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Business Over Tapas (23rd  May – 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

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

Editorial:

I went to see the physiotherapist on Tuesday because I have some sciatic pain (brought on, perhaps, by spending too much time sitting at the computer). In the clinic, I saw a sign from the 'Colegio de Fisioterapeutas' warning of 'intrusísmo' (Spain is very partial to these 'colegios' which are a form of protectionist and price-fixing guilds). The warning comes regarding those who practice some form of physiotherapy without the correct credentials - or university training. It's nice to know that they care. But, where does public protection stop and personal or generic protection begin? Is the 'colegio' and indeed all the many different 'colegios' that dominate Spanish professional services working for or against the Public Good?

Housing:

Is Spain on the verge of deterring foreign property buyers? (asks Property Showrooms rhetorically): 'Overseas investment has been the bread and butter of the Spanish property market since the recession hit. However, new legislation could see the country deterring those that are actually propping up the floundering sector. Due to come into effect this summer, the law will make it difficult for foreign home owners to rent out their property to holidaymakers. All holiday lets will need to be authorised by the regional government and failure to gain this approval will make any rental activity illegal.

Such a law is already in place in certain areas, but the nationwide roll-out will have a significant impact on popular tourist destinations. The legislation is designed to restrict private tourist rentals, which have been accused of detracting from local hotel industries. However, some prospective investors may consider the new regulations too cumbersome and choose an alternative nation for investment'...

From La Voz de Almería: -  'The Government has announced that it will introduce measures to establish greater control in summer leases through a modification of the 'Ley de Arrendamientos Urbanos', that will have to be adopted by the autonomous regions.

This set of new measures requires individuals renting their properties to give previous notice to their town hall; the registration of the rental home in a record; the hiring of a company for support and maintenance; the submission for the public inspection of the rental home; the availability of a 'complaints book' and the obligation to give a record of the occupants names and details to the police.

The 'Organización de Consumidores y Usuarios'  consumers group considers these measures 'an outrage under the excuse that this is unfair competition for the hotel industry'. They also note that 'it is an attack on domestic economies that find it impossible to sell their second home and see renting as an economic alternative'.

From Bloomberg Businessweek comes: - 'Spain’s Sareb, set up last year to acquire 90 billion euros ($116 billion) of soured real estate assets at a discount from rescued lenders, is preparing its first sale, known as ‘Project Bull,’ to test the beleaguered property market’s ability to attract investors.

Sareb has hired KPMG LLP to market a pool of homes located in the south and east of Spain, in Andalusia and Valencia, as well as unfinished buildings, according to four people with knowledge of the auction. Bids are due by July 18 on the real estate, which could be worth about 200 million euros, said the people, who asked not to be named because it’s private.

“Success on the first sale would be a signal to other investors that there’s an opportunity here, but this is a big hurdle,” said Lee Tyrrell-Hendry, a credit strategist at Royal Bank of Scotland Group Plc in London. “Investors are looking for yield and Spain is one of the few areas you can get it, but that is because there are still huge risks and the economic outlook is still weak.”'...

Finance:

El Mundo reports a trade surplus: - 'The Secretary of State for trade, Jaime Garcia-Legaz, has announced that Spain had a trade surplus of 635 million euros in March. It is the first time since this statistic began in 1971, in which exports exceed imports.

 In that month, exports grew by 2% over the same month of the previous year, to 20,288 million euros, while imports fell by 15%, to 19.653 million'...

Público.es says that:  'The Public Debt increased by nearly 40 billion in the first quarter and is now at almost 88% of Spain's Gross Domestic Product. The Government estimates that public debt will be at 91.4% of GDP by the end of this year.

Public debt rose 39.438 million euros in the first quarter and reached a total volume of 923.3 billion or 87.8% of the GDP and the highest figure ever recorded in recent times, according to data from the Bank of Spain'.

La Nueve Tribuba reports that: 'Spain's six largest construction companies have a joint debt exceeding 40.7 billion euros during the first quarter of the year. The amount represents a decrease of 9% from where they were at the end of 2012, when it touched the 45 billion euros.

