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The latest business, economic,property, stock market and financial news from Spain. Keep up to date with what is happening with the Spanish economy, stock market, the economic crisis, the euro zone debt sovereign debt crisis and the Spanish property market.

Spain unveils radical austerity budget
31 January 2010

Spain unveiled a radical austerity plan on Friday in an attempt to boost its credibility among investors after a week of financial market turmoil for fellow eurozone member Greece.

Madrid rushed out hurriedly prepared measures to narrow its budget deficit by €50bn ($70bn, £43bn) over four years. It is also raising the national retirement age from 2013.

Greece also tried, with renewed energy, to salvage its reputation after seeing the value of its government bonds tumble over the week on investor worries about its fiscal health. The sell-off raised concerns the country will find it more expensive and difficult to raise future funds from bonds markets.

George Papandreou, Greek prime minister, said t the World Economic Forum in Davos that his country was prepared to “draw blood” with domestic reforms to establish its financial credibility and was not contemplating external help in case its deficit reduction plan failed.

Madrid’s plans underlined the concern in European capitals about the economic crisis in Greece and the loss of confidence among bond investors in the weaker eurozone economies.

Read the full article at FT.com



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Funds flee Greece as Germany warns of "fatal" eurozone crisis
29 January 2010

Germany has triggered a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region's economic crisis has turned dangerous and could prove "fatal" for the entire eurozone.

The yield on 10-year Greek bonds blasted upwards by over 40 basis points to 7.15pc in a day of wild trading. Spreads over German Bunds reached almost four percentage points, by far the highest since Greece joined the euro, and close to levels that risk a self-feeding spiral. Contagion hit Portuguese, Spanish, Irish, and Italian bonds.

George Papandreou, the Greek premier, said in Davos that his country had been singled out as the weak link in a "attack on the eurozone" by speculators and political foes. "We are being targeted, particularly by those with an ulterior motive."
 
Marc Ostwald, from Monument Securities, said the botched bond issue of €8bn (£6.9bn) of Greek debt earlier this week has made matters worse. Many of the investors were "hot money" funds that bought on rumours that China was emerging as a buyer, offering them a chance for quick profit. When the China story was denied by Beijing and Athens, these funds rushed for the exit.

However, a key trigger yesterday was testimony in Germany's parliament by economy minister Rainer Brüderle, who said there would be "no bail-outs" for struggling debtors and no move to a "European economic government".

"A few European nations are exhibiting dangerous weaknesses. That could have fatal consequences for all countries in the eurozone," he said. Despite the warning, he said each country must solve its own problems.

"Germany is not in a mood to be the deep pocket for what they consider profligate, southern neighbours," said hedge fund doyen George Soros.

Mr Brüderle's hard line contradicts a report in Le Monde that Franco-German officials are discussing a rescue for Greece in order to keep the International Monetary Fund at bay.

The paper cited a source saying that EMU partners were ready to "help" Greece. "It is a question of credibility for the eurozone. The IMF might want to impose monetary conditions."

Le Monde's story was shot down by Berlin and Paris, but there is little doubt that certain officials have been trying to build momentum for a rescue. It is clear that the EU family is split on the issue. Jean-Claude Juncker, head of the Eurogroup of finance ministers, backs "assistance", with support of EU integrationists hoping to nudge the EU towards full fiscal union.

This is fiercely opposed by Berlin, and the German-led bloc at the European Central Bank. There are reports that Berlin is deliberately bringing the crisis to a head, hoping to lance the boil early and force the Club Med states to reform before it is too late. If so, this is a risky strategy. German banks have huge exposure to Greek, Spanish, and Portuguese debt.

Hans Redeker, currency chief at BNP Paribas, said Greece will face "great trouble" if it has to pay 7pc rates for long. Athens must raise €53bn this year, mostly in the first half. It has a been relying on cheap short-term debt to fund the budget deficit of 13pc of GDP, but this raises "roll-over risk".

Tim Congdon, from International Monetary Research, said the danger is that wealthy Greeks may shift money to bank accounts abroad if they lose confidence (akin to Mexico's Tequila Crisis in 1994-1995). This would set off a banking crisis and become self-fulfilling.

Greece has been financing current account deficits – 15pc of GDP in 2008 – through its banks, which have built up €110bn foreign liabilities. "If foreign creditors want their money back, defaults and/or a macroeconomic catastrophe appear inevitable," Mr Congdon said.

Adding to worries, Moody's has issued an alert on Portugal's "adverse debt dynamics", saying Lisbon needs a "credible plan" to reduce a structural deficit stuck at 7pc of GDP rather than "one-off measures".

The deeper concern is Spain, where youth unemployment has reached 44pc and the housing bust has a long way to run. Nouriel Roubini – the economist known as 'Dr Doom' – said Spain is too big to contain. "If Greece goes under that's a problem for the eurozone. If Spain goes under it's a disaster," he said.

Jose Luis Zapatero, Spain's premier, replied wearily: "Spanish public debt (52pc of GDP) is 20pc lower than Europe's average; our treasury spends 5pc of revenues on debt costs, less than France and Germany. Nobody is going to leave the euro," he said.

Source: The Telegraph



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Eurozone unemployment rate hits 10%
29 January 2010

BRUSSELS — Unemployment hit 10 percent in Europe on Friday, amid rising inflation and a weakened euro currency according to new data that shows recession-mired Spain bearing the brunt of a jobless recovery.

The human cost of post-recession, structural economic rebirth could be seen in updated European Union data when the seasonally-adjusted unemployment rate for the 16 euro countries hit a miserable one in 10 in December.

The news came on top of rising inflation -- with separate official figures showing the annual rate of price rises hitting 1.0 percent, a new peak after falling to an all-time low of minus 0.7 percent six months earlier.

The rising prices also come at a time when the euro is losing ground against the dollar -- with the European currency's value having slipped considerably from a November peak of 1.50 dollars to currently trade at under 1.40 dollars.

An estimated 87,000 additional people tumbled out of work in the last weeks before Christmas, according to the EU's Eurostat agency.

That may have been down from the 102,000 people who joined benefit queues in November -- but it still took the total number of unemployed people across the 16 countries that share the euro to 15.763 million.

The 10 percent rate was the highest since the currency was launched a decade ago and up from a downwardly-revised 9.9 percent in November.

Official figures published earlier this month had prematurely pegged the November eurozone rate at 10 percent.

Across the 27-nation EU, December's rate was only a smidgeon behind at 9.6 percent, up from 9.5 percent and corresponding to 163,000 more people unemployed.

More than 23 million people were calculated to be out of work across the world's biggest open trading bloc.

That meant that in the last year, 4.628 million people joined the ranks of the jobless across the EU, which also includes non-euro Britain, which only exited recession this week, and eastern industrial powerhouse Poland.

Some 2.787 million of those were in the core euro area.

Spain's unemployment rate hit a massive 19.5 percent, albeit only slightly up from the previous month.

Separate data from Madrid showed that the rate in Europe's fifth-largest economy -- ravaged by a radical contraction after a lengthy property, construction and tourism boom -- soared to 18.83 percent throughout the fourth quarter of 2009.

A total of 4.326 million people were out of work in Spain throughout that longer period, up more than one million from a year ago.

