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International News • RPT-Bankia compensation qualms signal loss of faith in Spain
RPT-Bankia compensation qualms signal loss of faith in Spain’s banks
http://www.reuters.com/article/2013/05/ … JV20130520
Mon May 20, 2013 2:39am EDT
* Spanish govt created compensation scheme to defuse scandal
* Bankia expects around 150,000 people to seek arbitration
* Lawyers say many people inquiring about taking cases to court
By Sonya Dowsett
MADRID, May 19 (Reuters) – Many duped savers at Spanish lender Bankia are shunning a state-supervised compensation scheme in favour of expensive lawsuits, prolonging a mis-selling scandal and complicating efforts to restore faith in the banking system.
The disputes over mis-selling at Bankia and other nationalised banks have created a major headache for the government as it tries to take the next step in their rescue, imposing large losses on holders of junior debt.
It set up the arbitration process to try to end daily protests by some of those debt holders – elderly savers who say they were mis-sold complex debt products as safe, high-interest deposit accounts.
But many people caught up in Bankia’s rescue see it as a trick to stop them getting their money back.
"We are not going to enter the arbitration process because we think it’s a swindle," said 66-year-old Carlos Peral at a recent protest outside a Bankia branch in a Madrid. All the demonstrators Reuters spoke to were seeking legal action.
Peral and his wife, both blind, have 80,000 euros ($103,300)of life savings tied up in Bankia preference shares, a form of hybrid debt due to be converted under the rescue by May 24 into ordinary shares worth around 38 percent less
The terms of its EU-funded 24.5 billion euro bailout require Bankia and its parent group BFA to raise 6.5 billion euros this way — by converting debt into equity at a large discount.
Whether customers win misselling claims through the courts or through the state-sponsored scheme, the bank will have to find the money to compensate them, a factor not taken into account when its recapitalisation was calculated.
"The arbitration process is not something positive for Bankia. The bank will have to settle those claims in cash," said a banker involved in Bankia’s recapitalisation.
Court cases drag out the issue for even longer. "You don’t know when the legal cases will end, they could last years."
Bankia declined to say how many court cases had been lodged against it related to preference shares, but said it was much fewer than the number who had requested arbitration.
A bank spokesman said the compensation claims would be easily covered by parent group BFA and would not affect Bankia’s capital. Preference share holders will have the market value of their shares deducted from any compensation package.
MISTRUST
The mis-selling scandal is salt in the wound for Spaniards forced to put up with years of tax hikes and spending cuts to deal with the country’s financial crisis.
A 2013 survey carried out by public relations agency Edelman found Spaniards the most unhappy worldwide with their banks, outstripping Ireland, Great Britain and Italy, all of which have suffered banking scandals in recent years.
Peral, one of 300,000 hybrid debt holders whose new shares are due to start trading on May 28, is deeply mistrustful: "The measures have been drawn up to trick people into making a claim which will then be rejected and they’ll keep the money."
Bankia customers have until June 30 to file claims of mis-selling. Auditor KPMG determines the maximum amount that could be awarded to the claimant, who then signs an agreement which waives future legal action. A state arbitrator then determines the actual level of payout.
The legal route is more expensive as it includes lawyers’ fees, but many preference share holders believe they have a better chance of getting more money back through the courts.
No arbitration case has yet paid out, but Bankia says successful claims should receive their money back, adjusted for interest. Lawyers were cashing in on the confusion surrounding the arbitration process, said a source close to the process.
"For the lawyers, the fact that there is a quick and free compensation process is very bad news," he said. "There is huge business for them in taking these cases to court."
The bank said that 44,316 people had so far applied for the arbitration process and it expected around 150,000 customers to turn to it in total.
The banker involved in the recapitalisation said many may turn to arbitration after May 28 when the new shares start trading if their price dips because savers cash them in.
MONEY BACK PLEASE
To determine eligibility for compensation, factors such as whether bank staff explained the risks of the product and the customer’s investment history are taken into account.
On the street, confusion over the criteria reigned.
"To win the arbitration you have to have Alzheimer’s, or be illiterate or on an extremely low income," said Raul Gomez, 60, who has 145,000 euros locked in preference shares, including a redundancy package from his former job as a supermarket manager.
"Going to court is the only way for me to get something back," he adds. He says that out of 52 court cases he knows of, 51 have been successful.