As of March 31, the largest debt was held by Sacyr at 8,619 million; financial liability follows with Acciona with 7,549 million; FCC with 7,254 million; ACS with 5,989 billion; Ferrovial with 5,755 million and OHL with 5,576 billion exposure. In the first three months of the year, these companies additionally noted a drop of 21% in their joint profits, a period that only FCC registered red numbers after the redevelopment policy which already got under-way last year, coinciding with changes in its board. Together with the falling profits, turnover fell by 6.8% with most of their activities occurring abroad, which currently represents more than 80% of the total portfolio of these giant companies and which has allowed them to offset, in the majority of cases, the fall in the domestic market. In construction activity, the turnover of these companies dropped an average of 14% to 9,457 million euros in the first Quarter.

The Madrid Labour Exchange has been advised by the regional government to offer jobs, by preference, to those unemployed who are still on the 'dole' as a cost saving measure... (Nueva Tribuna has the story)

The Miguel Blesa scandal:

El País in English tells of the arrest of a banker (the first senior banker to be arrested in twenty years) for impropriety in both the acquisition of the City National Bank of Florida in 2008, which may have cost as much as 500 million euros loss to the Caja de Madrid as well as granting unsecured loans of 26 million euros to the failed Grupo Marsans travel company: 

'Nearly a year ago, in June 2012, Prime Minister Mariano Rajoy said this was not the right moment to assess Miguel Blesa and Rodrigo Rato’s performance as presidents of Caja Madrid, the regional savings bank that later merged with six others to create Bankia – which subsequently required a record bailout of over 22 million euros.

That may have been the last bit of help that Blesa, 65, received from the Popular Party (PP), the political group that made him president of Caja Madrid in September 1997. A lawyer by trade, Blesa never concealed the fact that his close friendship with former PP prime minister José María Aznar was a key factor in his appointment to head Spain’s second-largest savings bank, with 190 billion euros in assets. Aznar and Blesa studied together to be tax inspectors, and before presiding Caja Madrid Blesa had served at FAES, the PP’s think tank.

Blesa, who was sent to preventive prison on Thursday last week on embezzlement charges, is one of the most representative examples of political interference in the running of Spain’s regional savings banks, which have undergone a major merger process to avoid bankruptcy after decades of overexposure to the property bubble and misguided loan policies based on political interests rather than sound business practices.

Blesa’s story illustrates the reason for the savings banks’ troubles: a president is appointed based on friendship with political leaders, rather than professional merit; the real estate bubble comes around, and money seems to fall from the sky; the industry watchdog fails to apply pressure, and managers end up ruining the businesses'...

(From Un Espía en el Congreso, an important political blog, written the day Blesa was arrested):   -   'The imprisonment of Miguel Blesa, Chairman of Bankia and Caja Madrid, will be ephemeral and the flower of a day, since he will quickly pay 2.5 million euros in bail, the tiniest part of the money taken into the entity during these years of widespread corruption. But Blesa is right when he claims before the judge that his responsibility "was no greater than that of any of the rest of the members of the board of administration of Caja Madrid, which consisted of 20 people who approved all major operations unanimously since 2008. I didn't have a special vote." And indeed: 20 leaders of the PP, PSOE and IU, CCOO and UGT were partners with Blesa and many of them continue to be paid giant sums of money after the collapse of the entity'...   

The blog then lists all the board-members by name and then lists those members of the various banks and cajas who made up the 'Pandora’s box which is Bankia'. Bankia, we remember, was built from the ashes of six failed banks and cajas and had 23 billion euros of public funds injected into it on its launch in 2012.

The essay ends with this:     '...The judges can hardly cope with complaints and they have asked for reinforcements to the Minister of Justice, Alberto Ruiz Gallardón, who unsurprisingly refuses to facilitate. The situation is maintained because the Spanish party-system, known on the street as 'la casta', has shielded itself with a mutually useful system of judicial protectionism, which hinders any progress through the courts. And when these do sometimes occur, the judgements take years to be processed, culminating in addition, in the event of a conviction, in Government pardons. The solidarity displayed between the parties to protect their own criminals is, for these purposes, most generous'.

The story of Blesa continued the following day, when Miguel Blesa's lawyers paid the 2.5 million euro bail and Blesa was allowed to leave the jail, where he had spent just one night.