Experts have repeatedly expressed fears of a "double-dip" recession on the Iberian peninsula -- which is also struggling with a Greek-style public deficit way above EU targets.

"Although the rise in eurozone unemployment has slowed in recent months, it still seems poised to trend higher during much, if not all, of 2010," warned analyst Howard Archer of IHS Global Insight.

The "good news" was that it was the smallest rise since May 2008, but he warned that the wider psychological impact is "likely to hold down wage growth and limit the upside for consumer spending."

All told, the signs were that the European Central Bank will keep interest rates down at 1.0 percent until "at least late-2010," he concluded.

Source: AFP



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Spain to Discuss EU50 Billion in Spending Cuts, Official Says
29 January 2010

Jan. 28 (Bloomberg) -- Spain’s Cabinet will discuss spending cuts of as much as 50 billion euros ($70 billion) by 2013 as it aims to slash the budget deficit by two-thirds to meet a European Union target.

At its meeting tomorrow, the government will discuss the so-called austerity plan that aims to cut current spending in the central and regional administrations, said an official at the prime minister’s office in Madrid today who declined to be named in line with policy.

Spain, mired in recession with the highest jobless rate in the euro region, has come under scrutiny amid concerns that smaller European countries like Greece may struggle to finance their growing debt. Even as Spain’s public-debt burden is about half the size of Greece’s, the risk premium on Spanish bonds has surged to the highest in nine months.

Spain’s public-sector deficit probably amounted to 11.2 percent of gross domestic product last year, according to forecasts from the European Commission, which has set a 2013 deadline to cut the shortfall to the 3 percent EU limit. The country’s debt burden is set to double from before the crisis to 74 percent in 2011.

Spain’s economy has been contracting since the second quarter of 2008, pushing the unemployment rate to 19.4 percent as the collapse of a construction boom destroyed more than a million jobs. In response, the government created one of the biggest stimulus programs in Europe, putting builders back to work, and extended jobless pay for the long-term unemployed.

To shore up state finances and convince investors about its deficit-cutting plans, the government raised taxes on income from savings in 2010 and will increase value-added tax in July.

Bank of Spain Governor Miguel Angel Fernandez Ordonez said more needs to be done as reining in the deficit is the most “urgent” priority, along with overhauling labor rules.

“It will be necessary to implement, in each component of spending, deep structural reforms,” he said in a speech in Vigo, Spain, on Jan. 26.

Source: Bloomberg
 



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Euro zone inflation, unemployment up
29 January 2010

(Reuters) - Euro zone inflation inched up 1.0 percent year-on-year in January, much less than expected, in a sign price pressures were muted despite the nascent recovery.

Eurostat also said the unemployment rate in the euro zone rose to 10.0 percent of the workforce from a downwardly revised 9.9 percent in November -- the highest jobless rate since August 1998.

ANALYSTS' COMMENTS

NICK KOUNIS, CHIEF EUROPEAN ECONOMIST AT FORTIS:

"This was below the consensus forecast of 1.2 percent, but not really a surprise following lower than expected German inflation figures earlier in the week.

"We expect HICP inflation to hover at around 1 percent this year. Rising energy and food price inflation will have an upward effect, but this is likely to be offset by some further decline in core inflation.

"This reflects that rising economic slack will bear down on underlying price pressures. Next year, headline inflation is likely to gradually move up, as the downward trend in the core flattens out, while the upward pressure from commodity prices should continue to come through.

"However, HICP inflation is likely to remain below the ECB's price stability goal. The overall picture will be one of slow economic recovery accompanied by low inflation, which should allow the ECB to withdraw policy accommodation very gradually."

HOWARD ARCHER, CHIEF EUROPEAN ECONOMIST AT IHS GLOBAL

INSIGHT:

"The further modest rise in Eurozone consumer price inflation in January and the prospect of a further limited increase in the near term is unlikely to worry the ECB given that it is very much an energy price base effects story and underlying inflationary pressures currently remain muted.

"Meanwhile, although the rise in Euro zone unemployment has slowed in recent months, it still seems poised to trend higher during much, if not all, of 2010.

"This is likely to hold down wage growth and limit the upside for consumer spending. Consequently, there remains a compelling case for the ECB to only very gradually withdraw its emergency liquidity measures, and to keep interest rates down at 1.00 percent not only at next Thursday's February policy meeting but also until at least late-2010.

"The current signs are that the ECB is on this policy track."

CLEMENTE DE LUCIA, BNP PARIBAS

"After plunging to an all time low in July 2009 (-0.7 percent), the inflation rate has been constantly increasing.

"According to Eurostat flash estimate, inflation rose to 1 percent in January, up by 0.1 pp with respect to the previous month.

"Energy and food prices are likely to have been the main driver of the January increase.

"Oil prices rose significantly, particularly over the first two weeks of the month. On average, oil prices are likely to have increased by around 2.6 euro with respect to December 2009.

"Moreover, bad weather conditions are likely to have pushed higher fresh food prices. By contrast, core inflation, after increasing to 1.1 percent in December 2009 from 1 percent, should have resumed trending down.

"Large spare capacity in the economy will continue to exert significant downward pressures on core inflation over the coming months, limiting inflationary pressures.

"Moreover, the ongoing deterioration of labour market conditions will limit wage inflation, one of the main drivers of core inflation.

"In December, the unemployment rate, also released this morning, rose to 10 percent, the highest rate since June 1998.

"As labour market variables lag activity, the unemployment rate is likely to continue to increase over the coming months. Under these conditions the annual growth rate of compensation per employee is likely to decrease further. From the cyclical high of 3.6 percent year-on-year recorded in Q4 2008, compensation per employee eased to 1.4 percent year-on-year, in Q3 2009, reaching the lowest rate since the creation of EMU, and just short of the all-time low of mid 1998.

"Monetary developments confirm the weakens of inflationary pressures.

"Inflation is forecast to be well below the 2 percent ECB ceiling target this year and next year."

Source: Reuters



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Travellers get more for their money in Spain
28 January 2010

Cost-conscious travellers from the UK could return to Spain this summer for the best value holidays, a new survey reveals.

The fourth annual Holiday Money Report from Post Office Travel Money says rocketing inflation has seen Turkey prices soar by 44 per cent in a year, leaving the cost of a basketful of standard items in Spain costing barely half the comparable price in Turkey.

The list of top 10 cheapest destinations for British travellers converting pounds into local currency is headed by Hungary, followed by Thailand, Bulgaria, Spain, Indonesia, Czech Republic, Kenya, Malaysia, Japan and Croatia.

The report also warns that the eurozone countries, which saw holiday demand crash in 2009 as the Euro soared in value, are fighting back. They are helped by the fact that many think the Euro is now significantly overvalued.

The Post Office report says: "The eurozone, Europe's most unpopular holiday club, have already resorted to discounting to redress the impact of the strident Euro, but it will be interesting to see how Spain, Greece and France, in particular, play their cards to reclaim bookings.

"A 30 per cent year on year price drop for tourist commodities shows that Spain means business. While Hungary is again cheapest overall, Bulgaria's Sunny Beach becomes the lowest priced beach resort."

The report warns the so-called 'Aldi effect' is about to hit travel; as the distinctive style of the no-frills supermarket shopping reaches the travel industry.

