Higher taxes than Norway and Germany
The Institute Juan de Mariana has warned that taxes will strangle Spain at a time when the country is moving into recession and workers incomes are falling. Spain’s tax is now higher than Norway, Germany, France and UK, with rates between 25 and 30% for incomes between 10,000 and 30,000 euros per year.
400 public companies to be dissolved
The Government has agreed with the regional administrations to liquidate 400 public companies this year to help reduce the deficit. This necessary step will increase unemployment especially among bureaucrats on high salaries.
BBVA: Property prices falling further
In a recent study, BBVA have said that due to the worsening economic situation the bank does not expect any improvements in the property market this year, and that the fall in property prices of 6.8% in 2011, will continue this year. Rating agency Fitch has warned that prices for dwellings should in the coming two years fall 35% on what they were at the peak of the property bubble.
Owners will not pay for ‘legalisation’
We reported last week on the proposal from the Andalusia Government for legalisation of for more than 200,000 illegal dwellings in the Region, but with the owners being required to pay the high costs involved. Only 56 of the 15,000 owners of illegal dwellings in Chiclana (Cadiz) have agreed to pay.
Owners of illegal dwellings in Axarquia and Mijas (Malaga) have declared they will wait for the next regional elections, when they expect PP to form the new government. There is much opposition to the Government’s proposal, seen by many as a pardon for those who have broken the urban planning laws.
Wasting politicians to be punished
Cristobal Montoro, Minister for the Economy and Public Administration, has warned that in a new law on transparency, the possibility of penal punishment for public administrators, who spend more than approved in their budgets, is likely to be included. If this law is put into effect, we expect many mayors and regional leaders will be coming before the courts.
177,336 companies collapse
The business school Esade has calculated that since the crisis erupted in 2008, a total of 177,336 companies have collapsed, most of them small or medium sized. 13.7% of companies with 3 to 5 employees have collapsed; 17.8% of those with 6 to 9 employees; 21.3% with 10 to 25; 23.5% with 26 to 49; and 23.5% of those with 50 to 249 workers.
The larger companies fared better, with the number of companies with 5,000 or more employees has increasing.
The number of companies in the building sector fell from 246,271 in 2006 to 152,562 in 2010.
Industrial contracts shrinks
Contracts in the industrial sector fell in the month of November by 1.7%, after 21 months of increases. Also, orders received fell by 0.5%.
Fire in the camp of roses
The socialist party, with a red rose as their emblem, is experiencing internal struggles; two contenders are fighting for the leadership: Rubalcaba who lead the party into defeat during the last national elections after Rodriguez Zapatero had withdrawn, and Carme Chacon from Catalonia.
The battle will be decided in February at the federal meeting in Seville.
Bi-monthly electricity readings again
The government has decided that the bill for electricity will be issued based on real readings every second month, as it was before. The bill based on estimated consumption every second month will be dropped. We know that at least one of our members was asked about his preferences for one or two month billing, in an official ‘doorstep’ interview.
Family wealth falls
The wealth of Spanish families fell by 4% in the third quarter of 2011, to 764,043 million euros. Wealth is calculated as the difference between savings and debts. Savings stood at 1,708 billion euros at the end of the quarter, down from 1,761 billion a year ago. The total for long term loans fell 18,715 millions to 849.183 millions.
New labour law coming
Trade unions and employers could not agree on new employment legislation, so the government will now have to decide. The European Commission is refusing Rajoy more time, and is demanding immediate action.
The crisis this week:
(Reuters) - The euro rose to a three-week high against the dollar, and world stocks edged up on signs that a deal may be reached on Greek debt restructuring, and thus giving some hope that the euro zone crisis will be contained.
Oil prices gained more than $1 a barrel as EU foreign ministers agreed to ban imports of Iranian oil from the start of July.
In Europe, French Finance Minister, Francois Baroin, told reporters in Paris that a deal with private-sector investors about resolving Greece's debt crisis was taking shape.
German Finance Minister, Wolfgang Schaeuble, at the same event, said he wanted a second bailout program for Greece to be in place by March.
Whilst the euro zone crisis is far from over, analysts said a deal for Greece could signal a bit more stability for the country.
The euro was up more than 1 percent at $1.3037, its strongest since early January.
"Obviously anytime we talk about Greece everyone wants to be a little optimistic, (to have) a reason to buy back the euro after its downfall at the end of last year, but it's always a tricky thing," said John Doyle, a currency strategist with Tempus Consulting in Washington, D.C.
