Steve Hall said:
29 January 2012 @ 04:44
The post below is what I added to Graham Hunt's excellent blog about Spain at the Crossroads that Justin highlighted.
From reading the posts here, it seems that most people are of a similar mind. I think that the FACTS are irrefutable.
Just a couple of things to comment on this thread:
BPY said:
"So much of the Spanish economy was linked to tourism and building and now both those industries are declining at a frightening rate."
I am not sure what basis you are using for this - tourism is (thankfully!) doing rather better than anybody expected. Last year's figures for number of tourists, average spend per tourist, hotel occupancy, flights etc were quite encouraging. 2012 has got off to a good start and the forecasts are positive. Building is in no way declining. It is D.E.A.D. ("It has ceased to be", Python)
The collapse of Spanair is NOT good news but it is another nail in the coffin of Spain's least responsible and most detested union - the pilots'.
Leslie said, "said: Judging from the recent sales when the queues were extraordinarily long. Also there is a local cafe near where I live which is nearly always has custom.
One swallow does not make a summer. One cafe does not make an industry trend. In any case, yes, they may "nearly always" have custom. Consider that they "absolutely always" need custom .....just to survive. I have been talking to experienced bar-owners in Fuengirola recently, they expect 25-30% of bars to close this season alone! I was in a bar tonight for almost exactly one hour - I counted between 25 and 40 people. Let's say they spent 5 euros per hour ...that means the total takings were ca 160 euros for that one hour. With costs of 80 euros (say 100% mark-up on drinks), 2 wages say 15 euros, electricity, water, gas etc say 10 euros, rent 5 etc etc that leaves precious little left to even survive never mind make a profit .....oh and they were paying a singer (50 euros per hour?) So, on their busiest hour of the week, they are LOSING money!
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January 2012
Spain is in a mess …..simple, period or whatever you want to say.
Spain is very clearly at a crossroads and I am minded of Alice asking the Mad Hatter which way she should go. His reply was that this would depend on where she wanted to go. Spain went to the polls on 20th November and very clearly voted for a change of direction. Now, it is up to the new government to decide where that should head.
Sadly for eight years a PSOE government denied a blindingly obvious fact – Spain you are in a mess and you are a ship without a captain and a country without direction. Initially there may have been some reason as, ON THE SURFACE, everything looked rosy and we were all set to each partridges for the rest of our lives (This is a Spanish expression that is more figurative than “We all will live happily ever after”. If you mix the metaphor with “meat on the bone” you will get a picture of the Spanish Dream) Sadly, to that must be added the government’s ostrich like “head in the sand” approach to, well, any fiscal planning and you will see that all was not well. The Spanish for to turn a blind eye to something is “hacer el sueco”. (Act like a Swede) perhaps we should start to call it “hacer el español” because nobody wanted to recognise that Spain was no latter-day El Dorado but rather an economy built, literally, on sand and not on rock or anything else with any vestige of stability.
The challenge was that “everybody” thought that they had found the key to eternal prosperity. Sand, sea, sun and sangria. The Northern Europeans were wealthy and wanted to buy property in the sun, usually by the beaches of the Med where they could imbibe the (cheap) local tipples. The Spanish banks once known for their ultra-conservative lending policies started giving out mortgages like confetti – often to people who had no realistic expectation of paying them. Foreigners with 100% mortgages in Dublin and Dudley now took a second 100% mortgage in Dolores or Denia. Young Spaniards quickly realised that banks were opening the floodgates and many of them took mortgages that they also had no realistic chance of paying-off. Such was the start of “El Boom”.
This wanton monetary approach was not such a huge issue when house prices were going up and up (2001 -2007) but became a mega challenge as soon as house prices started to flatten and a problem of gargantuan proportions when they started to fall. I remember talking to my branch manager in 2007 when he quipped that he did not know what the concept of negative equity was never mind the Spanish for it. Fast forward two years, he was now lamenting that his bank is plumb centre of an urbanisation of 2400 almost identical homes, all marketed to foreigners and often with 100% mortgages. Now that is not hugely clever at any time but when the property starts to tumble in value and people find themselves with negative equities on ghost-estates you have an accident waiting to happen. It did. By 2012, the bank is sold for a peppercorn and people cannot withdraw their bonds etc!
