Spain Protests Against Retirement-Age Change Enter Second Day
25 February 2010
Published at 14:44 Comments (0)
MADRID (Dow Jones)--Workers will march Wednesday in cities across southern Spain in their second day of protests against the government's proposal to move the retirement age to 67 from 65 currently.
In a release, Comisiones Obreras, one of Spain's two largest unions, said "tens of thousands of people" had participated in Tuesday demonstrations in Madrid, Barcelona and other cities.
"We will defend tooth and nail the rights of the current and future retired," Comisiones Obreras Secretary General Ignacio Fernandez Toxo said.
The nationwide marches, which are scheduled to run through March 6, are the first major challenge by unions to the policies of Socialist Prime Minister Jose Luis Rodriguez Zapatero.
Spanish newspapers said the turnout at Tuesday's marches was low and that criticism of the government was muted.
Though Spain is grappling with an unemployment rate of nearly 20%, the highest rate by far in the developed world, the impact has been mitigated by generous state benefits.
At the same time, Zapatero has taken great pains to maintain good relations with unions by, for example, pledging not to make any labor-market reforms that are not supported by both employers and unions.
Source: Wall Street Journal
Spanish workers protest over government spending cuts
24 February 2010
Published at 14:35 Comments (1)
Thousands of workers have protested in Spain's major cities against government spending cuts and plans to raise the retirement age by two years to 67.
The rallies were the first mass labour protests in the six years of Prime Minister Jose Luis Rodriguez Zapatero's Socialist government.
He announced 50bn euro ($67.5bn; £43.8bn) spending cuts and a civil service hiring freeze in January.
Spain faces a large budget deficit, a sluggish economy and high unemployment.
The main demonstration was in Madrid, where union officials said 60,000 protested. Police put the crowd at a much smaller 9,000 people.
"Mr prime minister, don't play around with pensions, with the future of millions and millions of people in our country," said union leader Ignacio Fernandez Toxo in a speech at the rally in Madrid.
Mr Zapatero also wants to change Spain's rigid labour laws to make it easier and cheaper to hire workers.
Spain's rising debt has prompted scrutiny from bond markets worried about a Greek-style budget crisis.
But the head of the Organisation for Economic Co-operation and Development (OECD), Angel Gurria, said on Tuesday that Spain's public debt was manageable and not comparable to Greece's.
Source: BBC News
Spain braced for general strike as Zapatero tries to force labour law reform
23 February 2010
Published at 14:22 Comments (0)
Trade unionists to take to streets as PM faces first rebellion over employment reforms designed to jump-start country out of recession.
Spanish trade unionists will pour on to the streets tomorrow to protest against Socialist prime minister José Luis Rodríguez Zapatero's attempts to reform a moribund economy that has left one in five Spaniards out of work.
Marches are due in Madrid, Barcelona and Valencia in a show of union muscle designed to head off reforms to both generous labour laws and a state pension programme that critics claim are strangling growth.
It is the first time in six years that the beleaguered Zapatero, whose party has slipped badly in opinion polls, has faced a trade union rebellion. Unions hope hundreds of thousands will join the marches, which look set to kick off a long-running battle for Spain's future.
With the economy still in recession after almost two years, Zapatero is now running a country with 4 million unemployed. A million Spanish households have no bread-winner and predictions for the future are grim.
The government forecasts that the economy will continue to shrink this year and some believe unemployment could rise to 22%.
Economists led by the head of the Spanish central bank, Miguel Ángel Fernández Ordóñez, are demanding pension and labour market reforms in order to get Spaniards back to work.
But unions claim workers are being unfairly expected to shoulder the blame – and the pain – of recession and instead pin the responsibility on bankers and business leaders.
Some union leaders have already threatened a general strike if Zapatero tries to impose reforms.
"If it is done by decree, then the reply will be at that level," warned Javier López of the Workers Commissions union.
López's union is leading tomorrow's protests with Spain's other main trade union, the General Workers' Union. They have called a series of marches in cities across the country over the next three weeks.
The marches were sparked by Zapatero's proposal that Spaniards delay retirement from 65 to 67 in order to ensure the long-term stability of the country's pensions.
His announcement, at last month's World Economic Forum in Davos, was seen as an attempt to calm markets and stop Greece's debt crisis from engulfing Spain as well. But it provoked a furious reaction from unions, who said they expected pension reform to be negotiated with them first.
"This pensions business is a first warning about where they are coming from," López warned. "We will reply to each and every attack."
Zapatero's government has already withdrawn some pension reform proposals. But reform is needed to help bring down Spain's bulging budget deficit, which hit 11.4% of GDP last year.
The PM is having increasing trouble meeting his twin aims of keeping both unions and debt markets happy. "My government is characterised by its defence of social programmes and for maintaining and extending workers' rights in good times and bad, and that is how I will continue," Zapatero said today.
On a visit to London last week Zapatero announced an austerity drive to bring debt down and attacked the hedge funds and bankers he blames for Spain's problems.
Boom to bust
Jesús Muñoz left school two years ago, but has never worked. "Things are bad. Most young people here are unemployed," he said. In a country with 40% youth unemployment, he is far from unique.
Muñoz comes from Villacañas, a small industrial town in La Mancha where the dizzying transition from boom to bust reflects the deeper problems in Spain's outdated economy.
Factories line the road into town. Some are closed, with signs advertising unused machinery for sale. The others make doors for homes. But an exploded property bubble has left Spain with more than 1m unsold new houses and construction has ground to a halt.
Factory car parks are half-empty, as most have laid off large numbers of workers. Villacañas was once a place where you could leave school at 16 and immediately find a well-paid factory job. But no-one expects the door trade to pick up for many years. Spanish builders started more than 760,000 new homes in 2006, but only 201,000 in 2008.
Those who leave school at 16, as a third of Spaniards currently do, face a gloomy future. Most economists say Spain can no longer grow on the back of cheap, unqualified labour. New jobs will require skills and education.
Pensioner Eugenio Sánchez blames Spain's equivalent of sub-prime mortgages, rather than global meltdown, for the hard times. "People were getting 120% mortgages," he said. "That is madness."
Source: The Guardian
Primark sales take off in Spain
22 February 2010
Published at 14:37 Comments (2)
Associated British Foods’ said it expected interim adjusted operating profit to be “well ahead” of last year’s figure in part due to a strong performance during the Christmas period from its Primark discount chain of retailers.
ABF said trading at Primark’s 14 Spanish outlets was “exceptionally” strong and helped boost like-for-like sales across the group’s stores by 8 per cent in the past six months.
Primark, which currently has 196 stores, is undergoing a significant expansion. Five new stores opened in the last year in the UK, Germany, Portugal and Belgium, and the group expects to open another six stores in the UK and Spain during the coming year.
In a trading update ahead of interim results for the six months to February 27, the group also reported strong profits from its grocery businesses, which include Allied Bakeries and Twinings beverages, crediting the restructuring work undertaken in this division during the past year.
Read the rest of the article at ft.com
easyJet blasted by deaf woman over ordeal
20 February 2010
Published at 16:36 Comments (0)
A deaf woman has blasted easyJet for refusing to let her on a flight until she proved she had a hearing disability.
