Weekly Report 26.08.11
As the result of massive purchases by the European Central Bank, the Treasury has managed to place a bond issue for 3 to 6 months for almost 3,000 million euros. Such purchases are coming very close to a rescue action. Also, the Bank of Spain has been actively purchasing its own government bonds and even the surplus of the Social Security System is being substantially used for this purpose. German federal President, Wulf has criticized the intervention of the European Central Bank.
Proposal for limiting deficit in Constitution
Prime Minister Zapatero has proposed to opposition party PP, to add a pledge to the Constitution relating to the structural deficit and the debts of the public administration. PP leader Rajoy supports the proposal. Does anyone believe this will reduce the deficit?
340,000 mobile phones in public administration
The central administration in Spain pays for 70,000 mobile phones, up from 15,165 in 2004. In the regional administration, tax payers pay for 177,000, and a further 92,000 in local government departments.
Pope in Madrid
Pope Benedicto XVI has visited Madrid and been met with hundred of thousands young Catholics from all over the world. The event has bolstered hotel occupation in the capital, as well as income from tourism. Demonstrators against the papal carnival were forcible removed by police.
Ibex fell 5.8% last week
The Spanish stock exchanges fell 5.8% at the end of last week, falling from 8,647 points to 8,141. At opening on the 24th, the index stood at 8,279 points, down from over 11,000 at the beginning of the year. The largest companies lost 27,200 million euros in capitalisation.
Recession looms for Spain
After a weak increase of only 0.3% in economic activity in the first quarter of the year, growth fell to 0.2% in the second quarter, with the service sector losing 6.9% in June. All signals point to a new recession in the second half of the year. (See article ‘Recession looms and then what?’)
Exports in danger
The recovery in Northern Europe is slowing down. France had 0% growth in the second quarter and Germany only 0.1%. Confidence amongst analysts and investors in Germany plummeted 37.6 points after a fall of 15.1 in July. This has a direct effect on Spanish exports and production.
‘Patrimonio’ reintroduced
In a last effort to reach the proclaimed target of only a 6% budget deficit this year (we warned in the Yearly Report for this year this would not be achieved) the Government has decided to reintroduce the ‘Patrimonio’ tax, hitting foreign property owners. The tax was abandoned in April 2008 by increasing the bonus 100% and it was called ‘obsolete’ in the PSOE election program of that year. (See article on ‘Patrimonio’)
The Government has also decided to introduce a new tax on major companies.
Lower VAT on new property purchase
One of the most curious of the decisions taken by the caretaker government (new elections on the 20th November, a new government will be coming in) is to lower the VAT for new property purchases from 8 to 4%. This represent savings of 8,000 euros on a purchase of property valued at 200,000, but the reduction is only applicable on purchases completed before the end of this year, and only on new dwellings…….How ridiculous can a government be?
Regions ignore moribund government
Regional and local government are continuing to spend any money they have and even when they have none. Huge debts have appeared in the revisions made after the regional elections in Castilla-La Mancha. We shall probably see the same picture after PSOE loses the national elections in November, as well as after the coming regional elections.
38 million tourists in July
Spanish hotels recorded 38 million overnight stays in July, that’s 7.7% more than in the same month last year. The average spend per night this month was 75.4 euros, 1,.5 euros more than in 2010 and 67.3% of beds were occupied. Tourism from the UK increased 8.4% and from Germany 5.1.
On the Balearic Islands the number of tourists increased 13% over last year, in Catalonia 12% and in the Canary Islands 12.3%.
Poison in water deposits
A National Court judge has imprisoned an Islamic radical in La Linea de Concepción (Provincial de Cadiz) for trying to poison drinking water in a camping and tourist centre. On his computer, the police found evidence of plans to poison water supplies in various tourist centres and encourage other Islamic radicals to do the same.
Criminal charges against ex-leaders of CAM
A collective of public employees have presented allegations of criminal conduct by former senior staff of the saving bank CAM to the courts. They accuse the ex-Presidents of the entity, Vicente Sala (died two days ago) and Modesto Crespo of mis-appropriation of funds, falsification of documents and company fraud. Several others are also accused.
23,600 property companies have gone bust
Property consultancy company RR Acuña reports there are 683,000 new-built homes in Spain, probably extending over 3 years or more, to be sold by the developers. In addition there are 200,000 dwellings repossessed by the banks and 700,000 advertised for sale by present owners.
Also crisis in football
The financial crisis has also hit football and players in first and second division, who have gone on strike due to several clubs not being able to pay their fat salaries. Eleven of the clubs in the first division have problems, seven of them, including Rayo Vallecano, Zaragoza and Levante, cannot pay their bills. At the end of the 2009-2010 season, club debts amounted to 3,429 million euros, against income of 1,662 million.
Fiscal amnesty in Spain
The Tax Collectors of Spain has decreed a fiscal amnesty from 28th of this month. But do not uncork the bottle of Champagne too soon. It goes only for fiscal debts of less than 3 euros