Legal firm V Abogados recently put on back-to-back presentations about the arbitration process at a Madrid hotel to packed audiences, where people clamoured for advice.
"We’ve had around 2,000 people coming to our offices connected with this issue," says V Abogados lawyer Santiago Viciano. "Our switchboard has been blocked with people ringing in from all over Spain."
Most preference share holders have won their claims so far, he said, adding that he expected an avalanche of rulings through the courts after the summer.
The protesters just want their money. "We’re not interested in the swap or the compensation," said Mariano Hernanez, a retired carpenter with 464,000 euros in preference shares.
"I’m 81 now, and I will keep fighting until I get all my money back."
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Statistics: Posted by DIGGER DAN — Thu May 23, 2013 5:37 pm
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International News • Spain Loses Faith, But Rediscovers Reality
Spain Loses Faith, But Rediscovers Reality
SATURDAY, APRIL 27, 2013
Contributed by Don Quijones, a freelance writer and translator based in Barcelona, Spain. His blog, Raging Bull-Shit, is a modest attempt to challenge some of the wishful thinking and scrub away the lathers of soft soap peddled by our political and business leaders and their loyal mainstream media.
The reputation of the economics profession was dealt a heavy blow this week when it was discovered that much of the data used to support the findings of Kenneth Rogoff and Carmen Reinhart’s 900-page book This Time It’s Different – an apologia for economic austerity that since its publication in 2009 had formed an essential intellectual basis for the Troika’s austerity drive — had been heavily manipulated. It was, as Heidi Moore wrote in The Guardian, a stark reminder of the fact that while economists might spit out cold, hard numbers, it doesn’t mean they produce the cold, hard truth.
Not that news of the scandal was enough to put off Mariano Rajoy’s government (admittedly, with the Troika’s gun cocked and pointed at its temple) from announcing a further round of austerity measures on Friday 26th April — just one day after yet another eruption of violent clashes between protestors and riot police in Madrid’s Plaza Neptuno.
The new reforms include a two-year extension to what was supposedly meant to be a temporary, short-term hike in sales tax as well as a further increase in taxes on businesses — measures which, as any self-respecting economist (of which there are admittedly few) would tell you, are not exactly going to help the nation’s struggling and debt-laden companies generate jobs for the more than six million unemployed.
Indeed, the new tax rise could not have come at a worst time, following hot on the heels of the worst quarter for Spanish business closures since the crisis began. And with companies’ tax burden set to rise further, it is a trend that seems likely to continue, if not accelerate — especially in light of the fact that the current government appears to have all but thrown in the towel on the economy, admitting that the recession will likely continue until 2016.
Crisis Obsession and Fatigue
But Spain’s problems are not only economic in nature — they are also psychological. For well over three years now “La crisis” has been the nation’s number one topic of conversation, dominating both elevator small talk and dinner-time debate.
In fact, you can bet what little remains of your life savings that up and down the country right now there are hundreds of thousands of Spaniards discussing how royally fu**ed (if you’ll excuse the pun) they are. Countless others meanwhile struggle to lift themselves out of the depression and uncomfortable numbness resulting from acute crisis fatigue.
Such a bipolar collective mood is hardly surprising. After all, few countries have fallen from grace in such spectacular fashion as modern-day Spain. To recap, in just the last three years alone:
The economy has entered terminal decline and, with it, many people’s job opportunities have gone permanently AWOL.
A ruthless program of public-spending cuts and privatisation has been rushed through into legislation against the explicit wishes of the people;
The country’s banks have intentionally robbed hundreds of thousands of their own customers of their life savings;
Its local, regional and national governments have proven to be dens of treasonous and woefully inept thieves and liars;
Its royal family, seemingly dissatisfied with its multi-million euro budget, has been caught embezzling funds from the public purse.
Even on the football field, one of the last remaining sources of national pride, the country’s fortunes have taken a dramatic turn for the worse following Barcelona and Real Madrid’s recent mauling at the hands (or should I say, feet) of Germany’s Bayern Munich and Borussia Dortmund.
But it’s not just national institutions that have lost credibility here in Spain. According to Eurobarometer’s latest survey on the levels of public trust in the EU, Spaniards are also fast losing faith in the European dream.
