Moody’s downgrades Spain
Rating Agency Moody’s has downgraded the solvency of Spain for the second time in 6 months. The new grade is AA2 “with negative perspectives.”
The main three reasons: -
lack of a real estimate by the Government for the cost of the recapitalisation of the banks and saving banks,
the incapacity of the Government to enforce a reduction of the deficit, especially in the regional administrations, and
the expectation that the economy will not grow as projected by Government, this year, nor in the coming years,.
The cost of recapitalisation of banking sector
Moody’s estimate that the cost of saving the banks, and especially the saving banks, will be at least 40,000 to 50,000 million euros, not the maximum of 20,000 million predicted by the Government. In an “extreme scenario” the rating agency fears that the cost may surpass 110,000 million euros, i.e. equivalent to the very risky property debt.
The “heavy spenders” in the regions
The Agency points to the fact that neither central government, nor the regions, have taken the necessary steps to reduce their deficits and they predict that the Spanish economy will barely grow by 1.5% between now and 2014. Consequently, the country will have an “elevated vulnerability” to any 'storms' in the financial markets.
Four Regions down rated
Moody’s has also down rated the region of Catalonia to A3; Castilla – La Mancha and Valencia to A2 and Murcia to A1. Another 5 regions (Andalusia, Castilla y Leon, Extremadura, Galicia, and Madrid) are placed under observation with “negative perspectives.” The reasons given are failure to controlling their debts.
Bank of Spain demands certain bank increase their capital
The Bank of Spain has demanded that 8 saving banks, 2 banks and 2 subsidiaries of foreign banks increase their capital. The total increase demanded amounts to 15,152 million euros. The banks mentioned are Bankinter (must increase by 333 million) and Bankpyme (24 million). The foreign banks are Barclays (must have another 1,005 million) and Deutsche Bank (729 million). The saving bank Bankia (the merged Caja Madrid, Bancaja, etc.) needs another 5,775 million to reach the 10% “ratio of solvency”; Base (CAM, Cajastur, etc.) another 1,447 million; Civica needs 847; Mare Nostrum (Caja Murcia, Granada, etc.) 637; CatalunyaCaixa 1,718 and Novacaixagalicia 2,622 million additional capital.
More ETA terrorists arrested
Over the past weeks, Spanish and French police have arrested a number of leading members of the Basque terrorist organisation ETA. In all thirty-three suspected terrorists have been detained, amongst them the military leader.
The supporting organisations in the Basque Country have created a new political party called Sortu, but it has failed to disassociate itself from the ETA terrorism, and thus, it has not been permitted to take part in democratic elections.
Sale of dwellings up 19.6%, but why?
The sale of dwellings jumped 19.6% in January. The reason is simply that the sales which were completed before the end of 2010 were registered (when the tax deduction for acquiring a dwelling was eliminated). Also, as we said in last week's report, sales are now so few that a small difference means a large percentage change, up or down.
Shop turnover slips
Shop turnovers slipped 4.7% in January, compared with the same month last year, and was 0.2% lower than in December. This is the sixth consecutive month of diminishing sales. The big supermarket dropped 6.2%. Sale of foodstuffs was down 3.4%.
Seat Volkswagen's “ugly duckling”
Seat lost 311 million euros last year for Volkswagen, its parent company. This is an improvement of 8.3% since 2009 but the worst result of all the companies in the mighty VW group. In 2010, Seat sold 349,000 cars.
Unemployment “the most important problem” for 83.9% of Spaniards
Unemployment is the biggest problem for 83.9% of the Spanish population. 79.2% of the people questioned in a resent poll said the economic situation of the country is bad or very bad and only 20% believed it will be better in a year.
16.5% lead for PP in polls
PP, the main opposition party, has a lead of 16.5% in the polls over the governing PSOE. If elections were held today, PP would win 47.9% of the votes, against 31.4 for PSOE. On a scale from 1 to 10 all party leaders failed to qualify. Of the ministers in the national government, Alfredo Perez Rubalcaba (Interior Minister and the First Vice-President) scored the highest with 5.30 points, Prime Minister Zapatero was on 3.79 points, and opposition leader Rajoy 4.10……..
