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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.

Inflation in Spain hits 3.5% in April
29 April 2011

Figures just released show that inflation in Spain rose to 3.5 percent in April from 3.3 percent in March.  This is the highest inflation rate since October 2008.



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Spanish jobs a black hole amid black economy
29 April 2011

Spanish unemployment, officially the highest in the European Union, is at a 14-year peak latest data show, just as the government attacks illegal jobs which experts say cast doubt on the figures.

The statistics agency Ine said on Friday that the unemployment rate had risen to 21.29 percent, the highest level since the beginning of 2007.

But also on Friday the government was to approve a raft of measures to attack undeclared or so-called "black" unemployment.

Some estimates say this accounts for about 20 percent of gross domestic product and some experts say it makes a nonsense of the unemployment data.

Spain has the highest unemployment rates in the European Union and in the area covered by the Organisation for Economic Cooperation and Development, with figures twice the averages.

A study by the Foundation of Spanish Savings Banks (Funcas) published in March estimated that the undeclared market accounted for four million jobs and 17.0 percent of GDP.

Budget ministry experts estimated that it accounted for 23.3 percent of GDP, representing 245 billion euros ($363 billion) of which 161.5 billion euros was in the form of tax fraud.

Read the full article here



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Breaking News: Unemployment rises to 21.29% in First quarter 2011
29 April 2011

Unemployment rose to 21.29% in the first quarter of 2011 according to figures just released by INE, with an extra 213,500 joining the dole queues.  The number of unemployeyd people in Spain now stands at 4,910,200, just shy of the 5 million mark.

The government is insisting that unemployment will NOT reach 5 million this year, but I'm not convinced...




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Spain Unemployment Won't Top 5 Mln This Year - Labor Minister
29 April 2011

MADRID (Dow Jones)--Unemployment in Spain is unlikely to top five million this year despite anticipated "bad" first-quarter data that will be released Friday, Labor Minister Valeriano Gomez said Thursday.

Speaking in a TV interview, Gomez said first-quarter numbers "will be a bad piece of data," but didn't provide more details.

Fourth-quarter unemployment stood at 20.3% in Spain, up from 19.8% in the third quarter, and the highest level since the second quarter of 1997, when it was at 20.7%. The third-quarter decline had been the first since the rate started a continued rise in the second quarter of 2007, from well below 10%.

Overall, 4.7 million people were unemployed in the fourth quarter in Spain, which has the highest unemployment rate in the developed world.

Gomez also said he remains optimistic that his government will achieve a labor reform deal with trade unions and business representatives, even as the latest deadline for such a deal before the Easter holiday was passed. He added that new hurdles for a deal have appeared, slowing the negotiation process.

Source: Wall Street Journal



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Santander signals start of Spanish turnaround
28 April 2011

MADRID (Reuters) - Spanish banking group Santander SA flagged a turning point for its struggling domestic business, shrugging off a slight fall in first quarter earnings.

"Revenues are growing at a good pace throughout the group and in Spain reversed the downward trend of recent quarters. I am convinced that this change will continue in the coming months," Chairman Emilio Botin said in a statement.

While analysts agreed that things looked better in Santander (Madrid: SAN.MC - news) 's home market, they said it would be a while before Spain is out of the woods. The country has been a focus of market attention since a property crash unleashed high personal debt levels and high unemployment.

Santander's profit in Spain, which accounts for less than Brazil or Britain at the geographically diversified bank, fell 31 percent year-on-year but rose by 54.3 percent quarter-on-quarter.

"These are basically solid results and I think this quarter will be the worst in terms of comparables because after the weakness of 2010, revenues will be more stable," said Arturo de Frias, analyst at Evolution Securities.

"Spain will start to look better in terms of profitability, but it will still be weak for a while," he added.

Read the full article here.



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RUSH FOR HOMES IN SPAIN AS PRICES PLUNGE
20 April 2011

BRITONS are dashing to snap up Spanish properties following the country’s economic crisis.

Second homes in Portugal are also being targeted as Britons take advantage of its fragile financial position. Inquiries about homes in Australia and New Zealand fell away the furthest last month. Overall, searches for overseas property increased by 1.2 per cent last month, in comparison to February. A survey by property company Rightmove Overseas and foreign exchange firm Moneycorp found that the Spanish province of Valencia saw the biggest increase in searches for homes – up more than 166 per cent.