Lesley Stewart, 49, had to show her hearing aids to staff at Gatwick and get confirmation that she needed her dog Molly on board.
And after having to wait for a manager and missing her flight, she was then charged £43 for faxing Hearing Dogs for Deaf People to confirm Molly was a hearing assist dog.
Mrs Stewart, of Jedburgh in the Scottish Borders, said she had flown with easyJet before without problems and is demanding an apology and compensation. "Molly keeps me safe," she said. "It was absolutely ridiculous."
Source: The Mirror
Ryanair 'abandons passengers' on wrong Canary Island after landing in thunderstorm
19 February 2010
Published at 17:31 Comments (0)
British holidaymakers were left stranded on the wrong Canary Island after a budget airline had to divert in a thunderstorm and then allegedly abandoned them.
The tourists were being flown to Lanzarote by Ryanair but ended up landing on neighbouring Fuerteventura due to bad weather.
But after being let off the plane, the passengers claim they had to make their own arrangements to get to the correct destination.
One family were left £400 out of pocket after forking out for overnight hotel accommodation and a 30 minute ferry crossing to Lanzarote the next day.
Kay Wright, 40, was with her sons Jack, six, George, five, three-year-old daughter Kacey and stepdaughter Tabatha, 23.
She claimed they were given no further help from Ryanair and was forced to ring partner Tony Wainwright at home in Bournemouth, Dorset, to help her reach their destination.
Tony, a 48-year-old security consultant, said: 'I got a phone call at about 6pm to say they had landed but were on the wrong island.
'After disembarking they had gone into the terminal but there were no Ryanair representatives to tell them what to do next.
'It was left to me and a very helpful Spanish lady to sort out a taxi, arrange alternative accommodation for the night and book ferry crossings to Lanzarote in the morning.
'I don't blame Ryanair for the bad weather but to abandon a family, on the wrong island, is unforgivable.
'It has cost us another £400.
'I know Ryanair is a budget airline but surely they have some duty of care to their passengers.'
The family had flown from Bournemouth Airport to Lanzarote on Wednesday and were left stranded along with dozens of other passengers.
The weary family finally arrived at Playa Blanca yesterday following an eight mile ferry trip in choppy seas to Lanzarote.
Tony said: 'There has been no contact from Ryanair whatsoever.
'No information was posted on their website to say the flight had been diverted.
'When I rang I was told to write and I would receive a reply within 14 days.
'The flights were cheap, they cost about £250, but there's no way we would use Ryanair again.'
A Ryanair spokesman said: 'Ryanair flight FR 4755, Bristol to Lanzarote, diverted to Fuerteventura due to bad weather in Lanzarote.
Unfortunately ferries were also affected by these high winds so passengers were provided with EU261 information which outlines their entitlement to provide receipted hotel expenses to Ryanair, for refund.
'Ryanair arranged that the ferry company would carry affected Ryanair passengers to Lanzarote free of charge when ferries recommenced the following morning.
'Ryanair apologises to passengers for any inconvenience caused by this weather related diversion but can never put passenger convenience before passenger safety.”
The guidelines state that if flight disruption is outside the control of the airline, no monetary compensation is due.
David Skillicorn, managing director of Bournemouth-based tour operator Palmair, said: 'There should be arrangements in place to cope with this situation.
'We would arrange for staff to go to Fuerteventura airport to give advice, arrange ferry crossings or sort out alternative accommodation.
'Planes break down and weather conditions change.
'When all travel arrangements have been made on a website it's fine when it goes well but another story when things go wrong.'
Source: The Daily Mail
Spain economy 'to shrink by 0.5%' in 2010
19 February 2010
Published at 14:42 Comments (0)
The Spanish economy will shrink by 0.5 per cent in 2010 according to Bank of Spain forecasts to be made in public in March, a worse contraction than the current official forecast, newspaper El Mundo said today.
The forecast revealed by the unnamed sources at the bank compares to the 0.3 per cent contraction estimated by the government, which has been staging road shows in New York and London to reassure investors it will be able to restore the economy to health and cut its bulging budget deficit.
A Bank of Spain official, who declined to be named, said that any officially revised forecast would be revealed only around March time.
"We don't know where they got that figure from," the official said.
But the data, if confirmed, would still be more optimistic than International Monetary Fund forecasts for a fall of 0.6 per cent.
While the difference of 0.2 percentage points between the reportedly imminent Bank of Spain forecast and the government estimate is not large, an increasingly pessimistic outlook would disappoint those hoping for a change to a more positive outlook for the Spanish economy.
Spain's gross domestic product contracted by 3.6 per cent in 2009. It was the last big Western European economy still in recession in the last quarter of 2009, according to data released this week, although there were signs of improvement from domestic demand and exports.
But with unemployment at over 18 per cent, investor worries have centred on whether the government can cut the fiscal deficit to 3 per cent of gross domestic product by 2013 from 11.4 per cent last year.
The spread of Spanish 10-year bonds over benchmark German Bunds spiked to about 100 basis points earlier this month during the nerves caused by Greek debt, although it has since eased to about 77.
The government's €50 billion austerity plan, designed to convince markets it can meet this target, met with scepticism from analysts who complained its assumptions about economic growth were unrealistic.
More painful cuts would need to be made if the deficit is to reach the theoretical European Union limit by 2013, they said.
The government has said that the economy can return to boom-time growth levels of around 3 per cent by 2012, but many analysts say Spain faces long-term stagnation unless it can become more competitive and reform its rigid labour market.
It also faces high household and corporate debt, the legacy of a decade of high current account deficits that fuelled a property boom that even the government now admits was usustainable.
Source: Irish Times
Zapatero Sees Spain Returning to Growth in First Half
19 February 2010
Published at 14:41 Comments (0)
MADRID—Spain's gross domestic product will return to growth during the first half of 2010, Prime Minister José Luis Rodriguez Zapatero said Wednesday, after final data showed that the country was still in recession in the fourth quarter of 2009.
In a speech to Spain's parliament, Mr. Zapatero also said the country is able to reduce its budget deficit and called for opposition parties to reach an agreement with the government on reforms necessary to overcome the economic crisis.
New spending cuts through the year 2013 could exceed €50 billion ($68.85 billion), he said. In 2010, the government plans spending cuts of €5 billion, he said.
Austerity measures will affect all areas of government apart from social spending, research and development, sustainable economy funds and development aid, Mr. Zapatero said.
Spain's budget deficit reached 11.4% of GDP in 2009, raising concerns about the sustainability of the country's finances. The government has forecast a 9.8% of GDP deficit for this year, and has said it wants to push the deficit down to 3% of GDP by 2013, in line with European Union rules.
"We will take any measures necessary to correct any trend that would divert from the path of fulfilling budget targets," Mr. Zapatero said.
Spain's gross domestic product fell 0.1% in the fourth quarter from the third quarter, and was down 3.1% against the fourth quarter of last year, final data from Spain's National Statistics Institute, or INE, showed Wednesday. It also confirmed that GDP fell 3.6% in 2009.