1.321 euros for a litre gasoline
1.321 euros is the average price for a litre petrol at filling stations; an increase of 0.99% in a week. To fill a 50 litre tanks costs 66 euros, 14 euros more than a year ago.
10 nuclear plants in Spain
The Spanish news agency EFE reports that Spain is the only country in the EU which has nuclear reactors of the same design as those seen in Fukushima in Japan, now seriously affected by the earthquake and tsunami which hit the NE of the country last Friday.
The boiling water design can be found in Spain at Cofrentes, Valencia, and in Santa María de Garoña in Burgos. The former was opened in 1984 but the latter opened in 1971, the same year as the Japanese plant.
The boiling water design came from General Electric in the 50’s and is an alternative to the pressurised water design, and both are considered to be as safe as each other.
The problems in Japan have re-opened the nuclear debate, and in Spain the Government has already extended the life of the Garoña plant to 2013.
Greenpeace has recently criticised safety at the Cofrentes plant, saying it is showing its age, and claiming it is not even needed if the data of the Spanish electricity supply is studied. Greenpeace has accused the plant’s owner, Iberdrola, of putting profit before investment. The ecologists also note that earthquakes upto 5.1 on the Richter scale have been seen in Spain, in provinces where there are nuclear plants.
The Government is expected to make a decision on whether to extend the working life of the Cofrentes plant later this week.
The Guardian:
Spain is in deep trouble.
Ahead of a planned refinancing of its banking sector, the ratings agency Moody's has downgraded the country's debt [http://www.guardian.co.uk/business/2011/mar/10/moodys-cuts-spain-credit-rating-downgrade" title="downgraded the countrys debt].
As far as the markets are concerned, the entire Iberian peninsula is overburdened with debt. Portugal is already considered a sure-fire future candidate for a European bailout. Spain, which has considered itself too big to fail, could be closer than it thinks to a rescue.
Spain's problem, like Ireland's, is a banking and property sector burdened with hundreds of thousands of unsold properties, many of them still listed on balance sheets as high-grade assets when they are in fact worth a fraction of their former value ? and in effect junk.
As the markets see it, Ireland owned up to its massive debts and sought a rescue [http://www.guardian.co.uk/business/2010/nov/21/ireland-asks-70bn-eu-bailout" title="Ireland owned up to its massive debts and sought a rescue], while Greece was an obvious candidate for EU support. Traders consider Spain and Portugal to be countries in denial.
Yet this was also the situation a week ago, which has left analysts asking themselves why Moody's has made the downgrade now.
The problem lies in Brussels, Paris and Berlin, where political leaders are fighting over plans to introduce a bigger and better bailout facility for troubled sovereign states coupled with more stringent measures that would force them to reduce their debts at a faster pace.
Germany's chancellor, Angela Merkel, has insisted on pursuing a hard line. She has the backing of her party, the central bank governor and a declining number of allies in the eurozone.
Merkel faces seven regional elections this year and has already lost the first [http://www.guardian.co.uk/world/2011/feb/20/angela-merkel-christian-democrats-hamburg-defeat" title="lost the first]. She fears the German people will never forgive her for offering profligate nations such as Spain, who enjoyed the boom much more than the Germans, cheap money to get back on their feet. The "ma?ana" culture, so the argument goes, will always persuade the Spanish to put off what should be done today, so tough rules on deficit reduction must accompany fresh bailout cash.
Italy and France accept the need for deficit reduction, but argue behind the scenes that peripheral eurozone nations are in no position to pay a higher price for rescue funds. It will only make a bad situation worse.
On Illegal Housing
The association against urban planning abuses in the Almanzora Valley (Almeria) has issued the following statement:
Hundreds of Denuncias and Licences in the courts
The head of Public Works and Planning (in Andalusia) also revealed yesterday that the Junta had impugned 83 town hall plenary decisions in Almanzora, the majority of those relating to the granting of licences which had permitted the construction of these illegal houses.
In addition, 163 denuncias had been issued for possible planning crimes.