Inquiries about property in Costa del Azahar rose by 39.91 per cent, while Costa de Almeria saw a surge of 8.83 per cent. Tom Whale, account manager at Rightmove, said the Costa del Sol, Andalucia and Southern Spain regions remain a firm favourite for British buyers, especially as some properties are now 30 per cent cheaper than in 2007. One seven-bedroom villa with a gym and swimming pool in popular Lliria, Valencia, was on the market for £302,440 three years ago before slumping to £130,619.

Read more:

http://www.express.co.uk/posts/view/241760/Rush-for-homes-in-Spain-as-prices-plungeRush-for-homes-in-Spain-as-prices-plunge#ixzz1K3t8ixqS


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Ryanair introduces reserved seating
20 April 2011

Ryanair is backing down on one of the key planks of budget air travel by allowing passengers to reserve seats on some routes.

From next month, customers will be able to choose where they sit on planes flying from Dublin to London Gatwick and Malaga.

The move marks a departure from the established thinking among no-frills airlines, that reserved seating hampers quick turnaround of jets and adds to admin costs.

It also indicates a change of strategy for Ryanair, after exhausting all other avenues of raising revenue through hidden charges including everything from credit card handling fees to baggage costs.

Passengers will have to pay 10 euros (£8.80) each way for the privilege of selecting their seats under the policy, which comes into effect from May 16.

In all, 24 seats will be available for pre-booking – in the front two rows, and the rows with extra leg room over the wings – on each 189-seat 737 aircraft.

The operator is running the system as a trial on the two routes from Ireland but will introduce it on other services if it proves successful.

A Ryanair spokesman said: "Passengers can pre-book their favourite seats in the front two rows, to ensure a prompt exit on arrival, or in over wing exits, for extra legroom.

“If this new service proves popular with passengers then we will roll it out selectively on other Ryanair routes in the coming months.”

Customers can already buy priority passes that allow them to board Ryanair flights ahead of other customers.

Following the announcement, Ryanair shares rose as much as 1.5 per cent to 3.39 euros in Dublin, where the company is based.

Ryanair has been criticised in the past over the extent of its additional fees.

Last week, the airline was successfully sued by a disabled woman after her husband had to carry her on to a plane using a fireman's lift when the flight crew refused to help.

Jo Heath, 57, who suffers from multiple sclerosis and uses a wheelchair, was left on a runway at Luton Airport for half an hour after the special lift she had booked failed to arrive.

The Ryanair crew refused to help her on to the plane after claiming it was unsafe for them to carry disabled passengers because they might "damage their backs''.

Mrs Heath was left "humiliated'' by the incident and sued Ryanair for £1,750 after Northampton county court ruled the budget airline had breached contract and broken disability discrimination laws.

Source: The Telegraph



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Telefonica May Cut Workforce in Spain by 20% in 3 Years
14 April 2011

Telefonica SA (TEF) may cut its workforce in Spain by about 20 percent within the next three years as the country’s former phone monopoly targets growth in Latin America to make up for declining sales in its home market.

Telefonica, which employs about 35,000 people in Spain, faces a “difficult” macro-economic environment and “increased competitive pressure,” the company said in a presentation on its website today. Madrid-based Telefonica, which is cutting 6 percent of manager positions, said it will link pay and benefits more to employees’ productivity rather than the consumer price index.

The operator is betting on higher dividends and Latin America’s rapid growth to win back investors discouraged by the Spanish government’s austerity measures and the highest unemployment rate in the euro region. Chairman and Chief Executive Officer Cesar Alierta raised his bid three times last year to convince Portugal Telecom SGPS SA (PTC) to sell its part of their venture that controlled Brazilian wireless operator Vivo Participacoes SA. (VIVO4)

“The potential cut in workforce of up to 20 percent is greater than we expected and the move to realign salaries to productivity and away from CPI is encouraging,” Guy Peddy, an analyst at Macquarie Securities in London, said by e-mail today. “The aim to sustain margins is also more robust than we expected.”