The country remains in recession while its euro-zone peers returned to growth in the third quarter, although for some countries GDP stagnated or declined in the fourth quarter.
Spain's economic crisis was exacerbated by the collapse of its once buoyant construction sector, which led to a steeper rise in unemployment than in all other European Union countries bar Latvia.
Spain's jobless rate hit 18.8% in the fourth quarter, according to the INE.
Mr. Zapatero Wednesday also said it was necessary to extend accords with all political forces in the country, and said his government will set up a commission with opposition parties to reach a consensus on how to end the crisis.
The commission is slated to discuss the creation of employment, industrial policy, plans to cut the deficit and reform of the financial system.
The government aims to pass these pressing reforms before the end of the first half, Mr. Zapatero said.
The leader of the opposition People's Party, Mariano Rajoy, said the government's lack of direction and improvised economic policies had led to an "ocean of debt."
To return to growth, Spain also needs to reduce taxes, Mr. Rajoy said.
Source: Wall Street Journal
Pain in Spain could fall on British companies
19 February 2010
Published at 14:39 Comments (1)
Britain's exposure to the financial turmoil sweeping through southern European economies could be far greater than previously thought, according to data seen by the Guardian.
Despite relief that Britain's decision to stay out of the euro has avoided the kind of budgetary crisis brewing in Mediterranean nations, figures showing that UK sales to Spain, Britain's seventh-largest trading partner, plunged by 31% to £7.74bn (€8.92bn) in 2009, reveal how exposed are the balance sheets of some of the UK's biggest companies.
Top-selling brands such as Vodafone, Burberry and British Airways are suffering from Spain's shrinking economy – which accounts for twice as many UK exports than China.
Barclays is also suffering from low savings and lack of investments. In a rare piece of bad news from the bank yesterday, it said that its impairment charges in global retail and commercial banking across western Europe rose £370m to £667m, largely driven by losses in Spanish commercial property, construction and small business loans.
With four million – almost 20% of the workforce – unemployed, Spaniards are cutting down on their spending. This trend includes those who have a job and who fear that they may lose it.
Consumers are leaving bills unpaid, forcing companies such as Vodafone to sell lists of unpaid accounts to businesses that specialise in recovering cash. The phone giant recently reported a 6.8% sales decline in Spain, where it generates an annual £1.3bn of service revenues – the third-largest market after Germany and Italy.
The business of recovering money has grown so popular in Spain that it advertises in top venues such as FC Barcelona's football stadium, grabbing millions of TV viewers. Even Barcelona football club is tightening its belt. It has put on hold a multimillion-pound redevelopment project of its 100,000-capacity Camp Nou stadium, a project assigned to British architect Norman Foster.
London-based Diageo, maker of brands such as Smirnoff and Baileys which are popular in Spain, is suffering from the new habits in a country that has traditionally entertained more outside the home than inside. Now this has changed, people are going out less, and while at home, local and cheaper beer is replacing spirits and wine.
"The challenging macro-economic environment continued to shape Diageo's performance in Iberia with reduced on-trade consumption [in bars and pubs] and down-trading to value brands in the off-trade [supermarkets, shops]," the company said recently.
Spain and Portugal account for only about 4.5% of Diageo's net sales, although the company blamed the falls in Spain, as well as Ireland and eastern Europe, for being the main reason for its overall sales decline in Europe.
Spain is one of Diageo's strongest markets for products such as Baileys, which is often served along with dessert at weddings. Sales of famous names such as J&B fell in shops and supermarkets as consumers moved to cheaper brands. The company is now aiming to sell to customers at home, offering ready-to-serve cocktails such as the Cacique Mojito.
As many as 700 British companies operate in Spain, employing about 100,000 people. Top exporters include British Petroleum, which has a network of more than 300 petrol stations around the country.
The energy sector has been severely affected by the recession: UK energy sales to Spain more than halved to £575m (€663m) in 2009 from £1.2bn in 2008, mostly driven by a plunge in oil exports, according to the data from the Spanish government.
"Spain's recession implies a big adjustment in the country's imports, despite the strength of the euro," said José Antonio Zamora, economic and trade councillor at the Spanish embassy in London. "Energy products and capital goods have been particularly hit because of the fall in investment."
Tourism companies have also suffered as the number of British visitors to Spain has plummeted to about 11 million from 17 million, due to the UK recession and the stronger euro, which makes trips to the Costas more expensive.
Other big export names include British Imperial Tobacco – which bought Spain's cigarette maker Altadis – and Bupa, owner of the Sanitas private health insurance brand.
UK-Spanish mergers have flourished over the past few years as the two economies opened up to competition in Europe. Spain's Iberdrola took over Scottish Power, while British Airways is now planning a tie-up with Spain's flagship carrier, Iberia.
Source: The Guardian
Burberry closes Barcelona plant and cuts 300 jobs as Spain's woes deepen
18 February 2010
Published at 22:45 Comments (0)
Fashion house Burberry plans to close its Spanish design facility and cut 300 jobs in Barcelona, as Spain's economic woes mean it no longer pays to produce an exclusive range of clothes for the country.
The closure of the unprofitable unit also fits into Burberry's long-term strategy to amalgamate the licensed businesses it once had around the world into a single global brand.
Burberry will stop producing a local collection for Spain after the autumn/winter season this year, and close the site in Barcelona where the range is designed and produced, resulting in the job losses.
The plant closure and redundancies will cost between €50m (£43m) and €70m, Burberry said.
The clothes sold in Spain cost about 25pc less than the Burberry brand sold in the rest of the world. Burberry is now in talks with Spanish retailers over which shops will carry the more expensive global brand as a replacement for the local one. Department store chain El Corte Ingles is one of its biggest customers.
Spain accounts for about 9pc of Burberry's sales, but the company said it expects its operations in the country to make a loss this year and in the near future.
Under a process started by its previous chief executive, Rose Marie Bravo, Burberry brought back licensed businesses under central control. It had two lines in Spain, Thomas Burberry, which closed last year, and Burberry Spain. But with the Spanish economy in recession for almost two years and 20pc unemployment, it was no longer worth running the separate line.
Source: The Telegraph
Eurozone contagion fears spread to Spain
17 February 2010
Published at 14:22 Comments (0)
Zapatero blames speculators, as Madrid identified as next 'weak link.
Even as the 27 finance minsters of the European Union gathered in Brussels yesterday and ordered Greece, again, to impose yet more hardship on its people in order to slash the national deficit, some may have been eyeing their colleagues around the Brussels meeting room warily.
For all are concerned about which nation might next suffer from the dreaded "contagion". The fear is that the next member of the so-called "PIIGS" – Portugal, Ireland, Italy, Greece and Spain – to suffer a crisis of confidence will be Spain.
Representatives of the continent's stronger economies chimed in on the need for austerity in Athens. The German deputy finance minister Joerg Asmussen, whose government has proven resistant to calls for a bailout, said that Greek efforts will "have to measure up" to steps taken by Ireland, which cut public-sector wages sharply. "We certainly won't let them off the hook," added the Austrian finance minister Josef Proell. His Swedish counterpart, Anders Borg, called for Greece to take more "concrete steps to regain credibility".