Judge Elpidio José Silva, who ordered Blesa's overnight stay behind bars, may now be expelled from his career after the General Council of the Judiciary completes a disciplinary investigation into Silva's activities in unrelated cases.  (More at El Mundo)

World Asset Declaration:

The Town Hall of Benissa in Alicante, via Radio Ser:

'CONCERN OVER THE EXODUS OF FOREIGNERS - Benissa has approved the motion submitted by the CIBE ([I]a local political party[/I]), which warns of the increase of residents of European origin who have decided to renounce their residence, worried about the consequences of new regulations imposed upon them to declare all those goods or rights that have overseas. In fact, since the adoption of this law, the number of neighbours of European descent who spend most of the year here who have renounced their Spanish residence has increased in the region by 600%. With this motion the municipality of Benissa rejects this controversial law'. A similar story at the Costa Blanca News says  - 'Benissa council has followed Jávea council's lead and put together a draft resolution to the government over its asset declaration royal decree. The motion was presented by Alvaro Mendoza of CIBE with all parties voting in favour except the PSD. PSOE leader Vicente Cabrera spoke very forcefully in favour of the motion. Other towns likely to draft motions of their own include Parcent, but opponents of the asset declaration law have asked why other Costa towns with large ex-pat communities are not joining in. Towns such as Jávea and Benissa realise that should ex-pats get penalised for any reason over the asset declaration law many will vote with their feet and leave Spain. If any kind of foreign resident exodus was to occur the local economies of many towns in the Valencia Region would be severely hit and any chances of a recovery in the housing market would be well and truly scuppered'.

San Fulgencio, Alicante: On Friday May the 10th, the proposal by Councillor Jeff Wiszniewski of the PIPN political group, which had the backing of the councillors of the PP was approved in an extraordinary council meeting. The PSOE headed by Trinidad Martínez voted against the proposal and the APFU headed by Mariano Martí, Mark Lewis and the rest of the councillors, abstained. It calls to the National Government to put a delay on the Law 7/2012 of October 12 regarding the declaration of assets abroad which every resident of Spain must declare. This law severely prejudices the interests of foreign citizens residing in Spain.

(Comment from an Alicante resident): '...The other thing that is strange is that there were not more towns, such as Calpe, Teulada, Altea, Alfaz, Benitachell, Orihulela, and down on the Costa del Sol, etc. that didn’t likewise rally to support their ex-pats and the few concerned Spaniards who have significant assets abroad. It remains to be seen of course how the ex-pats will react in the next local elections - those who don’t in the meantime chose to cease being fiscal residents, get off the padrón, etc.'

Hacienda on Wednesday released some information about the World Asset Declaration. According to the only report I could find - Over 131,000 Spaniards admitted that they held property, accounts and investments abroad worth 87,700 million euros. As to whether many (or most) of those Spaniards were in fact 'residentes extranjeros', we shall have to wait and see...

Tourism:

Even the poor tourists are being gouged it seems, as the Derby Chronicle reports: 'North families heading for the Spanish sun are in for a shock . . .some holidaymakers will have to pay for their own hotel’s sunbeds. With the bottom falling out of Spain’s economy, it’s the Spaniards who are now charging for British bums on loungers. For the first time in Majorca, some hotel guests are being asked to pay for their hotel-owned sunbeds.

One hotel in popular Cala d’Or is charging a staggering seven euros – almost six quid – for use of loungers. The hotel is charging guests for beds on the spectacular spot overlooking the bay of Cala Ferrera. Just down the road at Cala Gran, guests will be charged two euros a day for the privilege of their poolside position'...

Tax:

From The European Parliament:  - 'EU member states should join forces to halve the €1 trillion uncollected "tax gap" by 2020, says Parliament in a resolution voted on Tuesday. MEPs want governments to agree measures to clamp down on tax havens, close avoidance loopholes and combat aggressive tax planning. Other ways in which EU countries could benefit by better coordinating their tax systems are set out in a separate resolution, also voted on Tuesday, on the annual tax report.

"The scope for cross-border tax fraud is scandalous, and unilateral national measures will not suffice to defeat it" said Mojca Kleva Kekuš (S&D, SI), the lead MEP on the resolution on tax evasion.

'We need a common platform to exchange tax information in years to come and tax systems that foster growth. What we need is not more taxes, but more people and more companies paying them'', said Ildiko Gáll-Pelcz (EPP, HU), the lead MEP on the annual tax report'...

Politics:

The Telegraph ran a provocative piece last week titled 'Spain is officially insolvent: get your money out while you still can'. Ambrose Evans-Pritchard, from the same newspaper, in an attempt to calm the waters, answers: '...Spain has already done all that can reasonably be expected of any nation, enduring its 'calvario' with dignity and fortitude. It has slashed internal consumption by 16 percentage points of GDP without triggering a social explosion - 'no mean feat', said one minister.

