended his policies before Parliament on Wednesday, saying he had chased off the specter of an international rescue for Spain and that he would continue making tough reforms to modernize the economy'... (From Reuters on Wednesday)
News from Portugal has sent a jug of cold water over Spain: 30,000 public sector workers will be fired as President Pedro Passos Coelho expects 'to save' 4,800 million euros by 2015. His government will cut pensions and will increase the retirement age by a year to comply with the 'troika'. Funcionarios will have to work an extra five hours more a week: an increase from 35 to 40h. (More at Público.es)
'There is a reason why Spain's "Bad Bank" has that name (its official designation is far more jovial: SAREB) - because it is full to the brim with "assets", mostly residential loans, that no longer generate cash flows, and which are capitalized increasingly more with taxpayer cash. How much assets? At last check some €50.7 billion. The problem is that since real, documented cash flows from the real economy, not the fake, made up one reflected by various stock indices, are what funds (or don't as the case may be) said assets, the liabilities will soon be in need of more equity infusions. Specifically, there is a total of €50.7 billion in liabilities consisting of senior debt, and an equity capital buffer of €4.8 billion. Alas, this liquidity buffer will hardly be enough as more and more loans are defaulted on and turn "non-pay" (i.e., the rise of NPLs drowns out the "reserve"), while cash has to be paid out - constantly - to satisfy the liabilities cash interest demands'... (More at Zero Hedge)
From Marca España comes an introduction to 'Spain, a competitive economy': 'Despite the difficulties of the present times, Spain is a competitive economy which, based on its export sector, falling labour costs and tax consolidation, will return to a path of rapid growth and convergence with economies with higher per capita income'...
'Spain's greatest entrepreneurs say they are fed up with the national press. They complain privately that the media magnifies the problems of Spain, while it barely mentions the positive news, all of which enormously complicates the promotion of the solvency of the country to foreign investors.
'It is very hard to encourage confidence in Spain to international investors with so much bad press.' says the President of a large Ibex company to El Confidencial Digital.
And the anger is shared by other senior business leaders, most of them belonging to the 'Consejo Empresarial para la Competitividad' (CEC), a lobbying group which brings together the seventeen leading companies of the country led by businessman César Alierta: They say in private that they 'stand alone' in the defence of the Spanish economy when they travel abroad.
Specifically, these VIP entrepreneurs are now immersed in a 'road show' through the World's 25 most important financial capitals (New York, London, Berlin, Tokyo etc...) to introduce and promote the many strengths of Spain as a country to invest'...
The underground or 'black' economy in Spain will reach an estimated 195.6 billion euros in 2013, which is 18.6 of the GNP, according to Visa and reported in El Mundo. The main areas where taxable receipts are not exchanged is in construction, industry, commerce, restaurants and real estate. Bureaucracy and complicated taxing processes are given as two of the culprits for Spain's relatively high position in the European underground league, just behind Germany, Italy, France and the UK in fifth position although the head of Visa for Spain and Portugal would like to see the end of those 500 euro notes which make pay-offs so easy (and no doubt reduce the use of plastic money and its paper trail).
'The Caja Rural de Granada presented its annual study of the economic situation last Friday, highlighting that Andalucía is suffering a deeper recession that the rest of the country, and thus it will take longer to come out of the crisis and, when employment is created, this will be more precarious and at the expense of social welfare.
Miguel González, the author of the report, stressed that this year will be "very similar" to a "very black" 2012.
González opposed optimistic messages that regularly announce a recovery of growth because they create "uneasiness among citizens", and pointed out that Andalucía and the country are in "a deep depression which will take several years to leave".
The Study highlights the sharp drop in the Andalucian industrial production index at 20.6%, compared with the national fall of 3.6%, which illustrates the difficulties that will be faced by Andalucía in reviving her markets.
"If the Spanish economy does not have any trace of optimism, what can be said in the case of our region? Andalucía cannot get out of the crisis by herself. We are a wagon and not a locomotive and, worse still, we are parked in the sidings in a train station that's been closed for lack of custom", he said'... Article from Ideal.
'Telefonica SA (TEF), Europe’s most indebted telephone company, is reviving a plan to sell its Madrid headquarters five years after failing to find a buyer for the buildings, according to five people familiar with the matter.