And yet fears are growing that, even though the Greek crisis is far from resolved, Spain could be the next "weak link" as the Greek Prime Minister, George Papandreou, described it a few weeks ago. It would certainly be standard market practice, analogous to the way they chased successive investment banks into the ground in 2008. Now the Spanish Prime Minister, Jose Zapatero, has virtually admitted as much is happening to him, blaming "speculators" for Spain's travails.
At first glance, Spain is in a much more secure position than her "Club Med" neighbours, because she starts with a level of national debt that is comparable to the UK, France and Germany – around 60 per cent of GDP (against well over 100 per cent in Greece) – and her banking sector has not, yet, suffered from quite the same meltdown as other economies that enjoyed a property bubble in the early years of this decade, notably the British, and Irish.
Spain's banks are strong and acquisitive, stronger than most other countries' institutions. But Spain's annual budget deficit, like the UK's and Greece's, has spiralled well into double figures – at almost 12 per cent of GDP it rivals Greece's Olympian disregard for the old Maastricht treaty rules of prudence.
And the markets are worried. Not, admittedly as fretful as they are about Greece, but the market price of insuring Spanish government debt has jumped in recent weeks (the mysterious-sounding credit default swaps), and now stands at €139,000 per €10m of debt – four times the cost of insuring an equivalent German bond.
The problem is size. The Nobel Prize-winning economist Paul Krugman put it this way: "In economic terms the heart of the crisis is in Spain, which is much bigger". The EU's Competition Commissioner Joaquin Almunia – a Spaniard – has suggested that Spain's economic problems look increasingly like those of Greece and Portugal. But in a worst case scenario, Greece is affordable – about 2.5 per cent of European GDP.
Spain, conversely, accounts for about 16 per cent of EU GDP, and is a much more expensive proposition for restoration work. Indeed, there are some grounds for supposing that, even if Berlin wanted to, it might be unable to afford to take on Spain's fiscal challenges. The IMF remains an option, but the damage to the eurozone's cohesion and credibility would be that much greater if an IMF team had to do what the EU demonstrably could not.
Underlying Spain's problems is a badly distorted economy. Unemployment is the obvious threat to stability. At almost 20 per cent of the workforce, there is little doubt that the Spanish economy seems peculiarly unable to generate jobs. Its bubble economy depended on a real estate boom; now its underlying competitiveness is in doubt.
In the 1980s, Spain was the location of choice for many foreign companies wanting access to the European market; now the showpiece GM factory in Zaragoza, only 30 years old, will be one of the hardest hit in the GM Europe restructuring. Jobs are heading to Eastern Europe, India and China.
Spanish productivity growth is disappointing. The labour market is also notoriously inflexible. That has helped push the property downturn into a slump, and left Spain teetering on the edge of a deflationary disaster. Elena Salgado, Spain's finance minister, recently declared Spain "is not Greece". She may have to start working harder to convince the markets that the similarities are just coincidental.
Source: The Independent
Spain's economic blind spots
15 February 2010
Published at 15:03 Comments (0)
Spain is not facing up to the severity or singularity of its financial crisis, largely caused by its property bubble.
Spain is facing a credibility crisis. Property prices are crashing, wiping out a large part of many families' wealth and leaving banks with billions of euros in loans, which look increasingly risky in a country where up to 1.5 million houses appear unsaleable.
Unemployment is more than 4 million and rising sharply. It's clear that what once appeared to be solid public finances were nothing of the sort but were in fact an illusion based on bloated and unsustainable revenues from a property boom.
But Spain's credibility problem isn't just economic – it's political. For if it is to win back the trust of the markets it needs to show that it can diagnose the extent of its financial problems, take the necessary measures to correct them and find the national willpower to carry them out.
Up to now none of these things has happened because the government in Madrid has been unable to face up to its obligations or even accept that there is a uniquely Spanish set of problems here – preferring to blame the global financial crisis instead of understanding that it has simply highlighted and accentuated our country's specific economic weaknesses.
So the financial markets, which demand a credible plan for the future, have seen only a government paralysed by fear and incomprehension.
The government argues that foreign banks and media don't understand Spain and are envious of what they argue are relatively healthy finances. They point out, for instance, that forecast debt to the end of 2010 is only 66% of GDP and that Spanish banks have needed almost no public funds to rescue them.
So it sounds superficially plausible to argue that Spain is over the worst of the crisis – but this ignores some deeper truths. One is the cost of getting the financial sector back on track after it has absorbed the cost of defaulted loans. The next is, of course, unemployment – which could quite feasibly, on recent experience, reach 5 million in Spain and stay at that level for a decade.
Over the last two weeks, spurred by the Greek crisis, the government has started to come to grips with these problems. It has announced some serious plans to tackle public spending, particularly by cutting pensions over the medium term. It has announced plans to cut short term deficits by reducing infrastructure and civil service expenses.
The next steps should be to set the economy on a new long-term growth path, based on increased productivity. This will need educational reforms which lead more students to graduate from high school (skills were superfluous in the old, construction and tourism-driven growth model), and create institutions of international excellence. Spain must also eliminate the harmful split between permanent and temporary workers, which destroys any incentive for professional development.
The good news is that the country still has the borrowing capacity to finance these reforms – Moody's has recently reaffirmed its AAA rating, and public debt ratios remain among the lowest in Europe.
At the moment the Spanish economy is akin to someone trying to work with one hand tied behind their back. Spain will have to act decisively and restructure its entire system in order to rediscover its full muscle.
But that can only happen when unions, government and opposition parties accept the problems we are facing.
Source: The Guardian
Santander may float in UK if it buys Williams & Glyn's branches from RBS
14 February 2010
Published at 19:36 Comments (0)
Speculation mounts over possible UK flotation by Spanish bank if it buys network that EU is forcing bailed-out RBS to sell.
Banco Santander could float part of its rapidly growing UK division – which includes the former Abbey, Bradford & Bingley and Alliance & Leicester – if it ends up buying the 300 bank branches of Williams & Glyn's that the Royal Bank of Scotland has been forced by the EU to put up for sale.
Other options include seeking finance from the debt markets, through a big loan subscribed by several banks, or through a share exchange with other investors, it is understood. But the process to sell the business-focused RBS branch network – a move forced by the European Union after the government bailout of the taxpayer-owned bank – is still in its "very early days," a source told the Guardian. Neither Santander nor UBS, which is managing the sale, declined to comment.
Speculation about a possible deal has been sparked by comments by Santander's chief executive, Alfredo Sáenz, last week in Madrid that "there's still much to be done in Britain". However, Sáenz also said the bank did not have any plans to float its British unit, which is now selling about half of all new mortgages in the UK.
Bankers and investors have speculated about a flotation of the UK division after the successful partial stock market listing of Santander's Brazilian unit last year. The sale contributed €1.4bn (£1.2bn) to the bank's €8.9bn profit in 2009, which was also driven by strong growth in the UK, the chairman, Emilio Botín, said in Madrid.