Whether the country proves to be solvent or insolvent by mid-decade depends almost entirely on the future actions of the European Central Bank and the northern creditor powers. Nothing is pre-determined.

Data released on Wednesday last week shows that Euro-land is in an even deeper double-dip recession than feared, with the risk of a Japanese-style slump stretching on for years. There was no outside shock to explain this relapse. It was caused by policy error, and those policies have not been corrected.

If Euro-land sticks to its grim path of synchronized contraction on all fronts - fiscal, monetary and bank de-leveraging - and if it continues to impose all the burden of intra-EMU adjustment on the deficit states in a replay of the early 1930s, then it will push Spain, Portugal and others over a cliff'...

The investigating judge Pablo Ruz, looking into the Luis Bárcenas papers, has turned his attention to the Partido Popular politicians said to have received regular extra payments from the ex-party treasurer. So far, the President of the Senate, Pío García-Escudero, has admitted to 59,000€ a year between 1999 and 2003; Eugenio Nasarre also admitted to taking money during 2003 and 2004 which, he says, 'were declared to the tax-man', he further admitted to other payments which, he said, were passed on by him to a political trust called 'La Fundación Humanismo y Democracia' where they were delivered as 'anonymous donations'. Other declarations from senior PP players - Jaime Ignacio del Burgo, Calixto Ayesa, Santiago Abascal, Jaume Matas, Jorge Trías and Luis Molero - continue through the week. The leading question, of course, isn't how much they took, but rather what were they asked to do in return?

A slightly jocular piece of news from David Jackson reveals that the Junta de Andalucía is making some strange friends: - 'The Junta de Andalucia, reports El Mundo, is signing a “friendship deal” with Cuba and Venezuela (basically, the Commie part of South America), and is angling towards entry of the Bolivian Alliance of the People of Our Americas (ALBA), a left wing free trade association promoted by Cuba and Venezuela which aims to (from their mission statement) “provide a dignified and unified front against the right wing capitalist aggression of the United States of North America via Independence, Revolution and Socialism”. Other members states are Ecuador and Bolivia.

This would put Andalucía on the same footing as Iran, which is also a friendly observer nation'...

Corruption:

Sunday's major report in El Mundo was called 'España, ¿un país de corruptos?' Is Spain a country of the corrupt? It begins: - More than 1,600 cases of corruption are handled in the courts and not a day goes by without fresh headlines involving mayors, councillors, political parties, even the Royal household, in judicial proceedings for abuse of power. Only unemployment concerns Spaniards more: 44.5% of Spaniards, according to the Centre for sociological research (CIS), think that corruption is the main problem of the country today'...

'Spaniards feel in general that we are a country of corruptos', explains Javier Noya, researcher at the Elcano Royal Institute and director of the Marca España. Although the accusation is tougher at home than it is abroad, in countries like the United Kingdom and Germany, the flow of negative news about Spain is beginning to make a difference in our reputation there, multiplying the distrust towards the Spanish.

So is corruption imprinted into the Spanish DNA? No, say the experts.

To begin with, 'in the Spanish case, if we compare the perceptions of corruption and the personal experiences of the citizens there is a great difference,' says Víctor Lapuente, specialist in issues of public administration and corruption at the University of Gothenburg (Sweden). Unlike what happens in other countries, such as Greece and Romania, everyday life is not run by the payment of bribes or corruption in basic services, such as education, health or public safety. In our day to day existence we are 'clean'. The problem is not administrative corruption, but political corruption.

If our leaders, those who govern us and who create the law, practice corruption, then they are really saying: 'you can do it also'.

It is not a new problem. The cases now coming to light 'developed from the economic expansion, from around the year 1993' and linked especially to the area of urban growth, says Manuel Villoria. professor at the Universidad Rey Juan Carlos University, noting that 'more that at the level of the State, corruption has been concentrated to mostly local, and regional level where there are fewer controls and more discretion'. The re-qualification of land was an easy and relatively 'safe way' to make fast money with few risks.

So what will happen now that the construction sector has collapsed? 'Corruption has moved to other areas, probably in public contracts, concessions, privatizations..', lists Villoria, which has an impact on the problems of the lack of transparency in contracts and of the famous 'revolving doors' - when politicians leave public office and move on to work in companies involved in the same sector as they were in before.

Spain appears in the public's perception of corruption in the same level as Botswana according to Transparency International, standing around the position number 30 index and behind most of the old 15 countries of the EU...