The complex, known as Distrito Telefonica and opened at the height of Spain’s property boom in 2008, is valued at about 1 billion euros ($1.3 billion), said one of the people, asking not to be identified because the deliberations are private. Telefonica may lease back as much as 90 percent of the project’s space, including its iconic glass towers, another person said'... (from Bloomberg Businessweek)
Tax Havens:
'...The scheme that Apple cooked up last week to finance a $55 billion stock buyback for its shareholders was orchestrated to avoid paying $9.2 billion in taxes, Bloomberg reported Friday... ...Apple was able to do this because of techniques it uses to keep its U.S.-made profits offshore, and because of provision in the tax code that allows it to deduct interest it pays on money it borrows. That’s a double whammy: It does not pay the taxes it should on the money it earns from all of those i-whatevers we buy and it gets money from the government when it borrows money from a big bank rather than using the money from its overseas stockpile'... (From 'Apple Dodges Enough Taxes to Cover Much of the Sequester' at Truthout)
(Commenting on Apple's activities in America, El Confidencial notes in an article titled 'Apple doesn't pay taxes in Spain...or in the USA' that '...In Spain, it has been alleged that Apple declares fictitious losses to register profits in Ireland and thus neutralize the effects of their huge sales in our country, exceeding 2 billion euros. Now, however, we have heard that our country is not alone in its complaints')...
If Apple is being used here as an example of big business paying as little tax as possible (and therefore contributing to the well-being of society, this is because we have always thought kindly of Apple as the talented underdog, beaten into second place by Microsoft.
Politics:
'Public support for Spain's ruling centre-right party has slipped following a high-level corruption scandal and ongoing recession, and Spaniards remain pessimistic about the political and economic outlook, a poll showed on Friday. Half of Spaniards consider the political situation to be "very bad" and ranked corruption as Spain's number two problem behind unemployment, according to a survey by the state-owned Sociological Investigations Centre (CIS), carried out in April. A record high unemployment rate of 27 percent, political corruption allegations and austerity measures have eroded support for the two main political parties, the ruling People's Party (PP) and socialist PSOE, the survey of 2,482 people showed. Prime Minister Mariano Rajoy's PP would take just 34 percent of the votes if a general election were called now, compared to 35 percent in January and the 44.6 percent the party received in the election in November 2011'... From Reuters
IU's Proposals: 'Raise the minimum wage, currently at 645,30 euros per month, to 1,100€. That minimum pensions to climb up to that same amount to encourage consumption. Prevent profitable companies from declaring bankruptcy. Use 50,000 flats of the SAREB 'Bad Bank' for social use with a maximum rent 300 of euros a month. Use 30 billion euros of nationalized banks to get credit to small businesses and autónomos. And all "Hecho en España", a trade mark that would try to emulate the success of other countries in the labelling. (Such proposals, say the IU, would help create over three million jobs in the next three years, according to Público.es).
These are some of the economic measures that the coordinator of the Izquierda Unida, Cayo Lara, presented at a meeting with the President of the Government, which was held this Wednesday. (From El Huffington Post).
Like Alfredo Pérez Rubalcaba's plan before – to solve Spain's crisis by turning around the tax system and to allow credits to stimulate the economy – Mariano Rajoy says that Spain would be forced to follow a course of asking for a bailout plan from Europe. (more at Nueva Tribuna).
Despite news in the Business over Tapas a few weeks back about phasing out procurators in Spain, a piece in El Mundo discussing the Council of Ministers has this to say: 'On the consideration of the draft law of civil procedure, the Minister of Justice has pledged to give procurators new powers to streamline the process of enforcement of judgements. In Spain there are more than 10,000 procurators and the Government plans to expand their use in court and judicial usage'. More (in legalese) at Lex News. A comment on the El Mundo story reads: 'Sure, to engorge the number of useless people who live off being procurators (after having done the same with the notaries). They merely make transactions more expensive, and have no reason to exist in the 21st century. They exist because the law says you must use them, and pay them just for being middle-men. There are no procurators and virtually no notaries in the Anglo-Saxon countries, and they do not seem to fare so badly!'
Which brings us to: The European Judicial Network with useful information on 'Bringing a case to court in Spain'.
'...Spain is in deep trouble. Its unemployment rate is extremely high: 27 percent for the entire population and 52 percent for the young. Suffering among the popular classes is enormous. The high number of suicides among people who are thrown out of their houses because they cannot pay their rent or mortgage is increasing exponentially. Meanwhile, the major characteristic of government policies is cutting public expenditures (including public medical care expenditures) and increasing deregulation of labour markets, with the unspoken objective of lowering wages. The purpose of these "austerity" policies is to devalue domestically the value of Spanish commodities, including wage labour, to make the economy more competitive. Cuts of public social expenditures are destroying the underfunded Spanish welfare state (Spain, even before the cuts, had the lowest social expenditures per capita in the Euro-zone). The government justifies these cuts as necessary to reduce the public deficit and the public debt (which was smaller than Germany's when the crisis started) in order to instil trust and confidence in the ever-present financial markets'... From an article by left-wing observer Vincent Navarro for Truthout.