Contrary to press reports, it is understood that Santander has not contacted its shareholders to test the idea of a partial flotation of the UK unit. The business posted annual profits of £1.5bn last year, up 30% from 2008, after aggressive expansion and as brand awareness grew through its red logo and sponsorships such as Formula 1 driver Lewis Hamilton. An average valuation of ten times the company's profits would value the business at £15bn.Buying the 300-strong former Williams & Glyn's branch network would lift Santander's share of Britain's small business market, which stands at about 3%, well behind its stake of about 11% of the residential mortgage market. Santander is now Britain's third-largest bank, in terms of deposits, after RBS and Lloyds Banking Group.
The Madrid-based bank, which has rapidly grown in the UK after the acquisition of Abbey National and parts of Alliance & Leicester and Bradford & Bingley, has expanded internationally over the past decade, reducing its dependence on Spain, which now only accounts for about 25% of its profits. The country's shrinking economy and 19% unemployment has lifted the bad loans ratio to more than 3% and is expected to continue doing so as the economy still deteriorates.
The UK market now provides 16% of the group's profits, the third largest, after Spain and Brazil.
The bank expects double-digit growth in Britain this year, pushed by a recovering economy, and through "opportunities that may arise," Botín said.
Source: The Guardian
Zapatero sidelined as Spain faces own problems
12 February 2010
Published at 15:18 Comments (0)
SPANISH SITUATION: SPAIN IS a proud nation and less than two months ago was looking forward to seeing its prime minister, José Luis Rodríguez Zapatero, standing in the limelight during the country’s six months as holder of the rotating EU presidency.
Instead, Mr Zapatero was pushed into the background when he joined his European colleagues in Brussels yesterday. He was left out of the meeting to discuss Greece’s debt crisis attended by European Council president Herman Van Rompuy, German chancellor Angela Merkel, French president Nicolas Sarkozy and European Commission president José Manuel Barroso.
In recent weeks Spain, Europe’s fifth-largest economy, has been forced to defend its own economic credibility as investors and bankers around the world placed it alongside other struggling European countries as the PIGS (Portugal, Ireland, Greece and Spain). And, indeed, recession continues to bite in Spain and unemployment is in freefall.
So painful was the situation last week that Spanish minister for the economy Elena Salgado and her secretary of state for economic affairs were forced to fly to London and Paris to reassure bankers and investors and brief the financial press that investments in Spain were safe.
A prediction by Mr Zapatero in December that the country was facing an “imminent exit” from recession has proved to be mere wishful thinking.
Spain’s economy fell by 0.1 per cent in the last quarter of 2009, making it the only G20 nation still in recession.
The official Spanish statistics agency reported this week that gross domestic product (GDP) shrunk by 3.1 per cent compared with the same period the previous year, and its public debt is expected to rise from 55.2 per cent of GDP in 2009 to 74 per cent in 2012.
Another example of Mr Zapatero’s wishful thinking was his boast this week that Spain was in a better situation than it was six months ago, a statement bitterly received by the half a million workers who have lost their jobs in that period.
Unemployment in Spain stands at almost 20 per cent, making it the highest in the euro zone, with more than four million people lining up at the dole queues.
The government is reluctant to follow Ireland’s example of cutting the salaries of public-sector employees for fear of provoking a confrontation with the unions, which are already up in arms following the suggestion of raising the retirement age from 65 to 67. It was yet another proposal the government was forced to withdraw under union pressure.
Ignacio Toxo, leader of the Workers Commission union (CCOO), warned the government against taking action that would hurt workers.
He said Mr Zapatero’s government was floundering.
“We can’t go on like this. They stagger from one crisis to another. They are like a bunch of incompetent amateurs,” he said.
Source: Irish Times
Spanish economy still stuck in recession
11 February 2010
Published at 13:36 Comments (0)
The Spanish economy shrank 0.1 percent in the fourth quarter of 2009, making Spain the last major European economy still stuck in recession, official data showed on Thursday.
The national statistics agency INE said Gross Domestic Product (GDP) contracted by 3.1 percent compared to the last three months of 2008 while the economy contracted 3.6 percent overall in 2009.
"The global downturn is slowing," INE said, noting that the external sector was doing better while domestic demand was not as weak as before.
Europe's fifth-biggest economy has proved vulnerable because its growth relied heavily on credit-fuelled domestic demand and a property boom that collapsed in late 2008 after a decade of frenzied activity.
Unemployment has soared to nearly 19 percent as a result and the government has come under increasing pressure to keep its debt and deficit levels under control.
Thursday's INE figures match those published by the central bank last week and confirm that Spain was unable to join Britain, France, Germany, the Netherlands and several other eurozone members in escaping recession.
The economic downturn has stoked doubts that Spain will be able to slash its public deficit to the EU limit of 3.0 percent of GDP by 2013, as promised after the shortfall jumped to 11.4 percent last year.
Reaching the EU limit is based on forecast growth of 3.1 percent in 2013.
Spain's Socialist government, which says the worst of the slump is over, has forecast a return to growth in the second half of this year, although a contraction of 0.3 percent is predicted for the whole of 2010.
The International Monetary Fund expects the economy to contract 0.6 percent this year, compared to growth for the 16-nation eurozone of 1.0 percent.
The government insists that recent measures taken, including planned spending cuts of 50 billion euros (68 billion dollars), will bear fruit.
Total accumulated public debt is projected to rise from 55.2 percent of GDP in 2009 to 74.3 percent in 2012, also well above Europe's 60-percent limit.
The debt and deficit burdens have sparked deep investor disquiet and have driven up the government's cost of borrowing on the international financial markets.
Source: AFP/Yahoo Finance
Spain's Troubled Economy: Why Europe Is Worried
10 February 2010
Published at 13:55 Comments (0)
You know your country's economy is in trouble when the Finance Minister travels to a foreign country to seek out that dying breed known as the daily-newspaper editorial staff. That's exactly what Spanish Finance Minister Elena Salgado did on Monday: she flew to London to speak with the editors of the Financial Times. As the economic news out of Spain has only worsened in recent weeks, the British paper has gone so far as to suggest that the country poses serious risks for the rest of the euro zone. Now the Spanish government has embarked on a campaign to convince the paper — and the rest of the financial world — that the worries are unjustified.
While other European nations like France and Germany — and even Britain — are beginning to show signs of economic growth, Spain remains stuck in recession. Results from the fourth quarter of 2009, which will be released on Thursday, are expected to show 0.1% contraction in gross domestic product, which would make Spain the only G-20 country not to have experienced expansion during that period. In fact, the International Monetary Fund has predicted that Spain will remain mired in recession until 2011.
Other recently released statistics are just as grim. In January, unemployment reached 18.8%, the highest level by far in the European Union, where the average is 9.5%. Although still lower than the E.U. average, the debt-to-GDP ratio has also doubled in the past year, to 55%. "The are significant problems in Spain," says Fernando Broner, an economist at the Barcelona-based Center for Research in International Economics. "And we may find out there are even more corpses buried. We hear a lot about how Spanish banks were prevented from purchasing American toxic assets. But they've managed to create their own toxic assets."