From the French border to the Portuguese border whole new towns were thrown up with minimal infrastructures. Towns doubled in size (Torrevieja 50,000 -100,00 in 6 years) and everybody wanted in on the bandwagon. Everybody wanted their slice of the cake (and more!) “Greed was good” was the mantra and if you could lift a hammer you were now a master builder and if you could change fuse, you were suddenly a time-served electrician. Unemployment was low and waves of immigrants flooded in from Eastern Europe and North Africa. Corruption was rife and huge scandals have rocked the country. Valencia, Marbella, Catral, Albox, Algorfa, Mallorca ….the list just goes on. Presidents of major corporations are routinely tried and even the king’s son-in-law is facing imprisonment and has been removed from all royal duties. Many native Spaniards and “New Spaniards” were delighted at the chance to earn a good living legally. Sadly, many in high places used their powers in municipal, local, regional and national governments to buy and sell land, re-classify it illegally, allow building on protected land or simply take bribes! The end result was one and half million empty homes which is the largest property stock anywhere in Europe! With huge unemployment and banks again reluctant to lend – it is going to take a long time to get this over-supply out of the system which has led to 80% of builders being unemployed and 2/3rds of all estate agents and property companies closing their doors!
Yes, the whole economy was built on property and it’s half-brother tourism (especially residential tourism). That’s fine until your two groups of “prospects” suddenly find cracks in the system. For the foreigners, the dream homes were often built to a poor standard, there was very often precious little in the way of infrastructure whilst the young Spaniards began to understand that owning your own home is NOT such a great idea if you can’t afford to pay for it. Their elder siblings and definitely their parents had stayed at home longer to save a bigger deposit and then have a much smaller mortgage. This new generation were quite simply not able to pay the mortgages, the food and car bills and ever-increasing utility charges etc even when they were in work. When they started losing their jobs, the situation became catastrophic.
Unemployment has increased exponentially and youth unemployment spiraled completely out of control. With a national average of 44%, it is evident that some areas have more than one in two young people out of work. National unemployment has peaked at 24% and after the landslide victories for the PP (centre to right wing) people are now beginning to take their heads out of the sands and accept that there is a genuine crisis. The “milestone” 5 million unemployed is a chilling factor. The summer and autumn of 2011 saw just about everybody take to the streets to complain about their fates. Civil servants, fire-fighters and police did not get paid on a routine basis in many parts of Spain whilst a national movement mobilised huge percentages of citizens of all ages and political persuasions. There was little of the random violence of Croydon or Tottenham! These were people who wanted a job, a roof that they could afford over their head and food on the table. They also wanted to see the end of the corruption that is almost endemic in public office.
Spain was, in many eyes, on the point of anarchy and but for the November elections everything could easily have got out of hand. Spain is a young democracy and has come a long way since the death of Franco and its first tentative steps towards democracy in the mid 70s. In this age of mass media television was 24/7 focused on the fragile state of the country. What had happened in Argentina just 10 years before was painfully and easily remembered. The overwhelming majority of the Spanish did not want that! The PP were handed the election on the plate but would the governance of the country be a poisoned chalice.
The Finance Minister started one of his first speeches talking about “The worst economic crisis in our history….the one that has sapped our youths’ confidence in their future” It is clear that, at least, the new government are aware of the gravity of the problem. Rajoy the prime minister has promised and is implementing major labour reforms but it is too early to predict whether they will have any success or will they just be the Second Verse of “Spain fiddles whilst Madrid burns”. (Apologies to Nero in Rome) Spain is a full member of the Euro and as such an integral part of the whole Eurozone. Merkel and Sarky had lost confidence in Zapatero and they have both given Rajoy very aggressive targets to meet with a very clear, “If not….” message. Civil servants have had their hours increased by 2 and half hours per week and a huge series of cuts have been enforced – from not lighting the roads, to fewer tube journeys, teachers and health workers. There are some very bitter pills being swallowed with many more to be prescribe over the months to come.
Yes, Spain, IS at a crossroads. Will Rajoy be the man to lead it on a straight and safe track? My jury is out. He is manifestly a better option than Zapatero whose one claim to fame was his apparent honesty. Respect to him for that but,….. Will Rajoy be able to tame the unions? The first signs are very positive indeed and the union leaders seem willing to cooperate. They realise that greater flexibility is required and their was general disgust at the Iberia pilots’ strike especially when it was expertly communicated that they were about the best paid employees in Spain. Their actions were prejudicing the jobs of thousands of lesser paid workers! With potentially 25% unemployment by the end of the year most are committed to a fairer sharing of the cake.
All this said, I genuinely believe Spain WILL bounce back. I fear it will not get better until it gets worse I fear but there is light at the end of the tunnel. Yes, we will go down the wrong road a few times BUT lessons do seem to have been learned. There is no desire for a boom and bust economy and Spain still has everything that made it so special before the last 10 years of madness. We still have our sun, sea and sand, we still have an impressive heritage and a well-integrated multi-cultural society. Spain can still organise the best ferias and fiestas in the world and offers some of the best food and wine to be found anywhere. We have hopefully learned from an over- reliance on inbound tourism from Northern Europe but the Brits, Irish Scandinavians and Germans will still come and keep the tourist tills ringing. The younger generation are becoming more outward-looking. They are learning languages, they are travelling for employment, they are learning IT skills. It will take time for sanity to return. I am certain of that.