Consumers are expected to accelerate cost-cutting trends first seen in 2009, including out-of-season breaks, camping trips, budget accommodation and all-inclusive packages.

City breaks are expected to do well, with rising demand for shorter holidays.

Cruising is also expected to sustain recent growth levels as "a good option for holidaymakers who want to know exactly how much their trip will cost in advance of travel".

Post Office Money reckons long-haul travel will be boosted by major events in 2010, including the Winter Olympics in Vancouver, the World Cup in South Africa and the opening of Universal Studios' Wizarding World Of Harry Potter in Florida.

However, selling ski holidays in Canada this winter is far from easy, because its dollar is 6 per cent stronger against the pound than a year ago. The ski resort of Banff was named the most expensive of 14 surveyed in the annual Ski Resort Report.

The report thinks the Sunshine State will zoom up the popularity stakes as Busch Gardens and Universal Orlando Resort open new attractions to "make Florida the centre of the universe for theme park fanatics, large and small".

British visitors can also expect good value for sterling in Mexico, fighting back from the swine flu epidemic.

The same goes for Iceland, badly hit by global financial crisis, and Egypt, where British visitors can expect to collect 14 per cent more Egyptian pounds for their sterling than a year ago.

British visitors splashing the cash in New York could get an extra bonus: The 2009 increase in the duty free allowance between the UK and USA to £340 means holidaymakers can bring back more gifts without paying duty on them.

Both New York and Las Vegas are flooded with new accommodation, suggesting lower prices in due course.

The shopping arcades of Dubai promise tasty bargains too: The value of the UAS dirhan has sunk against sterling, giving British visitors some 13 per cent more money to spend than a year ago.

Says the survey: "Travel agencies have been inundated with the kind of low-price offers more common in Red Sea resorts and Dubai, one of the world's glitziest destinations, is looking its cheapest ever."

Sarah Munro at Post Office Money thinks Sri Lanka has also been great value in the past six months, and could do even better in 2010.

"Sri Lanka is great value and a strong contender for budget long haul business," says Munro.

However, currency restrictions mean visitors holding sterling can only come home with a maximum 1,000 Sri Lankan rupees, worth less than £10.

If they take US dollars in cash or travellers cheques, they can take a minimum $5,000 (£3,102) with them when they leave - a much more generous allowance.

And shoppers planning shorter forays into Europe will find Prague, Warsaw and Budapest significantly cheaper than cities within the eurozone.

Cheapflights.co.uk, a leading comparison site on flights, claims a major move to Eastern Europe is evident.

Nadine Hallak, Cheapflights spokeswoman, says: "Brits are heading in the direction of Eastern Europe en masse. Our viewer searches show a massive increase in interest for the region, with Dubrovnik, Warsaw and Prague seeing the biggest rises for flights.

"Last year showed a recessional shift towards long and mid-haul destinations and as the downturn lingers, travellers are casting their nets a bit closer to home where the offering in price is similar to that of mid-haul."

At Lowcostholidays.com, which sold £109 million worth of holidays for 1.2 million passengers in 2009, chief executive Paul Evans says hoteliers in Spain are often willing to slash room rates, while Egypt hotels can offer "fabulous" value because they are dollar-based.  He has also seen a 120 per cent surge in bookings for all-inclusive holidays.

Source: The Telegraph



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The Spanish economy will fall by 0.6% this year 2010, according to the IMF.
27 January 2010

By 2011 the International Monetary Fund (IMF) left unchanged its forecast it had brought forward in October with Spain’s economy expected to grow by 0.9 percent.

The Spanish economy will fall by 0.6% this year 2010, according to the IMF.

The IMF improved by one tenth Spain’s growth forecast for this year, but still keeps the country in recession, a decrease of 0.6 percent, while the other major economies are starting top overcome the recession. So, Spain will be alone among the major developed countries this year.

By 2011 the International Monetary Fund (IMF) left unchanged its forecast it had brought forward in October with Spain’s economy expected to grow by 0.9 percent. These estimates contrast with those estimated for the euro area, which in 2010 will grow by 1 percent and 1.6 percent in 2011.

Germany and France, the area's largest economies and trading partners very important to Spain, comfortably exceed the European average for this year, with growth of 1.5 and 1.4 percent respectively. The Fund report forecasts upwards trends in all major world economies, except Spain.

Spain, moreover, is the only country with a negative sign in 2010, while the other major countries will this year will be positive, according to the agency. The United States, which caused the crisis, will grow 2.7 percent this year, which implies a major revision of the figures in the International Monetary Fund (IMF), which in October had predicted a gain of just 1.5 per percent. In 2011 the expansion will slow to 2.4 percent, according to its calculations.

To the world, the IMF predicts a recovery in two speeds, as the rebound in rich countries is weaker than after previous recessions, while in many of the emerging countries "activity will be relatively strong, especially thanks to buoyant internal demand" the report said.

Despite revisions, the IMF still believes that recovery is fragile and advises governments to maintain measures to stimulate economic activity. "The fiscal stimulus planned for 2010 should be fully in place," the report said. According to the agency, there is little evidence that private demand is improving at the margin of these incentive programs, so that premature withdrawal could stifle recovery. In developed countries, GDP before the crisis can only be recovered in late 2011, according to the Fund.

In them, the revival of its economy is complicated by high levels of unemployment and public debt, problems that persist in the financial system and the blow suffered by the economy of families, according to the IMF.

Source: Barcelona Reporter



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ECB will not set rates to suit troubled members-Weber
27 January 2010

FRANKFURT (Reuters) - The European Central Bank will not set euro zone interest rates to suit the bloc's few troubled members, Governing Council member Axel Weber said on Wednesday.

"We have to do monetary policy for the (monetary) union as a whole... we cannot take into our decisions developments in certain parts," Weber told broadcaster CNBC in an interview in Davos.

He also kept up the tough European rhetoric towards Greece, saying it had no option but to meet its promise to slash its budget deficit.

Weber, who heads Germany's Bundesbank, added that euro zone growth was expected to be around 1.5 percent next year and said that there were no signs on the horizon of a worrying surge in inflation.

Addressing U.S. President Obama's plans to cut the size of banking giants and force them to split off their more risky trading activities, Weber said he was cautious about splitting banks but welcomed the other measures.

Source: Reuters



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BBVA net profit sinks 94% as provisions for bad loans rise
27 January 2010

MADRID (Dow Jones)--Banco Bilbao Vizcaya Argentaria SA (BBV) Wednesday posted a shock 94% net profit decline, sharply undershooting expectations as it booked hefty loan-loss provisions and write-downs on the value of its U.S. operations.

Spain's second-largest bank by assets behind Banco Santander SA (STD) reported a net profit of EUR31 million in the last three months of 2009 compared with EUR519 million a year earlier. A Dow Jones Newswires survey of nine analysts forecast quarterly net profit at EUR1.07 billion.

The bank set aside EUR1.79 billion to cover mounting loan losses, as non-performing loans rose to 4.3% of total lending in December, up from 3.4% in September and 2.3% a year earlier.