Read more: http://www.time.com/time/world/article/0,8599,1962142,00.html?xid=rss-topstories#ixzz0f8JuXBw8
Spain sees sixfold increase in immigrants over decade
09 February 2010
Published at 14:17 Comments (0)
New arrivals take proportion of non-Spanish residents to 12%.
The number of immigrants registered as living in Spain has increased more than sixfold over the last 10 years, figures released by its National Statistics Institute have revealed.
Some 5.6 million non-Spaniards were registered as living in the country last year, accounting for 12% of the population, an increase of 400,000 on 2008.
Immigration helped the population reach 46.7 million in 2009, up from 40.5 million in 2000 when the country had just 924,000 immigrants officially registered.
At the beginning of the 1990s the population was made up almost entirely of Spaniards, with immigrants accounting for less than 1% of residents. But the past decade has seen an influx from around the globe, mostly from other European countries, South America and north Africa.
Joaquín Arango Vila-Belda, professor of sociology at the Complutense University of Madrid, said immigrants had occupied half of the jobs created in Spain between 2000 and 2008. He said: "Immigrants have arrived in their millions largely because of the availability of new jobs in Spain.
"Many of the 5m jobs created here between 2000 and 2008 were in sectors favourable to immigrant workers, such as construction, the hospitality industry and care."
Forty per cent of immigrants now living in Spain came from other EU countries, notably Romania, with 759,000 registered, and the UK, with 356,000.
Another 1.6 million came from South America and 902,000 from Africa, more than two-thirds of those from Morocco.The figures are taken from municipal registers of residents around the country and are released each year by the National Statistics Institute in Madrid.
Immigration has become a topic of political debate in recent weeks as Spain's economic crisis has deepened.
Unemployment reached 19% last year, almost twice the average for the euro zone, with a record 4 million out of work.
Last month Alicia Sánchez-Camacho, the leader of the People's Party in Catalonia, called for stricter limits on immigration and said the topic will play a leading part of her campaign for elections in Catalonia later this year.
And last month the town hall in Vic, 45 miles north of Barcelona, sparked outrage by attempting to ban illegal immigrants from the municipal register.
The move would have prevented illegal immigrants from claiming health care and education.
Unions say 43% of Vic's unemployed are foreigners, while around a quarter of residents are foreigners.
The controversial proposal in Vic, and a similar one in the Madrid suburb of Torrejón de Ardoz, wereboth dropped after receiving widespread publicity.
There are strong indications that the economic crisis is leading to a reduction in immigrants, who have been hit worse by rising unemployment than Spaniards.
Professor Arango Vila-Belda said the number of immigrants arriving in Spain had begun to slow dramatically in the latter part of 2009 because of rising unemployment.
Source: The Guardian
Google Working On Live Translation Service
08 February 2010
Published at 14:23 Comments (0)
Language lessons may be a thing of the past if Google cracks the live voice translation technology it admits it's been working on.
The company would combine its advanced voice recognition know-how with its text translation service to create a mobile phone that acts as an instant interpreter.
Head of translation services Franz Och said: "We think speech-to-speech translation should be possible and work reasonably well in a few years' time.
"Clearly, for it to work smoothly, you need a combination of high-accuracy machine translation and high-accuracy voice recognition, and that's what we're working on."
Google says one of the biggest challenges will be coping with accents.
Speaking to the Sunday Times, Mr Och said: "Everyone has a different voice, accent and pitch but recognition should be effective with mobile phones because by nature they are personal to you.
"The phone should get a feel for your voice from past voice search queries, for example."
Source: Yahoo/Sky News
G7: no need for IMF to bail out eurozone
07 February 2010
Published at 14:10 Comments (0)
Europe's leading finance ministers have vowed to try to unpick the crisis enveloping Greece, Portugal and Spain without resorting to an International Monetary Fund (IMF) bail-out as their problems dominated talk at yesterday's G7 summit.
At the meeting of finance ministers and central bankers, plans to focus discussions on financial regulation fell by the wayside as talk centred instead on the euro crisis.
Speaking on the fringes of the meetings, held in Iqaluit, a town just south of the Arctic circle in north-eastern Canada, Jean-Claude Juncker, chairman of the group of eurozone finance ministers, said: "We talked about Greece, Portugal and Spain and we told our partners we had to solve the problem ourselves without the help of the IMF."
The comments come amid growing disquiet over the plight of a number of euro area economies that have seen the yields on their bonds pushed higher in recent weeks as investors fret over their ability to finance their ballooning deficits. Shares in the euro area suffered their worst week in 11 months, with some traders fearing either a bail-out or, at the extreme, the beginning of a fatal disintegration of the euro project.
Greek bonds have come under extreme pressure, with the gap between their yields and those of German bunds widening to four percentage points, amid suspicion that the country's authorities will not be able to reduce the country's budget deficit sufficiently in the coming years. In the latter half of the week similar concerns surrounded Portuguese and Spanish debt. Economists say that without the luxury of being able either to depreciate their currencies or inflate away some of the debt, the economies may be caught in a debt spiral.
Although the G7 ministers insisted that the problems were manageable, German Conservative leader Günther Oettinger said in a newspaper interview yesterday that the euro was "in danger of becoming unstable". The German finance minister, Wolfgang Schäuble, said: "Greece has to realise that when you break the rules over a long period of time, you have to pay a high price."
The meeting, which is being held in Canada's Arctic territory of Nunavut, may be the last significant finance ministers' summit of the G7, since the grouping of rich nations is being supplanted by the broader G20 grouping, which has become more influential in the wake of the financial crisis. A dinner and "fireside chat" on Friday night was dominated by euro area issues, and although the formal debate yesterday was focused on banking issues, the quandary of sovereign debt remained high on the agenda.
Source: The Telegraph
Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal
05 February 2010
Published at 22:15 Comments (0)
The Greek debt crisis has spread to Spain and Portugal in a dangerous escalation as global markets test whether Europe is willing to shore up monetary union with muscle rather than mere words.
Julian Callow from Barclays Capital said the EU may to need to invoke emergency treaty powers under Article 122 to halt the contagion, issuing an EU guarantee for Greek debt. “If not contained, this could result in a `Lehman-style’ tsunami spreading across much of the EU.”
Credit default swaps (CDS) measuring bankruptcy risk on Portuguese debt surged 28 basis points on Thursday to a record 222 on reports that Jose Socrates was about to resign as prime minister after failing to secure enough votes in parliament to carry out austerity measures.
Parliament minister Jorge Lacao said the political dispute has raised fears that the country is no longer governable. “What is at stake is the credibility of the Portuguese state,” he said.
Portugal has been in political crisis since the Maoist-Trotskyist Bloco won 10pc of the vote last year. This is rapidly turning into a market crisis as well as investors digest a revised budget deficit of 9.3pc of GDP for 2009, much higher than thought. A €500m debt auction failed on Wednesday. The yield spread on 10-year Portuguese bonds has risen to 155 basis points over German bunds.