A major article in Sunday's New York Times on corruption is titled: 'Graft in Spain'. Here's a taste:
'...At a time when Spain, Italy, Greece and Portugal are imposing deficit-cutting austerity plans on their hard-pressed citizens, revelations of widespread political corruption are stoking bitter resentment, destabilizing governments and undermining the credibility of the political class as a whole.
Corruption did not cause the eurozone crisis. But the economic problems will persist, regional experts say, until these countries remake themselves into modern societies with efficient, competitive economies.
“It’s the key challenge,” said Miklos Marschall, the deputy managing director of Transparency International. “The political class has no respect in Southern Europe. The public institutions need to be rebuilt, step by step, so the government can be a credible actor.”
Spain is by no means Europe’s most corrupt nation — Greece and Italy are considered more so. But the sheer volume of political corruption cases here is proving deeply embarrassing.
Judges here are now investigating about 1,000 officials ranging from small-town mayors to former cabinet ministers. Even the country’s conservative prime minister, Mariano Rajoy, has turned up on a list of his party’s stalwarts who were supposedly taking payments under the table'...
Luis Bárcenas (no stranger to Business over Tapas) evidently put as much money away in Switzerland over the years as he was able. An internal note from a banker at the Dresdner Bank reads '...client brings offshore anything he can save'. A piece in Ideal begins: 'No half-measures. VIP treatment for a client that had told his bank in Geneva he hadn't the slightest scruple in removing from Spain any money he could and to bring it to Switzerland. He boasted of being able to bring out from Spain a million euros a year if the bank didn't raise too many problems. And so, we read from the internal reports of Dresdner Bank some papers that reveal that the bankers were content to deposit the money that Luis Bárcenas brought them, in bags of cash, during his continuous visits to Switzerland and that, beyond any basic formalities, they never tried to even check the implausible alibis which the PP ex-treasurer put forward whenever he appeared with a wad of banknotes at the counter'...
El Huffington Post has more: 'The Swiss authorities have announced the opening of a criminal investigation into the bank accounts which Luis Bárcenas may have in their country and that they may block the money if it is proved that it comes from bribes or money laundering'... There could be up to 38 million euros in Switzerland.
A German friend sent me this – it's a YouTube video called DIE SPANIEN RETTUNG - EL RESCATE A ESPAÑA. A Spanish viewer says: 'As a Spaniard I'm positively surprised! This is amazing! I always supposed Germans didn't know what was really happening regarding to banks, bailouts and the like. Glad to see I was wrong! This video has moved me. Thank you very much!' (Enjoy!)
'Since the transition from the Franco dictatorship to full democracy the Spanish Royal Family have been held in general high regard by the people of Spain. Indeed many would argue that the transition would not have taken place but for King Juan Carlos. Republicans of course take a very different view of things but, for now, that is by the by.
However since the financial crisis started there has been a fall in the support for the Royal Household. This is partly explained with the major loss of confidence in Spain’s institutions but also by the King seemingly being totally of out touch with the problems faced by the average Spaniard. Add to that the corruption scandal surrounding Iñaki Urdangarin, the King’s son-in-law which implicates his wife, the Infanta Cristina, and the Royal Family is in major trouble'... More at David Eade's Looking to the Left.
A majority of two of the three judges investigating the role of Princess Cristina in the Noos case have ruled (on Tuesday) that she is to be dropped from the inquiry. All is not rosy however within the family, as the Handball Federation of Quatar has decided to withdraw its invitation to Iñaki Urdangarin to be their coach for two years at 800,000€ (I'm still available, by the way).
Various:
'As the unemployment rate has soared to 26% in Spain many ex-pats are leaving at a time when the country’s population has fallen for the first time since records began in 1857. Figures from the National Statistics Institutes show that the number of residents fell by 206,000 to 47.1 million and this drop is entirely down to foreign residents leaving the country.