From Most Europhile to Most Euroskeptic in Five Short Years
While euroskepticism appears to be on the rise in all six of the countries surveyed (the U.K., Spain, France, Italy, Germany and Poland), it is Spain, once a bastion of pro-EU sentiment, that saw the most dramatic increase in public distrust in the EU, from 23 percent in 2007 to 72 percent today. In one of the most dramatic turnarounds this century — and one that merits far greater attention in the continent’s press — Spain is supposedly now more euroskeptic than even the U.K.
There can be no overstating the importance of such a sea change in public opinion. It is as if the youngest democracy in Western Europe has finally lost its youthful innocence. After the betrayal of so many hopes and promises, reality is finally dawning on the people that neither democracy nor EU membership are quite the panacea they were cracked up to be.
Indeed, in what must be a first, the staunchly pro-Europe El Pais published an article from the Screwdriver blog (in Spanish) that explores, in a balanced, mature, and non-alarmist way, the potential ramifications of Spain’s exit from the euro. The article’s author, Antonio Estella, an expert in European Union law, underscores the fact that since adopting the euro in 2001, Spain has become Europe’s most unequal country in terms of income distribution.
While potentially highly damaging in the short run, leaving the euro and reinstating the peseta is probably the Spanish economy’s only way out of its current predicament, the article concludes.
Not that Rajoy’s government seems remotely inclined to consider such a proposal. On the contrary, just two days before the publication of Estella’s article, Rajoy all but handed what remains of the country’s national independence on a plate to Brussels, saying that all EU countries must agree to give up some degree of sovereignty for the “greater good”.
As I wrote in my recent article “Europe’s Stark Choice: Revolution or Resignation“, the continued survival and expansion of the European superstate supersedes all other concerns in Europe, whether moral, political, social or economic.
But the eurocrats and their suppliant servants in national government may find it more difficult than they originally envisaged to bulldoze banking, fiscal and eventually political union into reality, especially with euroskeptic fever on the rise throughout the continent, including even in Germany, the ECB’s paymaster-in-chief.
Perhaps if it had shown itself just a little more sympathetic to the needs of the continent’s working and middle classes rather than favoring the interests of the “markets” and financial institutions at every turn, or, for that matter, perhaps if it had listened to the pained voice of the quiet majority rather than trampling all over democratic principles and conventions, then the EU might not be seeing the tide turn so quickly against it.
That said, the fact that growing ranks of Europeans are finally beginning to see through the EU’s cloak of utopian unity to its ruthless, heartless, technocratic core may well represent the last remaining glimmer of hope for real meaningful change in the fast-declining “old continent”. Contributed by Don Quijones.
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Statistics: Posted by yoda — Sun Apr 28, 2013 2:52 pm
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International News • The Reality Of Doing Business In Spain: A Personal Account
The Reality Of Doing Business In Spain: A Personal Account
THURSDAY, MARCH 14, 2013 AT 2:33PM
Contributed by Don Quijones, a freelance writer and translator based in Barcelona, Spain. His blog, Raging Bull-Shit, is a modest attempt to challenge some of the wishful thinking and scrub away the lathers of soft soap peddled by our political and business leaders and their loyal mainstream media.
Most of what is written these days about the struggling countries on the eurozone periphery is done so from an almost purely macro-economic perspective. Figures are bandied about and graphs exhibited to try to prove that one country or another is either on the road to recovery or the path to perdition.
The problem with this approach is that it completely ignores the human dimension of the economic depression in Southern Europe. The stark reality facing millions of Spaniards, Italians, Greeks and Portuguese is hidden, buried deep under a mountain of economic data, much of which is massaged to suit the purposes of the central planners-in-chief. The result is that we are often unable to see the trees for the wood.
For that reason, I’ve decided to devote this post to the story of a close acquaintance of mine–one of a dying breed of self-made entrepreneurs and small business owners here in Spain.
Although he is happy for me to tell his story, my friend would prefer it be done under the cloak of anonymity – as he says, you can never be too careful these days. For that reason, he will, for the duration of this article, go by the name of Francesc, or Cesc for short.
Cesc’s company has two lines of business: interior design (a sector which, as you can imagine, has been pretty anaemic since the collapse of Spain’s property bubble) and the design and construction of exhibition and trade fair stands, which until a few years ago, when Barcelona was the trade fair capital of Europe, was a thriving sector with enormous opportunities for enterprising businesses like Cesc’s.
For Cesc and his business partner, the heydays of the mid 2000s were a heady time indeed. Until, that is, his company took on a project to redo the interior of an upmarket restaurant in one of Barcelona’s most fashionable neighbourhoods.