Daniel Gross from the Centre for European Policy Studies said Portgual and Greece need to cut consumption by 10pc to clean house, but such draconian measures risk street protests. “This is what is making the markets so nervous,” he said.
In Spain, default insurance surged 16 basis points after Nobel economist Paul Krugman said that “the biggest trouble spot isn’t Greece, it’s Spain”. He blamed EMU’s one-size-fits-all monetary system, which has left the country with no defence against an adverse shock. The Madrid’s IBEX index fell 6pc.
Finance minister Elena Salgado said Professor Krugman did not “understand” the eurozone, but reserved her full wrath for the EU economics commissioner, Joaquin Almunia, who helped trigger the panic flight from Iberian debt by blurting out that Spain and Portugal were in much the same mess as Greece.
Mrs Salgado called the comparison simplistic and imprudent. “In Spain we have time for measures to overcome the crisis,” she said. It is precisely this assumption that is now in doubt. The budget deficit exploded to 11.4pc last year, yet the economy is still contracting.
Jacques Cailloux, Europe economist at RBS, said markets want the EU to spell out exactly how it is going to shore up Club Med states. “They are working on a different time-horizon from the EU. They don’t think words are enough: they want action now. They are basically testing the solidarity of monetary union. That is why contagion risk is growing,” he said.
“In my view they underestimate the political cohesion of the EMU Project. What the Commission did this week in calling for surveillance of Greece has never been done before,” he said.
Mr Callow of Barclays said EU leaders will come to the rescue in the end, but Germany has yet to blink in this game of “brinkmanship”. The core issue is that EMU’s credit bubble has left southern Europe with huge foreign liabilities: Spain at 91pc of GDP (€950bn); Portugal 108pc (€177bn). This compares with 87pc for Greece (€208bn). By this gauge, Iberian imbalances are worse than those of Greece, and the sums are far greater. The danger is that foreign creditors will cut off funding, setting off an internal EMU version of the Asian financial crisis in 1998.
Jean-Claude Trichet, head of the European Central Bank, gave no hint yesterday that Frankfurt will bend to help these countries, either through loans or a more subtle form of bail-out through looser monetary policy or lax rules on collateral. The ultra-hawkish ECB has instead let the M3 money supply contract over recent months.
Mr Trichet said euro members drew down their benefits in advance -- "ex ante" -- when they joined EMU and enjoyed "very easy financing" for their current account deficits. They cannot expect "ex post" help if they get into trouble later. These are the rules of the club.
Source: The Telegraph
Greece under EU protectorate as funds shift fire to Portugal
04 February 2010
Published at 14:24 Comments (0)
The European Commission has ordered Greece to slash public spending and spell out details of its austerity plan within "one month", invoking sweeping new EU Treaty powers to impose a radical shake-up of the Greek economy.
Greece's labour federation immediately called a general strike for February 24, dashing hopes that Europe's provisional backing for Greek crisis policies would restore investor confidence.
Joaquin Almunia, the EU economics commissioner, said tough measures were "extremely urgent" to prevent a further flight from Greek debt. "The huge imbalances from which the Greek economy is suffering are not sustainable in the long run. The fact of the matter is that markets are putting on pressure. This pressure cannot be ignored."
Mr Almunia said concerns have spread beyond Greece to other eurozone countries where public finances are spinning out of control, chiefly Spain and Portugal. "In these countries we have seen a constant loss of competitiveness ever since they joined the eurozone. The external financing needs are quite big," he said.
Yields on 10-year Portuguese bonds jumped 21 basis points yesterday as funds switched their fire to the next "domino", questioning whether the government of Jose Socrates can deliver spending cuts without a parliamentary majority. "The lightning rod has been passed to Portugal: who is next – Spain?" asked Marc Chandler, from Brown Brothers Harriman.
George Papandreou, the Greek premier, has agreed to a rise in fuel taxes and a partial freeze in public wages to stop the country "falling off a cliff". Even this will not be enough to satisfy Brussels – itself under pressure from Germany and the European Central Bank. The EU's hard-line faction is afraid that fiscal discipline will break down altogether across "Club Med" nations unless Greece first suffers public flagellation.
Brussels invoked new EU powers under Article 121 of the Lisbon Treaty, allowing it to reshape the structure of pensions, healthcare, labour markets and private commerce – a step-change in the level of EU intrusion.
The EU told Greece to "spell out the implementation calendar of (budget) measures within one month". Athens must be ready to "adopt additional measures if needed" and to submit quarterly updates.
To cap the humiliation, the EU is taking Greece to court over past falsification of budget figures. "This is the first time we have established such an intense and quasi-permanent system of monitoring," said Mr Almunia. The Greek Left said the measures reduce Greece to an economic protectorate
The gap between what EU demands and what ordinary Greeks seem willing to accept is so wide that it may prove extremely hard for Mr Papandreou carry the country. The top union bloc said the government had "succumbed to the will of the markets" but would now have to face the stronger will of the people.
Samir Patel, from the consultancy BH2, said austerity plans will "almost certainly send Greece into a deflationary spiral", and tip its banking system "into the Mediterranean Sea". Greece is being told to carry out IMF-style retrenchment without the IMF cure of devaluation.
One banker described events as eerily similar to market confusion before the failure of Bear Stearns and Lehman Brothers in 2008, this time involving sovereign states rather than banks. It is assumed that Europe must in the end rescue Greece, but Germany is so far sticking to its "no bail-out" mantra and nobody knows for sure how the drama will end.
The legal and political structure is simply not ready to cope with an escalation of the crisis and the problems spreading to Spain, should that occur. Spain's budget deficit reached 11.4pc last year, and is on a worrying trajectory for a country that has lost so much intra-EMU competitiveness and cannot let the currency take the strain. Spanish bank BBVA shocked markets last week with a 94pc fall in profits, largely due to property losses. Spain's mortgage association said days later that the "real estate sector is bankrupt" and threatened the financial system.
Spain's total public and private debt is over 300pc of GDP, much higher than Greek debt. With unemployment already above 4m – or 4.5m including regional jobless schemes – Madrid will not react well to the sort of austerity imposed on Athens. Fears that the slow fuse on Spain's political crisis may soon detonate a timebomb is creeping into the markets.
Source: The Telegraph
Spanish mortgage leader declares real estate industry is bankrupt
03 February 2010
Published at 14:27 Comments (0)
n a somewhat shocking and worrying statement a leading Spanish lender has declared the country’s real estate sector is ‘bankrupt’. According to Santos Gonzalez Sanchez, president of the Spanish Mortgage Association who speaks on behalf of the country’s mortgage lenders, there is so much debt in the industry that finance for property development has effectively dried up.
‘The real estate sector is bankrupt,’ he said, pointing out that Spanish developers had a combined debt of €324 billion in the third quarter of 2009, the equivalent of around 30% of Spanish GDP, according to figures from the Bank of Spain. The interest bill alone is around €15 billion a year.
More than 50% of the debt was used to buy land for which there is now no market. ‘Whilst those plots of land are not properly valued, the financial system can’t start afresh and won’t be able to finance new homes,’ Gonzalez told the Spanish press.