It also booked EUR1.05 billion in charges to adjust the value of its U.S. banking franchise and set aside EUR533 million in provisions to cover commercial real-estate loan losses at its BBVA USA unit. "As we expected, it has been a very difficult year from a macro economy point of view," said BBVA's Chief Executive Officer Angel Cano.

"BBVA ends the year better provisioned, more resistant than a year earlier," Cano told analysts.

BBVA, which owns the biggest bank in Mexico and has the second-biggest banking network in Latin America, has in recent years bought four U.S. banks, building a 650-branch franchise across the Rio Grande.

Having avoided many of the problems hitting the global financial services industry by sticking to basic retail banking, the Spanish bank was able to pick up assets from banks that have fared worse. Last year, it won a U.S. government auction for Guaranty Financial Group Inc., a Texas bank that had been warning for months that it was on the verge of collapse because of swelling losses.

However, BBVA now faces challenging economic conditions in all of its main markets. Its loan-loss provisions also included EUR200 million for properties in Spain, EUR164 million for consumer loans in Spain and Portugal and EUR73 million for credit cards in Mexico.

Like local rival Banco Espanol de Credito SA (BTO.MC), BBVA set aside funds to cover loan losses expected to surface from the troubled real-state sector this year. Total provisions and charges for 2009 amounted to EUR6.57 billion.

Some provisions are in anticipation on an expected challenging environment for 2010 and "take advantage of business opportunities that may arise in different business segments," BBVA said in a press release.

Other charges include EUR90 million linked to Venezuelan operations, which have been hit by high inflation, and EUR300 million in provisions for early retirement programs as it seeks to cut labor costs.

"Stripping away the write-downs, the results were actually of good quality," said David Gualtieri of Madrid-based Ibersecurities brokerage. "The market will probably initially look at the bottom figure and sell off on the back of it. However, don't be surprised if it rebounds, as "the cleaning of the slate" is something that all the Spanish banks will eventually have to do, and being ahead of the curve is always better."

At 0900 GMT, BBVA shares were 5% lower at EUR11.42, leading decliners on Spain's key IBEX-35 index, which was down 2.6%. BBVA shares have lost more than 10% so far this year, also hit by planned reforms in the U.S. banking sector.

BBVA's net interest income rose 16% to EUR3.59 billion from EUR3.09 billion a year earlier, above market expectations of EUR3.36 billion. BBVA said it was able to strengthen key solvency ratios, raising its core capital ratio by 180 basis points from 2008 to 8%.

Source: Wall Street Journal
 



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European states need to borrow €2,200bn
26 January 2010

European governments will need to borrow a record €2,200bn ($3,100bn) from capital markets this year to finance budget deficits.

The projected borrowing is a 3.7 per cent increase on the €2,120bn raised in 2009, according to Fitch Ratings, as governments continue to issue sovereign bonds and short-term bills.

This will put pressure on public finances as yields and volatility are set to rise.

The ratings agency said France would be the biggest issuer this year, raising an estimated €454bn, then Italy at €393bn, Germany at €386bn and the UK at €279bn.

As a percentage of gross domestic product, borrowing is expected to be the largest in Italy, Belgium, France and Ireland - at about 25 per cent.

Fitch warned over a rise in issuance of short-term Treasury bills in France, Germany, Spain and Portugal, "as it increases market risk faced by governments, notably exposure to interest rate shocks".

Fitch said 2010 was likely to see greater volatility as the liquidity premium enjoyed by sovereign issuers diminished as the recovery gathered pace.

This meant a material risk of a rise in government funding costs as yields rose.

"Combined with concerns over the medium-term fiscal and inflation outlook, this will likely cause government bond yields to rise, potentially quite sharply."

But Fitch said high-grade sovereigns would not have problems accessing markets, though they would have to pay higher rates.

It said one of the most striking developments was the scale of deterioration in public finances, with every European country in budgetary deficit and four with deficits of more than 12 per cent of GDP.

"This reflects not only the cyclical effect of the recession and the discretionary easing of fiscal policy but also deterioration in the underlying health of the public finances," it said.

"Although debt markets have not imposed binding funding restraints on European governments, relative pricing is much more dispersed between countries since the onset of the financial crisis. This trend will continue."

Source: FT.com



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Fitur opens with hopes for a better year for tourism
25 January 2010

The economy might not be at its best but repesentatives of the Andalusian tourism industry sent out a message of optimism at the opening of the Fitur tourism fair in Madrid on Wednesday. The president of the Junta de Andalucía, José Antonio Griñán, said he was confident that the strengths of Andalucía as a tourist destination would enable the region to recover the three million visitors it lost last year. Some 170 countries have joined the quest for tourists this week in Madrid.
 
King Juan Carlos and Queen Sofía opened this year’s Fitur with a minute’s silence for the victims of the Haiti earthquake. Later during their brief tour of the fair the royal couple spent some time at the area Fitur has devoted to Haiti and greeted the Haitian Ambassador Yolette Azor-Charles.
The urgent need to boost the tourism industry in Spain was clear from the huge support this year’s international fair has been given by top dignitaries on a national and regional level. This is in contrast to the absence of stands representing smaller resorts and tourist municipalities that have had to strike Fitur off their budgets for this year.
 
The Junta de Andalucía president’s recipe for recovering lost visitors includes, he said in his opening speech, developing sustainable tourism, which, he explained, basically boils down to improving on what the Andalusian tourism industry already does very well.
 
In an attempt to maintain the optimistic tone the regional head of Tourism, Luciano Alonso, managed to find a ray of light in the negative tourism figures for 2009 in that the visitors who have come have stayed a little longer than average and have spent a little more money. Alonso stressed the importance of the Spanish tourists to the Andalusian industry and announced new promotinal campaigns for Easter and the summer.
 
In the middle of a recession, at a Fitur with fewer stands and fewer tourism professionals than usual, the optimism, however moderate, of the authorities made up for this year’s simpler, less elaborate stands. There’s a lot of work to be done, but the first day of Fitur was proof of a general consensus to put on a brave face and get on with things.



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Britons piled into Spain and got burnt. The Germans bided their time. Now they’re moving in, should we follow?
24 January 2010

Britons piled into Spain and got burnt. The Germans bided their time. Now they’re moving in, should we follow?

We may fancy ourselves as a nation of hot-shot property investors who know a financial gold mine when we see one, whether at home or abroad. But are we? As the economy has unravelled, so has our track record in making property purchases across the globe — especially in Spain, where there has been much more pain than gain.

German investors, on the other hand, have largely avoided our mistakes, and are now buying back property in their fav­ourite haunts, such as Mallorca, from distressed British sellers. Could it be that the Germans are just better than we are, not only at football, but at buying overseas property? And, if so, what does this mean? Is now the time for smart investors to follow German buyers back into the Spanish market?

The Germans used to be big buyers in Spain, but, from about 2003, financial worries at home and a prudent mind-set meant they began to retreat, just as the British advanced. Many sold to British buyers after years of surging property prices. Now it looks as if they are back, at least in preferred strongholds such as Mallorca and Gran Canaria.

“Ja! More Germans come back now,” says Margret Düllmann, head of Düllmann & Hundertmark, an estate agency in Gran Canaria. Martie Quick, a director of Engel & Völkers estate agency in Mallorca, is witnessing the same resurgence. “They bought low, sold high, and now they are back to buy low again,” he says.

