26 Jul 2012 16:58:

Not so easy now that they are expecting EU countries to bail them out. They will come under the microscope.

Thread: Not looking good

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26 Jul 2012 14:24:

As Spain is unable to devalue whilst it adheres to the Euro, the Government will have no choice but to raise taxes.  Whilst GDP is falling due to its currently over-valued exchange rate within the Euro, the Government tax take will fall.  To maintain even a reduced level of public services, it will have to increase taxation.

Property is a likely target as it is easier to assess and collect tax on than an income tax, which has many possibilities for evasion. But as the previous report states any such tax must fall on both Spanish and foreign owners alike,   A similar tax has already been proposed in France.  it is unclear whether those many Britons and Germans who have a main residence in their native country will be taxed on their second or holiday home. it is also unclear whether there is as yet inter-governmental exchange of information in place that would permit them to identify second homes, as such.  

 

Thread: Not looking good

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25 Jul 2012 18:46:

It is entirely unlikely that the German people will accept the debts of Southern Europe, in full measure. \If you talk to almost any German they will say that they have supported the idea of Europe ever since the war.   But they have had the huge cost burden of rescuing East Germany.  They have seen their money go to support Greece, but believe that the Greeks have brought the problems upon themselves and have not done what they agreed to do to escape from their sad situition.

As for Spain, the problem lies with the huge over-lending of Spanish  banks to the local property developers. Most of the potential buyers for these properties are as always Germans or British. But right now, they are not buying much.  Valencia and Murcia where most of the overbuilding occurred have poured huge amounts of infrastructure support into these new developments.  Now both regional governments are bust as are many of the banks that lent on property, that cannot be sold.  It will take a decade or more to clear this situation and loaning money to banks will not in itself the resolve the real issue. 

That is that there is a huge overhang of property and associated infrastructure in Spain which may never be cleared. The German people reasonably enough do not wish to take responsibility for this mess.Nor. I believe. would the British if the UK was a Euro country.

My predictioon is that the Germans will not bail out Spain sufficiently to resolve the problem permanently and that Spain, as with Greece will be forced to quit the Euro, with similar consequencences for the value of Euro deposits in Spanish banks.

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Thread: Not looking good

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27 Jun 2012 11:32:

Moody`s the US ratings agency, which reports on the riskiness of all investment bonds, yesterday downgraded the credit ratings of all the large Spanish banks. Some are now no longer of investment grade, which means that pension funds cannot invest in them. Whilst this does not directly implicate the safety of deposits in a Spanish bank- their grading is for the bonds which the bank sells mainly to large investors- it does have an influence. It makes it more difficult for the bank to raise capital for its operations and therefore makes it less able to withstand a run on its deposits.

There is a plan that all European bank deposits should be guaranteed not by the national governments but by the European Central Bank,  This would reduce the risk of Spain not being able to guarantee the first €100,000 of deposits in a Spanish bank.  But this could take years to materialise. In the meantimne, you must rely on the Spanish Government, itself, not going broke. You can see from the history of Northern Rock just how quickly savers` confidence can evaporate. Diversify your risk..

 

This message was last edited by jamesensor on 27/06/2012.
Thread: Should I transfer my Euros from Spain to Germany

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26 Jun 2012 10:43:

The risk is clearly that the number of banks in trouble across Europe will be too big for the European Central Bank to handle effectively. Or it may be too slow to react. The ten banks with the highest debt to deposit ratios are all in Europe.

Spain has very real problems of an enormous unsold housing stock, which was built on the basis of bank credit. The banks are now taking on these properties as unperforming debt and attempting to clear them. But there is a huge backlog, which will take years to reduce.  The state and communities likewise spent huge sums on urbanizacion infrastructure for the properties, again with borrowed money. This massive bubble has now burst.

In uncertain times it is common sens to diversify your portfolio of assets.

 

 

This message was last edited by jamesensor on 26/06/2012.
Thread: Should I transfer my Euros from Spain to Germany

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