And this for Josefina Cruz (the minister) "represents an illegal occupation of territory that cannot be allowed because it is unfair to people who buy a house on urban land, and because there is planning legislation to be respected, regardless of nationality".
The courts will decide
As a consequence, it will be the courts “who will decide who acted badly in each case, the promoter or the council. The Junta will provide the corresponding information in each process and the justice system will determine if a house will be demolished or not”
In addition, Josefina Cruz bluntly stated that “it would be the owners of the houses to be legalised who would pay the costs to obtain basic services once the town halls had granted them permission”.
Nor did the minister hold back from insisting that “those who have come to our land and built a house without respecting the planning laws, having committed a lack of respect”.
The representative of the Junta is clear that “from now on the problem is at an end and control and regulation will prevail when planning the development of a municipality”.
Our comments:
There are hundreds of thousands of illegal properties in Spain, which do not comply with the present national or regional urban planning laws or regulations: Laws have been in an almost continuous process of change over the past 50 years, entrapping some of those who bought farm land, intending to build their home at a later stage. The plan may have been legal and correct at the time of buying the land but have since become illegal under laws introduced later.
Some foreigners bought agricultural land or farm houses when the laws prohibited building residential dwellings on land outside towns or approved urbanisations. Some of them relied on advice from foreign or Spanish real estate agents and lawyers, local promoters and builders, as well as politicians, telling them “this is the way it works in Spain.” Others knew the situation, but saw the illegal procedure as a short cut to a cheap property.
Information on how to safely and legally purchase of a property in Spain has been available to those who wanted it. Since 1982 I have written a number of articles and even books, explaining what was legal and what illegal, and warning against what looked like profitable short cuts. In Almanzora I even held meetings and clinics about illegal sales and constructions, explaining the possible legal and financial consequences: Few wanted to listen.
In the following, I reprint some of what I wrote on the question:
In 1998:
“Buying a finca rustica
A "finca rustica" means an agricultural farm or a piece of land that is not classified as building land. Some of the building plots being offered to foreigners in Spain are, in fact, fincas rusticas, and after the purchase of the land you may find out that you will not be permitted to build.
If you want to buy something outside the town centres and the urbanisations, you should be aware of the following:
You have no public guarantee of services for water, roads, electricity or sewage, as you should have on an urbanisation.
A water-channel next to the land does not necessarily mean that you have any rights to use the water. Water in a well in April does not guarantee you the same well will have any water in August.
Road rights must also be mentioned in the title deed. Do not get into a situation where, after the purchase of a finca, you are forced to buy additional land for road connection.
A nearby electricity line is no guarantee that you will be able to tap it. It may be a high tension line. A transformer for only one dwelling may be too expensive.
Each region has a minimum size requirement before issuing a building permit on agricultural land. You must find this out from the town hall, and you must make absolutely sure that the plot offered has the minimum required.
It is easier and more economical to get a license to repair an existing building than to construct a new one. If you can restore an existing building, you may not need complete architect's plans, but only a sketch, to obtain a license for "obra menor" (minor work). Consult the town hall beforehand.
Ask yourself the question: Am I the right type for living under rural conditions in the Spanish countryside? If the answer is not resoundingly affirmative, you should delay the purchase until you have become convinced. Maybe it is better to start with a small property on a planned urbanisation first, and take the step into rural Spain after you have become more acquainted with the country.
Buying a plot
Before buying a building plot, you must be sure that you can build on it. Even in an urbanisation with many houses already built, you may find there is no planning permission and that the houses have been constructed illegally, or that you will be the first one to be refused a building license. You must investigate in the town hall and get a written confirmation that you can build on the plot in question.
You may also ask the vendor to guarantee in the sales contract for the plot that you can build a house of so many square metres on the land and get your money returned if building permission is not granted.
When buying a building plot in an urbanisation, you should have all services to the border of your plot, like water, electricity, sewage and paved road. The cost for this is included in the plot price. The only additional cost to you should be for the installation of meters for water and electricity.
On a building plot there are certain limits to the height of the construction, the distance from the house to the road and any neighbours. Find out if you can get the house you want in the position you want before you buy.