Read the full article in the Telegraph


 



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Stays in Spanish hotels drop: statistics office
22 January 2010

Overnight stays in Spain's hotels dropped 6.6 percent in 2009 over the previous year despite a fall in rates, official data showed Wednesday, in the latest sign that the country's key tourism sector has taken a hit due to the recession.

The number of overnight stays by residents of Spain fell 3.2 percent to 109.8 million while the number of stays by non-residents fell 9.1 percent to 142 million, the national statistics institute said in a statement.

Average hotel rates declined 5.6 percent in 2009 over the previous year as establishments slashed rates in a bid to woo tourists in the midst of recession in Spain and in the country's main sources of foreign visitors.

In 2008 Spain lost its ranking as the world's second most visited country to the United States as the number of tourists it welcomed dropped 2.3 percent to 57.3 million, its first reversal in visitor numbers in over a decade.

Apart from the recession, Spain is feeling the pinch from the drop in the pound to near parity with the euro, which has made it more expensive for British holidaymakers to spend time at the resorts that dot its extensive coastline.

The appeal of the package sun-and-sand holidays that Spain pioneered is also beginning to wane as the popularity of independent travel booked over the Internet increases.

The tourism sector employed 2,250,000 people last year, or 12 percent of all workers in the country, according to the industry and tourism ministry.

Germany and Britain accounted for 54.2 percent of all overnight stays by non-residents in 2009.

The number of overnight stays by Germans fell 10.6 percent to 1.6 million while the number of stays by Britons also fell by 10.6 percent to 1.3 million.

The number of foreign tourists who visited Spain last year slipped 8.7 percent to just over 52 million, the second straight year of falling visitor numbers.

Source: The Independent

 



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Three-quarters of British expats in Spain considering returning home
20 January 2010

Almost three-quarters of British expatriates living in Spain are considering returning home because of the economic crisis, according to a new survey.

Falling property prices, a weak pound, and fears over job security are forcing those living abroad to rethink the move.

Britons residing in Spain are suffering the most financially, with four in five complaining that the drop in the value of the pound against the euro has left them worse off.
 
For many of the estimated one million Britons living in recession hit Spain, where unemployment stands at almost 20 per cent, the dream has turned sour.

The poll commissioned by Moneycorp, the UK foreign exchange specialist, found that 74 per cent of those living in Spain are considering repatriation.

Some 37 per cent of those who responded to the survey said they were already looking into returning home and a similar number said they may have to consider the option in the future.

British expats in Germany, Italy and France also responded with 38 per cent, 34 per cent and 33 per cent respectively stating that they would move back to the UK permanently.

David Kerns, Head of Private Clients at Moneycorp predicted a surge in the number of expats returning to the UK from countries within the European Union over the coming months.

"Our research shows that British expats have had a tough time and the findings reveal that no country has escaped unharmed from the economic downturn," he said.

"Brits living in Europe are feeling the effects of the weak pound as they are more likely to be reliant on income from their British property, UK pension and other regular sources of funds."

Those that own property abroad have seen the problem compounded by a dramatic fall in the real estate market, particularly in Spain, where prices on the Costas have dropped as much as 65 per cent.

"Brits living in Spain are particularly affected by the struggling property market with many owning holiday homes and letting out their Spanish properties," explained Mr Kerns.

But he said that British expats could do more to protect their income and avoid "nasty surprises" due to currency fluctuations.

"During challenging times, there is certainly more that expats can be doing to manage their money and make sure that they are making the most of their income," Mr Kern advised.

"By monitoring the currency markets and seeking expert guidance they can avoid nasty surprises in exchange rates and determine the best time to transfer money to and from the UK."

Source: The Telegraph



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Greece defies Europe as EMU crisis turns deadly serious
19 January 2010

Euroland's revolt has begun. Greece has become the first country on the distressed fringes of Europe's monetary union to defy Brussels and reject the Dark Age leech-cure of wage deflation.

While premier George Papandreou offered pro forma assurances at Friday's EU summit that Greece would not default on its €298bn (£268bn) debt, his words to reporters afterwards had a different flavour.

"Salaried workers will not pay for this situation: we will not proceed with wage freezes or cuts. We did not come to power to tear down the social state," he said.
 
Were we to believe that a country in the grip anarchist riots and prey to hard-Left unions would risk its democracy to please Brussels?

Mr Papandreou has good reason to throw the gauntlet at Europe's feet. Greece is being told to adopt an IMF-style austerity package, without the devaluation so central to IMF plans. The prescription is ruinous and patently self-defeating. Public debt is already 113pc of GDP. The Commission says it will reach 125pc by late 2010. It may top 140pc by 2012.

If Greece were to impose the draconian pay cuts under way in Ireland (5pc for lower state workers, rising to 20pc for bosses), it would deepen depression and cause tax revenues to collapse further. It is already too late for such crude policies. Greece is past the tipping point of a compound debt spiral.

Ireland may just pull it off. It starts with lower debt. It has flexible labour markets, and has shown a Scandinavian discipline. Mr Papandreou faces circumstances more akin to those of Argentine leaders in 2001, when they tried to cut wages in the mistaken belief that ditching the dollar-peg would prove calamitous. Buenos Aires erupted in riots. The police lost control, killing 27 people. President De la Rua was rescued from the Casa Rosada by an air force helicopter. The peg collapsed, setting in train the biggest sovereign default in history.

Economists waited for the sky to fall. It refused to do so. Argentina achieved Chinese growth for half a decade: 8.8pc in 2003, 9pc in 2004, 9.2pc in 2005, 8.5pc in 2006, and 8.7pc in 2007.

London bankers were soon lining up to lend money (our pension funds?) to the Argentine state – despite the 70pc haircut suffered by earlier creditors.

In theory, Greece could do the same: restore its currency, devalue, pass a law switching internal euro debt into drachmas, and "restructure" foreign contracts. This is the "kitchen-sink" option. Such action would allow Greece to break out of its death loop.

Bondholders would scream, but then they should have delved deeper into the inner workings of EMU. RBS said the UK and Ireland have most exposure, with 23pc of Greek debt between them (mostly for global clients). The French hold 11pc, Italians 6pc.

Remember, Athens holds the whip hand over Brussels, not the other way round. Greek exit from EMU would be dangerous. Quite apart from the instant contagion effects across Club Med and Eastern Europe, it would puncture the aura of manifest destiny that has driven EU integration for half a century.

I don't wish to suggest that Mr Papandreou – an EU insider – is thinking in quite such terms. Full membership of the EU system is imperative for a country dangling off the bottom of Balkans, all too close to its Seljuk nemesis. But Mr Papandreou cannot comply with the EU's deflation diktat.

No doubt, EU institutions will rustle up a rescue. RBS says action by the European Central Bank may be "days away". While the ECB may not bail out states, it may buy Greek bonds in the open market. EU states may club together to keep Greece afloat with loans for a while. That solves nothing. It increases Greece's debt, drawing out the agony. What Greece needs – unless it leaves EMU – is a permanent subsidy from the North. Spain and Portugal will need help too.