Read the rest of the srticle at Bloomberg.com



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Dixons shuts down loss-making Spanish stores
14 April 2011

PC World and Currys owner Dixons Retail today pulled the plug on its loss-making Spanish business.

The group's 34 PC City stores, online arm and head office will shut by the summer and its 1,364 staff are likely to be made redundant after Dixons failed to turnaround the business in the face of Spain's economic difficulties.

Dixons, which has 1,200 stores in 28 countries, signalled it was mulling a move to pull out of Spain when it issued its second profits warning of the year last month.

Worsening trading conditions saw same-store sales tumble 11 per cent in the UK and Ireland in the 11 weeks to March 26.

It is expected that the closure will result in a one-off hit to Dixons of £30 million but boost trading results by about £5 million a year. 

he company said its Spanish PC City stores did not fit in with its plans to sell a combination of electrical goods and computers in all of its stores. Dixons has had a presence in the country for around 10 years.




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Spain Fin Min: Expects Spanish Banks To Pass Stress Tests
10 April 2011

GODOLLO, Hungary -(Dow Jones)- All of Spain's banks will be able to pass stress tests, Spanish Finance Minister Elena Salgado said Saturday.

"Even the last one of the cajas [savings banks] is able to pass the stress tests," Salgado said, adding she is confident that a recapitalization of Spanish banks will be completed.

The transparency resulting from the stress tests in the long run will help Spanish banks, she said. She pledged "full transparency" in Spain's banking system.

She reiterated that Spain has already put in place most economic reforms needed to bring its deficit down.

"We still need to complete some reforms," she said, adding that talks about that are ongoing.

She acknowledged that austerity was unpopular, but said it was necessary.

Salgado also said she sees no risk of contagion from the Portugal crisis.

Source: Nasdaq.com



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Ministry raises jobless forecast
10 April 2011

The Spanish government on Wednesday increased its forecast for the jobless rate this year but maintained its prediction for GDP growth, arguing that weakness in consumer spending would be offset by stronger exports.

Presenting the new figures, Economy Minister Elena Salgado said the administration now expects unemployment this year of 19.8 percent, up from an earlier forecast of 19.3 percent.

The jobless rate ended last year at 20.6 percent, more than double the European average, with a record 4.7 million people unemployed.

The government still believes the economy will be growing at a pace that will start to create jobs in the second half of this year. "The government's forecast is that the number of people out of work will not reach five million this year," Salgado said. "The jobless rate will peak in the first quarter."

The National Statistics Institute is due to release the unemployment figures for the first three months of the year on April 29.

In a report last week, the Bank of Spain said it believes unemployment will continue to rise this year and will only begin to fall slightly in 2012. The administration estimates the jobless rate will drop to 18.5 percent in 2012 and 17.3 percent the following year.

The central bank also questioned the government GDP growth figure of 1.3 percent, forecasting a rise of 0.8 percent, in line with most experts. Salgado on Wednesday stuck to her output figure despite halving the estimate for growth in consumer spending to 0.9 percent. This is expected to be offset by the export sector and less negative public spending.

"The recovery will depend on the foreign sector to a greater extent than we had anticipated," Salgado said.

For next year the government lowered its estimate for GDP to 2.3 percent from 2.5 percent, and for 2013 to 2.4 percent from 2.7 percent.

The government also maintained the public deficit will drop from 9.2 percent of GDP to 6 percent this year and 4.4 percent in 2012.

Source: El Pais



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Spanish banks have €100bn exposure to Portugal
10 April 2011

More than €100bn (£87.6bn) of lending exposure to Portugal and some strikingly similar financial ratios mean Spanish banks were always going to be in the firing line when its neighbour finally decided to accept the inevitable and ask the European Union for a bail-out.

The average loan-to-deposit ratio of the Spanish banks at 126.7pc, is just 0.1pc below that of their Portuguese peers, according to SNL Financial, but the outlook for both countries' banks appear, at the moment, to be rather different to that of those in Ireland.

Applying the same stress test criteria to Spain's banks as was used last week by the Irish authorities to judge the strength of their own banks, analysts at Evolution Securities estimate the country's banking system requires about €40bn (£35bn) of new capital.