The biggest fall in registered foreign residents was among South Americans, especially Ecuadoreans and Colombians, the statistics agency said. It is a stark contrast to previous years when between 2000 and 2010 the immigrant population grew substantially from 924,000 to 5.7 million. This was fuelled by Spanish speaking expats from Ecuador, Colombia and Bolivia working in the construction industry. However, now the bottom has fallen out of the housing market they are returning to South America where there are more jobs'... (Found at Expat Forum)
An embarrassing story from The Huffington Post UK begins: 'A fifth of Britons believe they are still under British law when they travel abroad - rather than the law of the country they are travelling in.
New research found that 22% of people surveyed do not believe that foreign laws, such as those on drug use, dress code or alcohol, apply to them when they travel abroad.
The 1,722 people surveyed by travel company Global Visas had all been abroad within the last three years, but a fifth still believed that, as British citizens, the only law they are bound by is British law.
When asked why they believed this to be true, 55% said it was due to the fact they were ‘British citizens’, explaining why they felt British laws applied to them everywhere they went while 21% thought that it was due to the fact they were ‘just visiting’ the foreign country'...
El País in English has a story we couldn't resist: 'The Spanish Navy's Isaac Peral submarine, part of the new S-80 series commissioned from state-owned shipbuilder Navantia, has a serious problem — it is between 75 and 100 tonnes too heavy.
The excess — the result of miscalculations at the engineering stage — may not sound like much compared with the sub's 2,200-tonne weight when floating and 2,430 tonnes when submerged, but could compromise its ability to submerge and re-emerge.
Navantia, which has never built a submarine before, has admitted the existence of "deviations related to the balance of weights," as reported by La Verdad de Murcia, and estimated that correcting the problem will mean a delay of 12 to 24 months on the March 2015 delivery date. The firm says it is planning to bring in a foreign advisor to solve the problem'...
A message only for children, and a warning only for adults. A poster in Barcelona reads differently for those under a certain height. While children are well-looked after in Spain, and are generally safer than in some other countries, there is always the spectre of child-abuse. A clever advertising campaign here with video.
The Spanish Economy By Andrew Brociner
Andrew is away this week
Opinion:
Last week the leader of the Spanish government, Mariano Rajoy, said publicly that taxes would not be increased as part of a new round of financial adjustments that were imminent.
By the Friday this turned out to be yet another lie after his deputy Soraya Sáez de Santamaría specified that 'no big taxes' would be affected.
What she meant was that a new tax for environmental certificates was to be introduced and the tax on bank deposits was to be increased along with 'modifications' to special taxes such as alcohol, tobacco, fuel and so on.
To top it all, Sr Rajoy's lie was compounded by the fact that the IRPF personal income tax hike for this year will not be reduced in 2014 as previously promised.
Seeing as Sr Rajoy wouldn't recognise a promise even if one jumped out on him I have been left wondering about the situation regarding the controversial asset declaration.
With the April 30 deadline for making the declaration well and truly past I think I can safely assume that a lot of people have not filed form 720 and this being the case how long will it be before the taxman starts sending out letters demanding extortionate fines?
Seeing as the declaration is for information purposes only, will the taxman be scrutinising each declaration, intent on finding a mistake that can be fined?
It seems to me that the whole purpose of forcing people to make the declaration is to make money. Why would the government want reams of extra paperwork unless it intended to make economic use out of them and what will be considered as an error?
Will it be a spelling mistake, a wrongly written account number or as I have been assured just the omission of relevant details.
Given that the people who work in the tax office are at best jobsworths and at worst downright rude, how much leeway will somebody have to rectify any errors or will they just be fined and to hell with it?
Hundreds if not thousands of ex-pats are worried about the fallout from this but as yet the State has done nothing to allay their fears or address their concerns.
Coverage of the asset declaration decree in the Spanish media has been almost non-existent which has left me to wonder why.
According to the government it applies to everyone with assets outside of Spain but with only an estimated two per cent of Spaniards holding assets abroad it will be the country's ex-pat population that gets hit the hardest.
Is this the calm before the storm or are we being paranoid because after all Sr Rajoy has promised that the asset declaration is for 'information purposes' only.
The calm before the storm. Tom Cain writing in The Costa Blanca News
Finally:
'Don't overuse 'sorry', 'please' and 'thanks' in conversation: The Spanish are an emotional bunch, but they go for heartfelt apologies rather than saying sorry every time they brush against someone on the underground. According to a survey by UK car insurance company Esure, the average Brit will say sorry a staggering 1.9 million times in their lifetimes'. From The Local – How not to be taken for a foreigner...
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