All began well. The job was one of the biggest Cesc’s company had ever had and its small workforce was abuzz with excitement. However, the material and labor needed for such a job was immense, and with concerns mounting about the mounting costs, Cesc asked the restaurant owner to pony up half of the cash up front.
However, the restaurant owner’s cash flow was temporarily held up in other areas, so he proposed instead to give Cesc what in Spain is commonly called a “pagaré” (a promissory note – in other words, an official IOU) for close to 100,000 euros. Put simply, the restaurateur committed to pay the money in one month’s time, while his bank assured Cesc that, as a solvent, long-term client, the restaurateur could be relied on to make good on his obligations.
As Cesc recounts, “the bank told me that he was one of the richest restaurant owners in Barcelona, and even offered to extend us more credit than we needed – which we obviously declined.”
Duly reassured, Cesc cashed in the promissory note, using the funds to pay workers and buy materials. By the time the restaurant was ready, Cesc’s company had spent close to 180,000 euros on the job – all of it guaranteed by the restaurant owner.
However, when the time come to cash in the promissory note, Cesc was told by the banks that the funds were not there. One quick phone call later and Cesc was informed that his client was completely out of cash and almost certainly facing bankruptcy, leaving Cesc’s business on the tab for over 180,000 euros – money it neither had nor could dream of getting hold of.
That didn’t stop the bank, though, from immediately swooping into Cesc’s business account to remove all of the 40,000 euros sitting there, effectively stripping the company of all its cashflow. The rest of the debt was repackaged into a refinance deal, with exorbitant interest rates.
To make matters worse, that same month saw another of Cesc’s business clients close up shop, reneging on a 20,000 euro payment he owed the business.
“In the space of just a few days, our world was turned upside down,” says Cesc. “One minute, business was booming, the next we were in hock to the bank and completely out of cash. Our client is now completely broke and living with his parents, like so many people here in Spain.
“It has taken years for the lawyers to sift through the remnants of his (the restaurant owner’s) former business, and at the end of it almost all of his assets went to the banks or the government. We still haven’t seen a penny of our money.”
To keep their business ticking over, Cesc and his partner decided that their top priority would be to keep paying workers’ salaries and the company’s long-term providers. With the recession beginning to bite and business activity slowing to a crawl, the company’s revenues were so tight (especially after paying off its monthly debt obligations) that it couldn’t pay either social security – which in Spain, at 35 percent of each worker’s salary, is one of the highest rates in Europe – or corporation tax.
In the end, Cesc and his partner were forced to lay off most of the company’s workers.
“It was the hardest thing I’ve ever had to do and I never want to have to go through it again. I knew I was leaving my workers, many of whom had become close friends, in a very precarious situation. But there was nothing else we could do, we were broke.”
Shortly after that, Cesc and his partner declared bankruptcy. Yet whereas most people in their situation would have thrown in the towel, Cesc and his partner – both inveterate entrepreneurs – decided to give it another go, setting up a second business under a different name (this is, after all, Spain we’re talking about!).
“We know that we’re good at what we do, and we believe 100 percent in our product,” says Cesc. “We have some of the best designers as well as a team of great builders. Our clients, both big and small, are always satisfied with what they get.”
Despite a backdrop of one of the worst recessions in living memory – not to mention a ballooning debt of over 200,000 euros – the new company somehow continues to survive. But it’s getting harder and harder.
As Cesc says, “The economic situation in Spain is absolutely dire. More and more businesses – especially small, family-run ones – are closing down. And those that are left standing are now paying less and less for the services they need.
“Companies are cannibalising each other, with many being forced to take on jobs for little or no margin. Everything is getting devalued: not just the amount of money you can charge for your services, but also the meaning and quality of our profession.”
Instead of just competing for the meager scraps available in the Spanish market, Cesc has begun looking overseas for opportunities. As he has learnt, in Northern Europe, the company can make two or three times as much money for the same job as it does in Spain.
But Cesc’s sights are set not just on Europe. He’s also marketing his company’s services in the booming markets of China, Russia and the Middle East, and with a fair degree of success: his company was recently awarded contracts to design and build stands for trade fairs in Dubai and Shanghai.
But all the while, the shadow of debt continues to loom over the company and, with interest of up to 10 percent per annum, is growing at an alarming rate.