This is clearly a lot of money, but as a proportion of Spanish GDP it is far more manageable for Spain than Ireland's banking crisis was, with few expecting it to ask for a bail-out.

Even taking into account the debt that Spanish banks must refinance this year, the market appears to be pricing in little chance of a default at this stage and credit default swaps on all the country's largest lenders narrowed on Thursday, indicating greater investor confidence in the institutions.

Barclays Capital analysts have been less sanguine about the risks posed to Spain by its banks. In a report published in November, Barclays put Spain in a basket with Ireland and the Netherlands as countries in which the banks represented a "high" risk to the stability of the sovereign.

Referring to a "funding hump", this month is likely to be crucial for alleviating investor concerns in the Spanish banking system, which must refinance about €15bn of debt.

The signs so far appear to be good. Santander, Spain's largest lender and the one with the largest direct exposure to Portugal, already has about one-third of the €30bn of debt it must raise in 2011 to fund itself for the year.

While Santander could still take substantial losses on its Portuguese exposure, these are far from life threatening, and it would seem that the market's lack of concern appears to be justified at the moment.

Source: The Telegraph



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Rating cuts would hurt Spain more than Portugal
09 April 2011

(Reuters) - A Spanish ratings cut may hit government bond markets harder than the recent salvo of downgrades on Portugal because, unlike its neighbor, Spain is seen capable of escaping without an international bailout.

Fitch gradually slashed Portugal's sovereign credit rating by five notches over the two weeks after the Portuguese government collapsed on March 23. Other agencies downgraded Portugal but the market reaction was muted, raising questions over whether the ratings firms are behind the curve.

But analysts caution that Spain is in a wholly different position and that a change in the external view of its creditworthiness would have a negative impact.

Read the full article here



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Spain's PM heads to Asia in search of new investment
09 April 2011

MADRID — Spain's Prime Minister Jose Luis Rodriguez Zapatero will visit China and Singapore next week in search of new investments to shore up his country's embattled economy, government sources said Friday.

Zapatero arrives in Beijing on Tuesday where he will meet with Premier Wen Jiabao, Vice Premier Li Keqiang, Chinese financial authorities, bankers and investors.

He moves on to Singapore on Wednesday for talks with Prime Minister Lee Hsein Loong and investors before returning to China to attend the Boao Forum for Asia, an annual conference of government and business leaders and academia.

Read the full article here



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Barclays to inject extra funds into Spanish division
09 April 2011

Barclays bank is to move extra funds into its Spanish division in order to meet new capital rules coming into force this year.

Barclays Spain will raise 1.3bn euros ($1.9bn; £1.1bn) to meet the Spanish government's new capital requirements.

The bank's corporate division lost money last year due to rising bad debts.

It said it was raising more money than it needed to because the outlook remained challenging.

The higher capital ratios are part of the Spanish government's efforts to restore confidence in its financial system. It means all banks must hold a "core capital ratio" of 8%.

These are funds set aside to withstand further economic shocks. The capital must be raised by September this year.

The call for further funds follows a review by the Spanish central bank in March which found that 12 banks needed more capital.

Job losses

Barclays Spain is the largest foreign-owned bank in the country, with almost one million customers. It is 98%-owned by its British parent firm.

Last month, the bank announced plans to cut its workforce by 700, or about 20%, because of the poor economic climate.

The Spanish economy is struggling because of a house price crash, high unemployment and the abrupt end of a construction boom.

The European Banking Authority will name the banks that need to undergo a further stress test later.

The test is designed to see if they have sufficient funds to survive a two-year recession.

Source: BBC News



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Portugal Calls For European Union Bailout
07 April 2011

Portugal's acting prime minister has confirmed the country has called for a bailout from the European Union.

 

In a television statement, Jose Socrates said the administration had requested financial aid from the European Commission.

For months Portugal has resisted increasing pressure to apply for help from the European Union (EU) and the International Monetary Fund (IMF).

Until now Lisbon has said it could manage on its own, but its borrowing costs reached unsustainable levels after the collapse of the government in March.

The move makes Portugal the third country in the eurozone to seek help, following Greece and Ireland.