U.S. stocks opened slightly higher, whilst the broad MSCI world equity index Miwd00000pus, which is up over 5 percent for the year so far, gained 0.7 percent on the day.
The Dow Jones industrial average .DJI was up 23.65 points, or 0.19 percent, at 12,744.13. The Standard & Poor's 500 Index .SPX was up 4.41 points, or 0.34 percent, at 1,319.79. The Nasdaq Composite Index .IXIC was up 9.13 points, or 0.33 percent, at 2,795.83.
The benchmark 10-year U.S. Treasury note was down 12/32, the yield at 2.0653 percent.
In the oil market, Brent crude futures were up $1.31 at $111.17 a barrel.
The ban of Iranian oil by the EU ministers elicited further threats from Teheran to close the key Strait of Hormuz shipping channel.
The pan-European FTSEurofirst 300 .FTEU3 index of top shares was up 0.5 percent, while in Japan, the Nikkei .N225 ended little changed.
(Reporting by Caroline Valetkevitch, additional reporting by Richard Hubbard in London and Luciana Lopez in New York.)
The wealth tax (Patrimonio)
The Wealth Tax has changed so much over the past years, that with the recent decision of the new government to reintroduce it, we shall be repeating iy, in the form it was, when it was suspended in 2008 by the government, which did not predict that he property bubble was going to burst.
As soon as the new Government has established the rules of application of the re-introduced tax, we shall pass them on.
The "patrimonio" is a tax on your assets (mainly property, bank accounts, cars, bonds, stocks and shares). Fiscal residents (i.e. tax resident in Spain) pay wealth taxes on their world wide assets, but their family dwelling is exempt if it has a value of less than 150,000 euro. Non-residents pay wealth tax only on their assets in Spain, i.e. holiday home, yacht, car etc. registered in Spain.
The basic rate is 20% for assets up to approximately 167,129 euros, but the rate increases on assets above that.
The return for the wealth tax for those tax resident is made at the same time as that for the income tax; for non-residents it must be made before the 31st December, for the previous year. So in 2012 one pays the tax for the year 1st Jan to 31st Dec 2011.
70% of Landlords Fear Tenants Defaulting
The economic crisis and rising unemployment have increased rental apartment owners fears that tenant will not be able to meet their monthly payment. 70% thought their tenants would in this position.
This was one opinion that emerged from a study carried out by the legal expenses insurer ARAG, which manages the legal protection of over 64,000 rental properties in Spain, and who have given legal advice on 3,500 enquiries of this type over the past year.
"Today, 70% of owners recognise that their main fear when renting their property is the non-payment of rent, as they believe that the economic situation of the tenant, regardless of their initial reliability, may change from time to time depending on the current economic climate," said ARAG in a statement.
In this sense, and despite the crisis, the company says there is still a
group of owners, 20%, who consider that renting out their properties is not an option, because the potential income would not offset the problems they may encounter, such as the lengthy and costly process of eviction, property damage, etc.
The owners of flats who do rent out their properties, however, are
increasingly demanding guarantees of solvency from the tenants in an effort to minimise the risk of default due to a possible change in their economic situation. According to the survey data, the tenants who currently pose lower risks of defaulting are those with stable employment contracts, of more than a year, who do not spend more than 45% of their income on paying the rent, and have no history of bad debt.
Access to the rental market for those who do not meet these conditions it is still possible with a guarantor or by adding together income of all of those who will live in the same home. According to the head of ARAG Rentals, Raul Monjo, "Young people are the ones who have most difficulty in passing the solvency test, as they are the group most affected by unemployment and they are more likely to have only temporary contracts. In the majority of these cases, the parents must act as guarantors in order for them to gain access to a rented apartment".
Given the difficult economic situation, the owners of rental apartments are also choosing to spend part of the income on a legal protection policy to defend them in case of any conflict. This is evidenced by the 50% increase in owner protection policies recorded by ARAG during the last year, which is a type of insurance that advances the unpaid rents as they begin legal proceedings to recover the property.
If indeed there is a conflict between the landlord and tenant, in 67% of
cases the situation is resolved by mutual agreement without going to court, 30% of cases end up going to trial. In this sense, according Monjo, "The new Law on Measures to Streamline Procedures, which has just come into force and aims to speed up proceedings, may not have as significant impact as expected, because if the tenant contests the claim the process will remain long and dawn out. In addition, the workload of most courts may make it difficult to complete the issue within specific deadlines".
El Mundo reported that according to ARAG, the average time to resolve a rental dispute amicably is 2.2 months, whilst action taken in the courts averages seven months.
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