“We’re trying to pay it down as fast as we can, but it just keeps growing,” says Cesc. “For instance, the amount we owe social security has gone up from 50,000 euros a couple of years ago to almost 70,000 today. And all of that is interest.”
Cesc is not alone. In fact, his experiences embody what is happening to small and medium-size companies across Spain. According to the Spanish publication 80 Dias, 90 percent of companies are suffering late payment of invoices, with as many as 65 percent of Spanish SMEs at high risk of insolvency as a result.
In the most perverse of ironies, it’s the Spanish government itself, in particular at the local and regional level, that is arguably the worst culprit when it comes to late payment for products or services. For large companies, having to wait many months, or even years, to receive payment for services rendered can create serious cash-flow pressures. But for smaller entities, it can quite literally mean the difference between sinking or swimming. And each time a company goes under, a vital link in the business food chain is permanently severed.
Cesc speaks for hundreds of thousands of Spanish business owners when he expresses his frustration at the government’s refusal to support small businesses:
“The government seems oblivious to what small businesses are going through. All we would need is a temporary freeze on our debts so that we could have a little breathing space and concentrate on trying to expand our businesses. That way, we might actually be able to create new jobs.”
In Spain, as in pretty much all developed economies, most well-paid, full-time jobs are created by small start-up companies like Cesc’s – not the blue-chip multinationals in whose favour most economic legislation and policy are passed.
However, the Spanish government, filled to the rafters with professional politicians and economic advisors with zero experience of running a business, merely plays lip service to the needs of “never say die” entrepreneurs like Cesc. Perhaps that explains why the World Bank currently ranks Spain 136th out of 185 economies for ease of starting a business – behind the likes, I kid you not, of Nicaragua, Kosovo, Uzbekistan and Iran.
“In some places, like the U.S. and the U.K., they respect, even encourage, failure. Because that’s how people learn,” says Cesc. “Here in Spain, they punish you, brand you for life as a loser and make sure you never run a business again.” Contributed by Don Quijones, of RagingBullshit.com
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Statistics: Posted by yoda — Fri Mar 15, 2013 12:27 am
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International News • Spain now taxing expats on their worldwide assets, time to
Spain now taxing expats on their worldwide assets, time to buy in Dubai?
Posted on 05 March 2013
Foreign residents who live more than six months a year in Spain are now being taxed on their worldwide assets and there are very high penalties if you are caught not complying. Spanish austerity has caught up with its free wheeling expat community with a vengeance.
Leaving Spain is an option but then house prices have fallen more than 30 per cent from the peak and selling at any price is difficult. Sellers out-number buyers and there is a huge inventory of unsold property in Spain.
National disaster
For Spain it looks like another self-inflicted national disaster. Expats are often mobile and when they move out of Spain that will be bad for an already slumping housing market and all the other spending by this affluent one-million strong community.
Spain has already seen an exodus of Britons due to the falling value of pound sterling pensions when translated into euros. By contrast the British are still among the top buyers of property in Dubai where there is no facility to record local earnings and assets, let alone overseas assets.
Property remains untaxed, except for modest community and house transfer taxes. There is no capital gains tax, nor income tax in Dubai. Not surprisingly the city is witnessing a continuous inflow of high net worth individuals who wish to base themselves in the emirate, particularly for the seven months of fine weather.
Those who have a home in Spain, and have the means could consider spending five months in Spain and seven in Dubai. That would qualify them as resident in Dubai and not Spain.
Tax exiles
It’s common to meet new arrivals in Dubai who have become outraged at being pursued like criminals in their own countries, even when they have paid all their taxes properly. These states increasingly regard wealthy citizens as fair game to finance their debt-financed public sector ponzi schemes.
This is clearly going to get much worse before it gets better. The eurozone and UK are in recession and there is a mounting backlash against austerity cuts. Taxing the rich is an easy option for democracies where the majority is a tyranny for the rest.
Freeports like Dubai with a long tradition of minimal taxation are safe havens from this disaster that will only make the citizens who stay behind in these countries poorer in the long-run.
http://www.arabianmoney.net/destination … -in-dubai/
Statistics: Posted by yoda — Tue Mar 05, 2013 2:39 pm
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International News • Dark Rumblings Of A Coup D’État In Spain
Dark Rumblings Of A Coup D’État In Spain
FRIDAY, MARCH 1, 2013 AT 8:25PM
Spain is on edge. Unemployment is nearly 26%, youth unemployment over 55%. The government is mired in a corruption scandal. The economy is grinding to a halt. On January 23, the Catalan assembly declared that the region constituted a “sovereign political and legal entity.” A step closer to secession. And then a general gave a speech.