The European Commission's top economic official, Olli Rehn, welcomed the decision, saying it was in the interest of the 17-nation single currency zone.

Eurozone officials have said Lisbon is likely to need between €60bn (£52.6bn) and€80bn (£70.2bn) in EU and IMF loans over the next three years.

On Wednesday Portugal raised more than €1bn ($877m) on the bond markets, but had to pay an interest rate of 5.9% on its 12 month bonds, compared to 4.3% previously.

Speaking ahead of the announcement on Jeff Randall Live, Larry Kantor, global head of research at Barclays Capital also welcomed the developments. 

"The sooner they get the assistance and we establish this, the sooner we'll get more stable markets there," he said.

Source: Sky News



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Spanish Banks Face 'One of the Worst' Years
06 April 2011

MADRID—Three years into Spain's economic crisis, the worst could still be to come for the country's ailing banks as they grapple with falling profits and rising bad debt, the central bank chief warned Tuesday.

"2011 will be another year of adjustment, and for the banking sector, it will be one of the worst," Bank of Spain Governor Miguel Ángel Fernández Ordóñez said at a conference.

Mr. Fernández Ordóñez said bank revenue will be under pressure from weak demand for credit and rising financing costs, while banks will be forced to continue writing off large volumes of souring assets.

Also, the country's unlisted savings banks, known as cajas, must complete a government-driven overhaul that will see most of them convert into listed banks and reduce their number by nearly one third. The restructuring has entered a critical phase, with the cajas being forced to raise over €14 billion ($19.9 billion) in new capital to meet new minimum solvency requirements.

Read the rest of the article at the Wall Street Journal



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Will the ECB plunge Spain back into crisis?
06 April 2011

Tomorrow is likely to be the day when the first developed world central bank cracks under the burden of soaring inflation and starts tightening.

The European Central Bank (ECB) will be pleased it is first. It shows it is true to its Teutonic principles and will not countenance the sort of naughty inflationary growth driven by a cheap currency and de-valuing debt upon which the rest of the developed world thrives.

For us simple minded observers the problem for the ECB seems simple. It can either stamp out inflation in Germany but in the process allow the cost of peripheral debt to soar, forcing re-structuring and possibly defaults. Or it can allow inflation in Germany to rise but lend a helping hand to peripheral Europe.

Of course the policymakers on the ECB's governing council do not see it that way. They have succeeded in compartmentalising their thinking. Why have they done this? Put simply because they believe they can control the problem in peripheral Europe with 'special measures'. They won't let Portugal run out of money - they will buy the debt and trust their political friends will hand out cash at a rate that can be afforded. So in that sense they feel able to put aside their core decisions on rate rises from this debate.

The issue though is not whether the ECB action plunges basket-cases like Portugal over the edge. Rather it is how its actions affect Spain. This domino has been deemed too big to fall by European policymakers. But it could fall. Its politicians may be cocooned inside the vain belief that there are structural buyers of Spanish debt but there probably aren't nearly enough if it came under sustained attack in the money markets.

Read the rest of the article at citywire.co.uk



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Ryanair Shrinks Spanish Hub, Says Passengers Must Use Stairs, Not Bridges
06 April 2011

Ryanair Holdings Plc (RYA) will cut half its routes from Alicante, Spain, after the airport there said people must board via airbridges instead of stairs in a move the carrier says will cost it 2 million euros ($2.8 million) a year.

Ryanair faces a charge to fund the bridges at Alicante’s new terminal and also prefers stairs because they can be used at both doors, cutting boarding times, it said today. State airport operator Aena said the fee of about 30 cents a ticket “isn’t really expensive” and that people find bridges more comfortable.

“Ryanair has been operating at Alicante for over five years without the use of airbridges and this decision is an abuse of Aena’s monopoly,” the Irish carrier said. “The new terminal has exactly the same stairs as the old terminal, which would allow Ryanair to continue to apply walk on/walk off boarding.”

Europe’s biggest low-cost carrier plans to eliminate 31 of its 62 routes from Alicante and reduce the number of planes based there from 11 to two, it said in a statement, adding that the service cuts will cost Aena more than 30 million euros in passenger and turnaround fees and lost commercial sales.