The danger point for Greece will come when the Pfennig drops in Berlin that EMU divergence between North and South
has widened to such a point that the system will break up unless: either Germany tolerates inflation of 4pc or 5pc to prevent Club Med tipping into debt deflation; or it pays welfare transfers to the South (not loans) equal to East German subsidies after reunification.

Before we blame Greece for making a hash of the euro, let us not forget how we got here. EMU lured Club Med into a trap. Interest rates were too low for Greece, Portugal, Spain, and Ireland, causing them all to be engulfed in a destructive property and wage boom.

The ECB was complicit. It breached its inflation and M3 money target repeatedly in order to nurse Germany through slump. ECB rates were 2pc until December 2005. This was poison for overheating Southern states.

The deeper truth that few in Euroland are willing to discuss is that EMU is inherently dysfunctional – for Greece, for Germany, for everybody.

Source: The Telegraph



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Ryanair puts ‘pee fee’ back on the agenda
18 January 2010

Ryanair is once again considering charging for its on-board toilets, The Irish Times reports, despite admitting last year that the surcharge was a publicity stunt.

Chief executive Michael O’Leary came clean last year when he confessed that the toilet fee “is not likely to happen, but it makes for interesting and very cheap PR”.

But that assessment now appears to have been revoked by spokesman Stephen McNamara, who has revealed that the no-frills airline is looking again at the proposal.

Mr McNamara said the £1/€1 charge would only apply to flights of an hour or less, including almost all of the carrier’s popular routes between the UK mainland and Ireland.

Talks are reportedly underway between Ryanair and Boeing about the possibility of refitting 50 of its 737 aircraft, replacing the existing three toilets with a single coin-operated loo.

“One toilet will discourage overdependence.” Mr McNamara said. “There is nothing in the rule book to say that an aircraft has to have any toilets at all, which might sound strange, but we believe three toilets are excessive.”

Despite the airline’s renewed enthusiasm, however, many observers remain sceptical.

Though removing toilets would allow Ryanair to add extra seats, any such changes would first be subject to extensive re-certification work which could cost up to £400,000 per plane.

The move would also make it significantly more difficult for Ryanair to sell its old fleet.

Nonetheless, Mr McNamara insists the infamous ‘pee fee’ is now firmly back on the airline’s agenda. He explained: “The funny thing about Michael is that he’ll say these things as an off-the-cuff remark, and then he’ll start to think about it more and more, and he’ll start doing the sums.”

Source: cheapflights.co.uk



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Spanish house prices ripe for further slide
18 January 2010

MADRID (Reuters) - Spanish house prices have fallen only modestly in the recession and remain acutely vulnerable to the massive stock of homes that banks have taken onto their books from struggling property companies and repossessions.

Spanish house prices fell just over 6 percent last year, government data showed on Friday, and have slipped 15 percent since a decade-old property bubble burst in 2007.

Talk of a turnaround is premature with the market still at least 55 percent overvalued, according to a study by The Economist. A prolonged recession and rampant unemployment weighs on any hopes Spaniards will be returning to the market soon.

"In Spain, property values have still not adjusted to the reality of the market. We think 2010 will be the year prices will adjust," said Javier Garcia-Mateo at property consultants Aguirre Newman.

Spain had outstripped most other European Union countries in gross domestic product growth since the end of the 1990s, but the global financial crisis exposed an economy built on cheap credit and an unsustainable rise in the property market.

BAILOUT OR BUST?

When the construction boom that fed the economic bonanza fizzled out, banks financing property development had to either allow the developers to go bust or bail them out by taking on unsold property.

Most banks chose the latter, which helped side-step an embarrassing spike in their non-performing loan ratios but piled a huge amount of empty housing onto their portfolios, further fuelled by rising evictions for non-payment.

Read the full article at Reuters
 



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Malaga to have Spain’s best airport food and shopping zone
17 January 2010

 
Six thousand square metres of bars, cafeterias and restaurants and 2,800 square metres of shops. With the opening of the new terminal building Malaga Airport is to become a first class commercial centre with an advantage to make most traders’ mouths water: more than ten million visitors a year, which could soon grow into 20 million. The lucky businesses to occupy this coveted space have now been chosen. Just over a month ago Aena awarded the contracts for the 21 new food and drinks premises and 24 shops, most of which will be in the new terminal building.
 
As expected competition for the contracts was tough. The large airport services groups sought the help of big names to give their bids more renown and the result is a “star-studded” commercial zone.
 
Those to have come out best are, on the catering side, the British multinational Select Service Partner (SSP) who will manage 15 of the 21 food premises available. Meanwhile on the commercial side the group Areas has won the contract for 11 of the 24 shops.
Some of the names to land at Malaga Airport ready for the Easter opening will be in Spain for the first time. These include Caviar House & Prunier, a restaurant aimed at more gourmet palates; and Whopper Bar, a new concept of burger bar launched recently by Burger King with only two branches open so far in the world: in Florida and Munich. The American coffee shop chain Starbucks has also chosen the new airport terminal for its first branch in the province of Malaga.
 
On the shopping side the airport will include a National Geographic store, the first in the world to be located in an airport. An area of the new commercial space will be devoted to Ferrari who hope to repeat the success they have had in Barcelona. They will be alongside names such as Adidas, Adolfo Domínguez, Cottet and Swarovski, among others.
 
On the food and drink side of things special mention must be given to La Moraga Airport, a venture that is fruit of the collaboration between the prestigious local chef Dani García and SSP in order to adapt his city centre bar to an airport environment. The partnership between the chef and the group will eventually be extended to other airports and countries, starting with France.
The director general of SSP for Spain, Blanca Ripoll, stresses that Malaga Airport’s commercial and restaurant area will be “the best in the country”. Airport staff are now working with the different firms in order to adapt their plans to the special features of an airport terminal. This is especially necessary in the case of firms that have never set up in an airport, such as Vips, which will be located in the new arrivals hall.
 
“We carried out an in-depth study of consumer behaviour, needs and habits at Malaga Airport, paying special attention to the British public, who make up 40 per cent of passengers coming and going from Malaga. They want to see names they know well, such as Starbucks or Burger King, but also places that make them feel that they are in Spain, and that is what La Moraga will do”, explains Ripoll.



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Moody’s said Spanish recession continue until the second quarter of 2010
15 January 2010

These forecasts are contained in a statement, arguing that the weakness of economic activity, coupled with rising unemployment and slower income, will "depress" the residential property market, which estimates that prices have fallen 9, 5% from their highs in 2008.

Risk measurement agency Moody's said the Spanish recession will continue until the second quarter of 2010.

Spain as a country will take the longest to shed the shackles of the economic recession in the euro area. Furthermore, it believes that in this whole year, GDP will grow only 0.2 per cent while unemployment will exceed 19 percent of the workforce.

These forecasts are contained in a statement, arguing that the weakness of economic activity, coupled with rising unemployment and slower income, will "depress" the residential property market, which estimates that prices have fallen 9, 5% from their highs in 2008.

Oversupply of housing in Spain, with about 1.5 million vacant homes will lead to a "long process of adjustment" for the housing market, warns Moody's.

The agency also said that low interest rates have helped many of those with mortgages to cope with the economic "turbulence", but warns that the faster recovery in the rest of the euro zone can make the price of housing rise later this year, which "may be premature" to Spain.