Various:

'Inequality surges in world’s richest countries, esp. in times of crisis', says the Russian backed RT, which begins with the photograph of a beggar in Málaga. - 'Not only has social inequality risen in the industrialized nations over the past three decades, the economic crisis of 2008-09 sped up the deterioration as “pain of the crisis was not evenly shared,” a new report says.

The Organization for Economic Cooperation and Development (OECD), which unites the world’s most developed countries, has published an update to its report ‘Divided We Stand’. The report published in December 2011 showed that by 2008 the industrialized nations had the worst situation with inequality in three decades.

According to the new data, the gap between the rich and the poor in most of its 34 members has been getting wider since the crisis started at a higher pace than it did before. Inequality grew more over the three years between 2007 and 2010 than it did over the 12 years before that.

Among OECD countries, it appears that “the top 10 percent has done better than the poorest 10 percent in 21 countries,” with the widest gaps seen in the United States, Turkey, Chile and Mexico. In the three years described above, their income status had been continuously plunging by 2 per cent every year.

A majority of the countries experiencing the harshest rise of inequality were in Europe, where tough EU austerity policies took hold. Italy and Spain were hit worst. However, a 5 per cent decrease was seen annually in Iceland, Ireland, Estonia and impoverished Greece – which still remains on the verge of economic collapse'...

A young daughter of José Bono (senior PSOE politician, ex-Minister of Defence and ex-President of the Congress), is the owner of an establishment in the Centre of Albacete, in the most important commercial area of that city.

The property is in the name of the youngest of the four children of the ex-President of the Congress and his wife Ana Maria Albina Rodriguez Mosquera. According to the land registry number 4 of Albacete, ownership passed to the child on July 6, 2009, two months after the child made her first communion'... (From La Gaceta). The newspaper continues by noting that the girl is now just ten years old and is responsible for a mortgage of 110,000€ on the 130m2 property which is worth, according to some local realtors, around 350,000€.

(I couldn't find a link for this one): 'Spain Refuses Treasure Discovered in America'. - 'In this time of economic uncertainty it was shocking to learn today that the Government of Spain has decided not to accept the priceless treasure discovered in Florida.

Based on the large crowds coming to see the treasure currently on display at the Appleton Museum of Art it appears to be a poorly thought out financial decision.  The Museo del Prado or del Museo Arqueológico Nacional would get a huge economic boost by displaying the treasure yet this seems to have been overlooked.

The gift was offered by a team of archaeologists in honour of Queen Isabella the Catholic as the rare artefacts date from the earliest New World exploration site found in the United States.  The valuable coins, precious stones and some of the most beautiful glass ever found in the world are associated with the 1528 Cabeza de Vaca and the 1539 Hernando de Soto expeditions.  The United States Embassy was informed by the Departamento de Coordinación de Relaciones Culturales y Científicas via the Foreign Ministry that they do not want the treasure.

It seems the people of Spain did not get a vote on the issue and the decision was made without their input.  Instead of refusing the gift we should be celebrating and offering these archaeologists a knighthood for their extremely generous offer.

How or why this bad decision was made we will never know, but it is time for someone to make the right decision and we hope Her Majesty Queen Sofia will accept the gift for the people.

Hopefully it is not too late as other museums around the world are begging for the treasure. 

Opportunities for the promotion of kindness and spirit between the people of the United States and Spain should not be lost and this treasure coming home would be a wonderful event.

The artefacts will be on display for the entire year of 2013 at The Appleton Museum of Art in celebration of the 500th anniversary of the discovery of Florida by Juan Ponce de León and in celebration of 500 years of the wonderful Spanish culture and history that formed America.  Then the rare collection will be broken up and spread to many museums in other countries'.

 

 The Spanish Economy By Andrew Brociner.

Andrew is away this week

Finally, two clips:

Two old fellows are talking to each other, one in Euskara and the other in Catalán. Alfredo Landa is the interpreter, but he only understands Castillian Spanish. The other two suddenly realise that they can converse in Castellano, and send the interpreter to the Devil. A clip from a 1983 film called 'Las Autonosuyas' here. The YouTube 'short' was posted by a group that is against the autonomies and in favour of centralised control from Madrid.

On a similar subject, here's a video from Gibraltar TV called Pepe's Pot. A cookery program in a mixture of English and Llanito (followed by the quote: 'Johnny quítate el hat que el mushasho te va haser una photo')

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