“Airbridges are more comfortable and modern for passengers and that’s the main reason Aena has decided to use them,” Laura Baldo, a spokeswoman for the airport operator, said in a phone interview. “We aren’t talking about a big amount of money.”

Alicante is Spain’s sixth-busiest airport, attracting 9.4 million passengers last year, according to Aena. Dublin-based Ryanair contributed more than 4 million, or in excess of 40 percent of the total. The cuts, to be imposed in October, will reduce that to fewer than 1.5 million people, the carrier said.

Source: Bloomberg



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Spanish Service Sector Contracts In March
05 April 2011

(RTTNews) - Spain's service sector activity declined in March, after expanding in the previous month, survey data from Markit Economics showed Tuesday.

The headline business activity index for the service sector dropped to 48.7 in March from 50.8 in February. A reading above 50 indicates expansion in the sector, while one below suggests decline.

New orders declined marginally from the previous month due to lower consumer demand. Companies continued to reduce output prices amid intense competition and weak demand, while input cost inflation accelerated, led mainly by higher fuel costs.

Employment dropped for the thirty-seventh successive month in March, as companies in the service sector restructured their workforces.

Source: RTT News



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Spain March Jobless Claims Rise, Show Weak Economy
05 April 2011

MADRID (Dow Jones)--Spanish jobless claims rose again in March, adding to signs of a softening economy amid growing political uncertainty.

Jobless claims rose by 0.8% to 4.3 million in March from February, a new record high, the ministry said in a statement Monday. In annual terms, March claims were up 4% on the year. The ministry didn't give an unemployment rate, but data last week from the European Union's statistics arm Eurostat showed Spanish unemployment stood at 20.5% in February.

The poor unemployment reading comes after Prime Minister Jose Luis Rodriguez Zapatero announced over the weekend that he won't seek re-election next year, a move that could raise internal pressures within the ruling Socialist Workers Party over Zapatero's succession at a time of economic weakness.

Adding to the country's economic woes, the government's Official Credit Institute said its March consumer confidence reading fell to 68.3 from 73.4 in February. Friday, Spanish car manufacturer's association Anfac said new car registrations fell 29.1% in March.

The only bright spot for Spain has been its export sector. January goods exports rose by 25%, benefiting from strong demand elsewhere in Europe. Likewise, the country's large tourism industry has benefited from unrest on the other side of the Mediterranean, in North Africa.

Jose Luis Martinez, strategist at Citigroup, said the March jobs data were worse than expected. "In general terms, we're seeing very limited economic growth, driven by exports," adding he calculates gross domestic product rose at around 0.2% in the first quarter. The National Statistics Institute will give its first reading May 13.

Conservative opposition leader Mariano Rajoy seized on the March's rise in jobless claims to criticize the government's economic policy and reiterate his increasingly frequent calls for early elections. In a statement, Rajoy said the decision by the country's Socialist premier that he will not seek a third term in office creates political uncertainty at a time when Spain needs "stability, confidence and certainty."

His stature severely undermined by a deep economic crisis, Zapatero was pressured by his own Socialist party to make way for a successor, though he vowed to stay on until the end of his term in March, 2012.

Spain is suffering from the collapse of a decade-long housing boom that pushed the country into recession, sent unemployment spiraling and punched a large hole in public-sector accounts. The economy returned to weak economic growth last year but other sectors have not yet been able to pick up the slack from the ailing construction industry.

At a meeting with journalists, the head of Spain's social security administration said the job market should start to pick up in April and then show steady improvement in the following months as the tourism industry adds jobs for the Easter and then summer holiday periods. "The tourism industry is going to have a good year," Octavio Granados said.

UBS strategist Roberto Ruiz said he calculates Spanish jobless claims peaked in March. In the months ahead the tourism industry should create jobs, as should manufacturing industries, following a recent strengthening in manufacturing output, he said. But UBS forecasts that still high unemployment levels will weigh on consumer spending, translating into to weak GDP growth of around 0.6% in 2011 from 2010.