Despite this outlook, the agency believes that the market for mortgage-backed securitizations (RMBS) has stabilized in November, although the outlook remains negative.

Source: Barcelona Reporter

 



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Spain posts 8.7 percent drop in foreign tourists in 2009
14 January 2010

MADRID — Spain suffered a drop in foreign tourists of 8.7 percent last year due to the global economic slowdown, the government said Wednesday, its second straight year of falling visitor numbers.

The country received 52.5 million visitors in 2009, the industry ministry said, down from 57.4 million in the previous year when Spain lost its ranking as the world's second most visited country to the United States.

The government had expected the number of visitors to drop this year by 10 percent but Secretary of State for Tourism, Joan Mesquida, said the the decline in arrivals eased towards the end of the year.

"It was a complicated year," he told a news conference, adding that he was "moderately optimistic" for 2010 because of the improvement in the economy in Britain and Germany, the two main sources of visitors to Spain.

In 2008 the number of visitors to Spain fell by 2.3 percent over the previous year, its first reversal in visitor numbers in over a decade.

Apart from the recession, Spain is feeling the pinch from the drop in the pound to near parity with the euro which has made it more expensive for British holidaymakers to spend time at the resorts that dot its extensive coastline.

The country has also suffered from increased competition in recent years from cheaper sunshine destinations in the Eastern Mediterranean like Turkey and Egypt.

The appeal of the package sun-and-sand holidays that Spain pioneered is also beginning to wane as the popularity of independent travel booked over the Internet increases.

The tourism sector employed 2,250,000 people last year, or 12 percent of all workers in the country, according to the industry ministry.

Source: AFP

 



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Three quarters of Spain’s population believe the government is mishandling economic crisis
13 January 2010

Three quarters of Spain’s population believe the government is mishandling economic crisis

This survey suggests that 76% of respondents are somewhat disheartened (40.8%) or feel they did nothing (35.2%) as regard to how the executive faced a recession, while 74.9% believed the Government reacted to slowly (26.5%) or to late (48.4%) to the crisis. This harsh criticism of the executive management does not imply that the PP would have faired any better, since only 30.9% of those questioned believe that a government of that party would have handled the current crisis in a better way, while 62.8 % do not think so.

FUNCAS intends to present, at least once a year, a new survey on the perception of citizens about the economic situation, which in its first edition also shows the differences between respondents on the time they believe it will take to exit the crisis. 32.5% are confident that the crisis will not last for more than another a year and a half, 31.3% see the bottom of this situation in two years and a higher percentage of 33.8%, believes it will take more time.

Nevertheless, most respondents believe that in the last year its financial situation has remained the same (to 47.6%) or even improved slightly (to 7.8%), while 32.1% believe it has deteriorated a bit and it is much worse for 13.4%.

Source: Barcelona Reporter



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Spain's EU Economic Plan: Binding Goals
12 January 2010

As it assumes the presidency of the 27-member European Union, Spain is taking a hard line on the next 10-year EU economic plan: It wants firm compliance.

Spanish Prime Minister Jose Luis Rodriguez Zapatero has said the EU's new 10-year economic plan, set to be agreed over the coming months, should have binding goals and "corrective measures" for member states that do not comply.

Speaking ahead of the formal inauguration of Spain's EU presidency on Thursday (7 January), Mr. Zapatero also suggested that the European Commission be given new powers to police the fledgling plan, currently known as the "2020 Strategy."

"It is absolutely necessary for the 2020 Economic Strategy ... to take on a new nature, a binding nature," said Mr. Zapatero.

The Spanish leader suggested potential penalties for member states that fail to reach agreed economic targets could include cutbacks in payments from the EU budget.

"This is something we are going to put on the table. But I cannot preempt the outcome of the debate," said the Socialist prime minister, whose country is the first to hold the EU's six-month rotating presidency under the bloc's new Lisbon Treaty rules.

The calls for greater and more co-ordinated European efforts to tackle the ailing economy stand next to Spain's domestic situation, where years of rapid expansion ended abruptly with the onset of the financial crisis and the implosion of the country's property bubble.

While remaining vague on many of the details, Mr. Zapatero said a common energy policy and a common digital economy were examples of the priorities that should be included in the EU growth strategy.

"Our main aim is to introduce a qualitative leap in our economic union by means of new common policies," he said, pointing to the need for a greater role to be played by the commission.

"The Lisbon Treaty allows for more co-ordination, and for that to be truly effective, we need to equip the European Commission with new powers," said the Spanish leader, pointing to the absence of strong enforcement for the failure of the bloc's current economic plan, due to expire this year.

Outlook 'not bright,' says Van Rompuy

EU leaders are set to discuss the bloc's economic situation and the 2020 Strategy at an informal summit on 11 February, convened by the bloc's new permanent president, Herman Van Rompuy.

Speaking on Thursday at a Christian Social Union party conference in Wildbad Kreuth, Germany, Mr. Van Rompuy said the bloc's "long-term outlook is not bright," citing severe industrial decay in the wake of the deepest European recession since the Great Depression.

The former prime minister of Belgium said the lingering effects of the crisis may include a drop in investment on a "permanent basis" and higher "structural" unemployment, adding that western Europe risked losing its industrial base.

"Germany is the exception, but the Benelux countries, Italy and the UK are de-industrialising rapidly," he told attendees.

Mixed economic data would tend to support Mr. Van Rompuy's pessimistic statements, with positive data this week on EU business confidence in December tempered by poor retail figures for November in the eurozone.

Source: Business Week



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Spain's Santander launches British bank brand
11 January 2010

LONDON — Spanish banking giant Santander on Monday began renaming branches of Abbey and Bradford & Bingley, two British lenders which it now owns, it announced in a statement.

All Abbey and B&B branches will be renamed Santander by the end of January, the Spanish group announced in a statement. Santander plans to rename Alliance & Leicester, a third British bank which it owns, later in 2010.

"The name of Abbey National plc has today changed to Santander UK plc," the banking group said in a statement released to the London Stock Exchange.

"From today, the bank has started the rebrand of its Abbey and Bradford & Bingley branches, with 300 branches in the South East (of England) to be renamed today, with another 700 across the UK to be completed by the end of January," it said.

"Alliance & Leicester branches will be rebranded later in the year," the banking group added.

Santander, founded in 1857, is Europe's second biggest bank by stock market capitalization after number one HSBC. It had acquired British mortgage lender Abbey in 2004 for 9.2 billion pounds.

Last year, Santander expanded further into the British banking market, which was ravaged by the international credit crunch and global financial crisis.

The Spanish bank scooped up Alliance & Leicester in July 2009 in a deal worth 1.26 billion pounds.

And it bought part of the assets of troubled lender Bradford & Bingley for 612 million pounds (990 million dollars) in September 2009.

"This is a historic day for Santander as its name is firmly established on the UK high street," Santander Chairman Emilio Botin said in the statement.

"When Santander acquired Abbey in 2004, there were some who doubted we could make it a success. Today, there can be no doubts. Over the last five years we have transformed our UK business into one of the most successful banks in the country.

"The decision to become Santander will put us in an even stronger position the UK," Botin added.