‘The viability of the property sector is in question and it is putting the financial sector in danger,’ he warned.
Gonzalez added that something drastic needs to be done. He said that the Government or the Bank of Spain needs to take a lead in tackling the problem instead of ‘looking the other way’.
Some experts believe that Spain needs to create a ‘bad bank’ where all the toxic real estate loans can be dumped, freeing the banks from their bad debts and enabling them to start lending again.
Gonzalez also warned that the situation has wider implications as the situation with the developers is pushing up the cost of credit for the whole Spanish economy. ‘The developers’ debts affect the credit ratings of the financial institutions, with all the consequences that has for a sector that still hasn’t fully recovered its liquidity. The financial system will have to explain how long it can bear this situation,’ he added.
Experts are also warning that Spanish banks may have to deal with a tidal wave of repossessions this year, with big implications for the property market. The auctions banks normally use to dispose of repossessions are struggling to attract buyers, as the credit crunch has hit even the opportunists who traditionally bought at auction.
Spain’s General Judicial Council forecasts 180,000 foreclosures this year, up from 114,958 last year. With few buyers at auction, banks will have to take back the properties onto their books at the write-off price of 50% of valuation, which implies recognising a loss. That could have big implications for the banks and the property sector in general.
The big question is what impact this new batch of repossession, the equivalent of 15% to 20% of the current inventory of property for sale, will have on the market. These properties could end up dumped on the market at write off values that will send prices down.
Source: Property Wire
Are you ready for higher taxes in Spain?
03 February 2010
Published at 14:14 Comments (0)
Expatriates living in Spain have been hammered by the weakening Sterling to Euro exchange rate, negligible interest rates, pension restrictions and the fall out of the credit crunch.
Now they also have to face the further blow of higher taxes, as we begin to see the predicted tax rises sweeping Europe.
The UK led the way by announcing a 50% income tax rate for high earners, and Spain indicated over the summer that it would have to increase tax on the wealthy in order to tackle its ballooning budget deficit.
The Spanish 2010 Budget, which was delivered on 29th September, then went ahead and included various tax hikes, in spite of criticism from the opposition which warned that raising taxes at this critical time will only delay Spain's exit from recession.
One measure that will affect everyone living in Spain is the increase in the standard rate of VAT from 16% to 18%. The reduced rate currently applied to services and food production will increase from 7% to 8%. The super-reduced rate remains at 4%.
With income already reduced by poor interest and exchange rates, this increase will be noticeable for many expatriates. While there is nothing you can do to directly protect yourself from higher VAT, this is a good time to review your savings, investment and pension structures with a financial adviser to establish if there is anything you can do to increase your income.
Those with savings and investments will be impacted by the proposed increase in the savings tax rate, which includes capital gains and dividend income as well as bank interest.
This rate will increase from 18% to 19% for the first 6,000 euros of income, then to 21% on the excess. This will have a negative impact on wealth preservation and investment income, at the same time as the VAT increase will reduce the purchasing power of your wealth and income. Coming at a time of such low interest rates, these changes will do nothing to help expatriates living in Spain, especially those with large holdings in bank deposits.
The budget also includes plans to abolish the annual income tax allowance of 400 euros for employees. Provided the proposals are approved by parliament, the savings tax increase will come into effect from 1st January next year, while the VAT increase will apply from 1st July. Overall, the 'austerity budget' contains almost 11 billion euros in proposed tax increases.
Read the rest of the article here.
Spain’s official jobless tops 4m
02 February 2010
Published at 13:59 Comments (0)
Nearly 125,000 people registered as unemployed in Spain last month, pushing the official total to more than 4m for the first time in the country’s history.
The employment and immigration ministry said on Tuesday that the monthly registration was more than 3 per cent higher than in December 2009.
At the end of January, there were a record 4.05m people listed as unemployed in the country. While admitting the data were “very negative”, employment secretary-general Maravillas Rojo said January was a traditional black spot for job creation.
“According to the historical data, unemployment increases (in January) even during periods of economic growth,” she said.
She added that the rate of increase had slowed compared with the same month this year.
Read the full article at the FT.com
Spain January Jobless Claims +3.1% On Month, +22% On Yr
02 February 2010
Published at 13:58 Comments (0)
MADRID (Dow Jones)--Spanish jobless claims continued to surge in January as one of Europe's worst economic downturns continued, government data showed Tuesday.
Spanish jobless claims rose by 124,90, or 3.1%, to 4.0 million in January from December, the labor ministry said in a statement. January jobless claims were up 22% on the year.
"January is a bad month for employment," Employment Secretary Maravillas Rojo said, adding that in the past even during times of economic growth, unemployment would go up in that month.
Joblessness in January rose mostly in the services sector, the labor ministry said.
The government is aware that it needs to take new measures and on Friday it will outline proposals to fight unemployment, Rojo said.
The global financial crisis precipitated the collapse of Spain's labor-intensive housing market last year and pitched the wider economy into recession.
While many of Europe's large economies returned to growth in the third quarter of last year, Spanish output continued to contract.
According to data released in late January by Spain's National Statistics Institute, or INE, the country's unemployment rate rose to 18.83% in the fourth quarter from 17.93% in the third quarter of last year. Spain has the EU's second highest jobless rate behind that of Latvia.
Source: Wall Street Journal
Ryanair shrinks losses and raises profits forecast
01 February 2010
Published at 14:36 Comments (0)
Budget airline Ryanair has raised its full-year profit forecast as passenger numbers continue to rise.
It said it expected full-year net profits of about 275m euros, as it reported a 10.9m-euro ($15.3m; £9.5m) loss in the October-December period.
The loss was much narrower than the 101.5m-euro deficit recorded in the same period in 2008.
Ryanair said the result had been helped by a 37% fall in fuel costs, which had offset a 12% cut in fares.
But although passenger numbers increased by 14%, spending on Ryanair's extras - such as paying for checking in baggage - rose by just 6%.
Ryanair chief executive Michael O'Leary said the slower growth in what the airline calls "ancillaries" was due to "changes in consumer behaviour".
The carrier's new profit forecast compares with its previous estimate of "the lower end of the range of 220m to 300m euros," Ryanair said.
However, despite the higher forecast, the airline warned that market conditions remained difficult.
Even so, the Irish-based airline said it would continue to pick up market share from rivals, and expected to do particularly well in Italy, Scandinavia, Spain and the UK.
The company has been criticised for charging for a raft of extras on top of its basic ticket price.
Last month, the Office of Fair Trading Budget accused Ryanair of being "puerile and childish" over its payment policy, with customers only avoiding fees when they pay for tickets online if they use a Mastercard prepaid card.
In an interview with the BBC, Ryanair chief operating officer Michael Cawley said such criticism was not a concern to the company when it was expanding so fast.
He said it was the fastest-growing airline in Europe - and one of only two in the region that were growing at all.
Mr Cawley added that the fact passenger numbers had risen in the third quarter - and it was expecting another seven million more customers to fly with it in its next full year - spoke for itself.
Source: BBC News
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