Source: Dow Jones Newswire/ Wall Street Journal



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Portugal Not Very Important for Spanish Banks, Ordonez Says
05 April 2011

Bank of Spain Governor Miguel Angel Fernandez Ordonez said Portugal is “not very important” for Spanish banks as investors increase bets the country will have to seek a European bailout.

“The issue of Portugal is important for Spain, not so much for the banks fortunately, unlike other countries which have Portuguese risk on their balance sheets,” Ordonez told reporters today in Madrid. “What Spain has are banks there, which finance themselves internally. So for the banking sector, it’s not very important.”

Portugal’s government is fighting growing speculation that it will be forced to seek a European bailout. The country’s credit rating was cut by Moody’s Investors Service for the second time in three weeks today, and the ratings company said it expected the government that emerges from the June 5 elections to trigger the European Union’s rescue facility.

Spain, Germany, France and the U.K. have the biggest investments in Portugal, according to the Bank for International Settlements, and Banco Santander SA, Spain’s biggest lender, owns Portugal’s fourth-largest bank. Spain has foreign claims amounting to $85 billion in Portugal, according to data from the Basel-based BIS.

Source: Bloomberg



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Spain's property crash casts a long shadow over a place in the sun
02 April 2011

Collapsing prices have hit holiday villa owners and left 'an entire generation of Spaniards with a millstone round their necks'

Spanish homeowners used to have little in common with the wealthy north Europeans snapping up holiday villas and apartments on the Costas. Now both are united in adversity. Both are suffering in a market preoccupied with falling values, negative equity, a glut of unsold new property and, in some cases, doubts about the legality of new estates.

An estimated 600,000 new homes, and 200,000 part-completed ones remain unsold, a sizeable proportion of which are in holiday areas. The Bank of Spain says official house prices have fallen 17% since 2007, but many observers believe that the market is much worse than that, as the bank's index is based on valuations, not achieved sale prices. Estate agents say prices of homes have typically fallen 20% to 50% in different parts of the country, with no sector unaffected.

"There is an entire generation of young Spaniards with a millstone round their necks," says Enrique Quemada of One to One Capital Partners, a business consultancy. "They will have to work their whole lives to pay for houses now worth half what they bought them for."

Read the rest of the article here.



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Santander may take over troubled savings bank: press
02 April 2011

MADRID — Spanish banking giant Santander could take over the Caja Mediterraneo (CAM) after the troubled savings bank's planned merger with three others collapsed, Spanish media said Friday.

The CAM decided on Thursday to seek aid from the state-financed Fund for Orderly Bank Restructuring (FROB) in order to meet new banking requirements set by the government after the failure of its merger.

But the business daily El Economista said the Bank of Spain has decided "to launch measures to avoid (public) intervention."

Since the CAM reportedly needs around 2.0 billion euros ($2.8 billion), or the majority of its capital, the public aid would mean its nationalisation.

El Economista said the central bank is planning a "mini-auction" of the CAM for the big Spanish banks, among which Santander, the eurozone's largest bank by market capitalisation, "is the big favorite, followed closely by BBVA," the country's second largest bank.

It has also contacted La Caixa, Banco Sabadell and Banco Popular, the paper reported.

Read the rest  of the article here.



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Spain's Zapatero Won't Seek Re-election
02 April 2011

MADRID—Under pressure to clarify his political future, Spanish Prime Minister Jose Luis Rodriguez Zapatero said on Saturday he won't run for re-election when his current term ends in March 2012.

In a televised speech at a meeting of his Socialist party's federal committee, the 50-year-old leader repeated several times he would serve out the remainder of his term and focus on carrying out his program of reforms to overhaul Spain's ailing economy.

"I will fulfill my responsibilities as prime minister until the end of the term, until the very last day," Mr. Zapatero said.

His stature severely diminished by a 20% unemployment rate and unpopular economic reforms, Mr. Zapatero hadn't been expected to run for re-election. The timing for announcing his decision, however, had become a complex political calculus.

On the one hand, many Socialist party leaders believe an early announcement could help mitigate expected heavy losses in upcoming regional and municipal elections. On the other hand, others, including prominent business leaders, worry it could spark internal party tensions as would-be successors jockey for position and could even undermine Mr. Zapatero's authority to govern.