Source: AFP



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The Coming Housing Crisis in Spain, and What It Means for Europe
08 January 2010

Economic woes in Europe's PIGS (an acronym for Portugal, Ireland, Greece, and Spain, states at the periphery of the EU) have been grabbing headlines recently. Greece's swan dive has gotten the most attention so far, but there's likely another economy in line for the springboard: Spain.
 
It's only just now started to show up on everyone's radar, too. When all attention was on housing prices, Spain looked relatively stable: Over the last year, average housing prices dropped a mere 9%. As HSBC bank put it (italics added), "The [price fall] is much smaller than the 20% peak-to-trough drop seen for the UK housing market or the 32% fall of US housing prices, and is difficult to explain given the dominance of the housing market in the Spanish economy."
 
Not so difficult. Spanish banks are holding all the properties. It's a repeat of a strategy from the early 1990's, when local banks held onto their property portfolios until economic recovery caught up and let them unload the properties at acceptable prices. Makes perfect sense -- if it worked before, why not try it again?

The only problem is the Spain's "resilient" property market is likely ready to evaporate. The Bank of Spain has doubled the amount local banks must set aside to cushion repossessed property losses, and with liquidity already hard to come by, the banks have no option but to sell their properties. June estimates by Spanish bank BBVA said that housing prices would drop by 10% in 2009 and 12% in 2010, with a total 30% peak-to-trough drop. A December review hasn't changed those numbers.

We've all seen the devastating impact of a 30% drop in housing prices in the U.S. Imagine what it might do to a country that already has the Eurozone's second-worst unemployment rate (nearly 20%, second only to Latvia), whose credit outlook has been downgraded to negative, and whose budget shortfall for 2009 is five times last year's levels.

Keep also in mind that Spain is the Eurozone's fifth-largest economy, which, because of its buoyant property sector, has been a vital intra-Eurozone source of demand for export-reliant markets like Germany.
 
If Spain's domestic financial system becomes more unstable, the shockwaves will be felt throughout asset and interbank markets. Keeping your European investments safe in a world economy this turbulent requires constant updates on market moves all over the Eurozone. The editor of Elliott Wave International's Monday-Wednesday-Friday European Short-Term Update Chris Carolan covers Spain every Wednesday.
 



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Spanish industrial output falls 5.7 percent
08 January 2010

MADRID — Spanish industrial output fell by 5.7 percent in November on a 12-month comparison, the national statistics office said on Friday.

Industrial output has been falling for more than a year but in the last six months the rate of contraction has slowed down

Source: AFP

 



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Spanish unemployment nears 4m
07 January 2010

Spanish unemployment rose to its highest level for more than a decade in December, reaching nearly 4m and dealing a blow to José Luis Rodriguez Zapatero, Spain's Socialist prime minister, who has made job creation the focus of his economic strategy.

The number of Spaniards listed as unemployed rose by nearly 55,000 in December to reach 3.92m. It makes 2009 the year with the highest unemployment level since at least 1997, the starting point for the current data series, according to the labour ministry.

Spain's unemployment rate is by far the highest among large eurozone economies. Almost 20 per cent of the workforce has no job, compared with a eurozone average of 9.8 per cent.

Until recently, the Popular party, Spain's rightwing opposition, had failed to capitalise on the government's difficulties in dealing with the economic crisis, but an opinion poll published last week gave the PP a convincing lead.

The poll, for the rightwing newspaper El Mundo, said support for the PP was at 43.6 per cent, more than five percentage points ahead of the Socialists with 38.5 per cent.

The Unión Sindical Obrera trade union, lamented the fact that the news came as Spain took on the European Union presidency and, "more serious still, the job destruction and low level of employment that it will take us years to recover from". Mr Zapatero and his ministers have said the main aim of Spain's six-month presidency will be to help Europe recover from the economic crisis. They reject suggestions that Spain's economic weakness will undermine its efforts to devise a plausible strategy.

Read the full article at ft.com



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A stumbling Spain must guide Europe
06 January 2010

By any standards, it was an unfortunate beginning. Spain’s six-month presidency of the European Union, which got underway this week, appears to have been subject to an attack by computer-hackers. On its first day, web-surfers navigating to the special presidency website found themselves staring at photos of Mr Bean, the hapless British comedy character who (some claim), bears a resemblance to José Luis Rodríguez Zapatero, the Spanish prime minister.

Mr Bean is famous for his stumbles and mishaps – and Spain is also looking accident-prone at the moment. On the previous occasions that Spain has assumed the presidency of the EU, the country’s mood was very different. Both the González and Aznar governments were presiding over a booming economy that infused the whole nation with a certain swagger. But Spain has been hit very hard by the global recession. Unemployment is close to 20 per cent and the all-important construction sector is on its back.

Perhaps Mr Zapatero is being distracted by his domestic travails, because the work programme that he has proposed for the Spanish presidency is remarkably anodyne, even by the undemanding standards of most European Union presidencies. The now unhacked website claims that the EU’s new Lisbon treaty will be the “focus of the Spanish presidency”. Since the treaty has just come into force – and puts into place a complex structure that combines the rotating presidency Spain has just assumed with a new permanent presidency – it is understandable that the Spanish see getting this new system to work as a priority.

Read the full article at ft.com



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Spain companies up for sale in 2010; Price? 1 euro
03 January 2010

MADRID (Reuters) - Foreign funds will be the buyers of debt-strapped Spanish businesses putting up "for sale" signs in 2010, many for the symbolic price of 1 euro, the director of a niche investment bank said.

As the world starts to emerge from the global economic crisis, Spain is still hovering behind, with deep unemployment and heavy public debt shouldered by the country's banks. This means there is no money to finance businesses, or their sale.

"Spain is up for sale and there's not enough money in the country to buy everything that's being sold," Enrique Quemada, chief executive of ONEtoONE Capital Partners told Reuters in an interview.

"Who can buy it all? Now is the time to call in German, Dutch, Arabic and Chinese funds," he added.

ONEtoONE, founded in pre-crisis 2004 to fill a gap for middle-market Spanish deals that were being turned down by major investment banks, is now setting up shop in London and New York to showcase thousands of small and medium enterprises.

Spain, along with its Mediterranean neighbors, has the largest number of SMEs in Europe. Even among its about 120 stock market-listed companies, 17 have a market capitalization of under 100 million euros ($143.9 million), according to ThomsonReuters data.

Many business owners have already made small personal fortunes but are struggling to repay corporate debt. They are ready to sell out to investors with fresh capital and the new insight to salvage what in many cases has been a life-long business, Quemada said.

This year, for example, family-owned Spanish penmaker Inoxcrom, with 43 million euros of revenues, was sold to businessman Alberto Novel for 1 euro -- less than the cost of one of its fountain pens -- to off load debt and prevent a filing for administration.

"The advantage is that the company comes with its debt. The investor can take a majority stake and when it starts to create value in three years time, pay for the remainder. Nothing is paid now because you're taking a load off the guy's back," Quemada said.

Some 4,300 Spanish companies had filed for administration as of September 30 this year, according to Spain's National Statistics Institute, including listed companies like textile maker Dogi (DGI.MC).

Quemada said 10,000 bankruptcies are expected in 2010, with businesses related to the property, consumer and tourist industries the hardest hit after a decade-long boom.

Source: Reuters



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