The following points must be kept in mind when buying a plot for construction of an individual villa:
Do not accept a purchase document that does not clearly indicates the urbanistic qualifications of the land - whether it is a building plot (finca urbana) or agricultural land (finca rustica).
Do not make a final purchase until you have written confirmation from the town hall that you can use the land for the purposes you intend, or have the assurance that the plot has been zoned and approved for construction.
Do not sign before you know there are no high tension lines, old rights of way, water pipes or any similar obstacles on the land that may influence the construction.
Do not buy before you have made sure that there are no major roads, factories, discos or similar irritants planned next to the property.
If you buy the land from the same person or company that will also construct the house, first demand the title deed to the land upon payment. Then start the construction, and later write the house into the land escritura (declaración de obra nueva). “
In 2005
“In Spain there is a great number of illegal dwellings. What is an illegal dwelling, how to avoid buying one and what to do if you are the owner of one?
Illegal dwellings to be legalized
The minister for dwellings and urbanistic matters in the regional government of Valencia, Rafael Blasco, has reported that his ministry has found 150.000 dwellings built on farm land, especially in the municipalities of Orihuela and Elche, but also in the inland areas. He has sent a letter to the municipalities urging them to re-establish the legality, by providing the illegal houses with the infrastructure the law requires, or demolish them.
What is an illegal dwelling?
The law distinguish between farm land (finca rustica) and residential land (finca urbana). On farm land there have always been certain limits as to subdivision, and basically the houses built on such land should be for agricultural purposes. On land that was zoned for building of dwellings in a general plan, could be made the subdivisions and constructed what was established in the “plan parcial” (urbanization plan) approved by the town council. The condition was always that certain infrastructures should be provided (proper entrance roads, sewage collection and treatment, water supply and electricity, in addition to areas for green zones and social and public installations. The promoter was responsible for the plan, the permits and the infrastructure.
However, certain developers overlooked the requirements of the law. They subdivided a piece of farmland into plots much smaller than what was permitted, made some narrow roads, an electricity supply over poles crisscrossing the land, water in narrow pipes and the sewage into a cesspit in the garden. They “forgot” the land for green areas and public installations. Many of the houses were built without a proper building license, but with the “nod” from the mayor, and often with an assurance that the illegal development would be included in the next revision of the general plan, or when a general plan for the municipality was made.
The history of the illegality
We are convinced that the number of 150.000 illegal dwellings is correct. Most of them were built in the early 90s, when the socialists had won power in most municipalities. The Institute of Foreign Property Owners protested against the illegalities, to protect the new buyers, but the mayors used the need for work and income as an excuse. When the national authorities would not stop the illegalities, we took the matter to the European Parliament, that in 1988 sent MEP Edward MacMillan-Scott to Spain to investigate the situation. He wrote a highly critical report on the matter. In the same year the government of Felipe Gonzalez reacted belatedly by approving law decree 515, on protection for property buyers.
That did not stop the illegality, only diminished it. The illegal construction on farmland is still going on, under mayors of all political colors.
This was the background for the approval of the LRAU-law in 1994, that in its intention aimed at legalizing farmland that had been illegally subdivided and built on, without the infrastructure required. When the building boom started again some years later, certain developers saw this law as an ideal instrument for getting building land, at low costs, or without any costs for themselves. Since the original promoters had faded away after selling the plots, the individual plot owners became legally responsible. The law especially places the searchlight on areas where have been built more than 10 dwellings within a perimeter of 100 meter. There are certainly many hundreds of such cases
in the region.
Demolishing houses?
Minister Blanco is now demanding that the owners of dwellings built illegally on farmland be forced to restore the legality, or that the municipalities take steps to demolish the construction.
This is not a nice situation for the foreign owners who maybe bought a house built on a small agricultural plot, without the infrastructure required by the law, and not knowing which problems they eventually bought. Or the ones that bought a piece of land where they have constructed their house, being assured by real estate agents, lawyers or even mayors that “no hay problema”.
Local politicians are experts in avoiding problems. They may want to dodge the issue until after the local elections in 2007, and then go slowly into the problems. There are no great desire among local politicians to demolish dwellings. Normally this is only done if new, illegal construction is made today.”
Si (
No(