Many draw parallels with the situation in neighboring Portugal, where political turmoil last month brought down the government of Prime Minister Jose Socrates. Like Mr. Socrates, Mr. Zapatero lacks a parliamentary majority.

In the end, pressure from Socialist party leaders increasingly nervous about the May 22 regional elections as well as speculation in local media concerning the prime minister's future forced Mr. Zapatero's hand. He said he announced his decision Saturday partly "to put an end to what was perceived as uncertainty which could distract us from our primary task."

Mr. Zapatero said the party would start a primary process to choose his successor after the May elections. Alfredo Perez Rubalcaba, the powerful deputy prime minister and interior minister, is widely considered the frontrunner to replace Mr. Zapatero. A veteran of several Socialist governments, polls say Mr. Rubalcaba is the most popular member of the current government and the politician who could obtain the best result for the Socialists in a general election.

Source: Wall Street Journal



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Spanish Banks: Hard Landing
01 April 2011

Land has gone from being the safest of bets to the riskiest

HOW bad Europe’s debt crisis gets depends largely on Spain, which would be much harder to rescue than smaller economies like Greece. How bad things get in Spain depends largely on the banks, which are already trying to find an additional €15 billion ($21.1 billion) to meet new capital requirements imposed by the government. And how bad things get for Spanish banks depends largely on the country’s unfolding property bust. Nestling at the heart of these worries is land.

Land was the hot commodity in the decade-long Spanish property boom. Local councils allowed ever more plots to be zoned for urban development, issuing building permits with abandon and receiving fees or a percentage of the land. The scale of the boom is only now apparent, following requests from the Bank of Spain for details of lenders’ exposures.

Almost a quarter of the banks’€320 billion in loans to developers is backed by land, according to estimates by Goldman Sachs. Land also makes up nearly half of the €70 billion of real-estate assets now owned by the banks and savings banks. Add it all up, and Spanish institutions have exposure to more than €100 billion of empty plots, either as lender or owner. “The main issue for the banks isn’t excess housing, it’s land,” says Carlos Ferrer-Bonsoms of Jones Lang LaSalle, a consultancy.

Read the rest of the article at The Economist



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Spain May Take Over CAM After Talks on Merger Falter
01 April 2011

MADRID—Ailing Spanish savings bank Caja de Ahorros del Mediterráneo began discussing its possible nationalization with the central bank on Thursday, after its merger with three small peers fell apart late Wednesday.

A spokesman said the Alicante-based savings bank, or caja, is presenting the Bank of Spain with a new business plan and an application for money from Spain's state-financed Fund for Orderly Bank Restructuring, also known as FROB. He declined to say how much money the bank, known as CAM, needed, but analysts calculate that it would be enough to give the FROB control of more than 50% of the bank.

The nationalization of CAM would be the first since the Spanish government, under pressure to shore up international confidence in the health of the country's banks, in February set new minimum capital requirements. It said it would take equity stakes in those institutions that weren't able to raise new money. The Bank of Spain estimated that 12 banks would have to raise a total of €15.15 billion ($21.4 billion).

The confidence-boosting exercise, however, fell flat, as many independent analyses said Spanish banks would need much more capital. Moody's Investors Service, for example, estimated that banks would need between €40 billion and €50 billion.

Read the rest of the article at Wall Street Journal



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Merger collapse mars bank restructuring in Spain: Analysts mull the bigger picture for Spain’s government
01 April 2011

MADRID (MarketWatch) — The collapsed merger of four savings banks could be a setback for the Spanish government’s efforts to convince the rest of the world that its financial house is in order.

Late Wednesday, the merger of four savings banks, to be called Banco Base, collapsed after Cajastur, Caja Cantabria and Caja Extremadura all backed out.

That came after key partner Caja Mediterraneo (CAM), which has heavy exposure to the Spanish property collapse, applied for a cash injection of state funds on Tuesday which was twice what the Bank of Spain had estimated it needed.

Those four savings banks will now have to present new plans for capitalization to the Bank of Spain. CAM said in a statement late Wednesday that it will apply for state funds to meet necessary capital requirements, but many believe that it will be sold off to bigger institutions.

Read the rest of the article at MarketWatch.com



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