It’s just now percolating to the surface, but it happened on February 6, according to people who attended a conference on the Armed Forces and the Constitution at the Gran Peña, a club in Madrid that is a favorite hangout for retired military officers. The discussion was moderated by José Antonio Fernández Rodera, editor of the military’s magazine, Revista Jurídica Militar. Among the speakers were Ángel Calderón, Chief Justice of the Military Chamber; Pedro González-Trevijano, Chancellor of the King Juan Carlos University; and General Juan Antonio Chicharro, until 2010 commander of the Marine Corps and now in the reserves. About 100 people were in the audience.
There was nothing unusual until General Chicharro spoke. From the outset, he made clear that this wasn’t an impromptu speech. According to various attendees, he apologized; he would have declined the invitation to speak, he said, but the current “separatist-secessionist offensive” in Catalonia obligated him to come forward.
In the armed forces, “there is a general feeling of preoccupation, fear, uncertainty, and confusion” on this topic, he said. He lamented the dismissal of General José Mena in 2006 after he’d publically suggested that military intervention might be needed to counter Catalonia’s demands for increased autonomy.
He criticized Catalan separatists for their distorted interpretation of the Constitution with regards to secession and offered his own interpretation of two articles: Article 8.1, which charged the Armed Forces with defending Spain and its territorial integrity; and Article 97, which spelled out the subordination of the military to the civilian government. The first was at the hard core of the Constitution, he said. The second was further removed, with less force.
And so, while using conditionals and turning statements into questions, he spun a theory on when the military would be justified in overthrowing the government. The problem would occur, he said, “if those responsible for the defense of the Constitution didn’t behave as their role required.”
He asked his listeners to imagine what would happen if the Popular Party (PP) were to lose its absolute majority in the next general elections, and the Catalan nationalists were to demand, in exchange for their support, a change of the Constitution to undo the doctrine of the “indissoluble unity” of Spain.
“So what do the Armed Forces do?” he wondered, but gave no answer. “The rules are one thing, practice is another,” he said enigmatically. “If the defense mechanism of the constitutional order doesn’t work, by act or omission, then….” He didn’t complete the sentence. “The country is more important than democracy,” he said. “Patriotism is a feeling, and the Constitution is nothing but a law.”
Rousing applause, a standing ovation, cries of “Bravo! Bravo!” The questions from the audience went even further than the General’s speech—until chancellor González-Trevijano cut them off: “The alternative to the constitution is collective suicide,” he said.
When the story began to leak out, Diego López Garrido, the Socialist spokesman in Parliament on defense issues, pressed the Ministry of Defense to take immediate action against the general; he was still subject to the military disciplinary code which frowned upon suggesting coup d’états—in public. And on Thursday, the Ministry said that it has opened a preliminary inquiry to determine what exactly the general had said and if it ran afoul of any laws.
Perhaps warned by the general, the government is taking the hardest possible line against Catalonia’s ambitions to secede. On Thursday, the State Council issued an opinion indicating that there were sufficient legal grounds to dispute the declaration by the Catalan assembly. On Friday, Prime Minister Mariano Rajoy announced that the government would roll out its biggest legal gun. It would take the declaration to the Constitutional Court on the grounds that it violated the Constitution.
The economic nightmare with too many out-of-work restless young people on the streets, the secession of a region, a constitutional crisis in the wings, and dark rumblings by generals combine into a volatile mix. What had started out as a housing bubble that turned into a debt crisis then a broad economic crisis has morphed beyond the economy. It’s gnawing on democracy.
Now, a political espionage scandal blew up—in Catalonia of all places—scattering debris and money laundering allegations far and wide.
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Statistics: Posted by yoda — Sat Mar 02, 2013 12:46 am
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International News • The Confidence Crisis In Spain Sends Out Shock Waves
The Confidence Crisis In Spain Sends Out Shock Waves
MONDAY, FEBRUARY 4, 2013 AT 8:27PM
It should have been a glorious event for Spanish Prime Minister Mariano Rajoy: a tête-à-tête with German Chancellor Angela Merkel. At the press conference following the 24th German-Spanish government consultation, he’d stand next to her, illuminated by her glory. He’d brag about implementing structural reforms, cleaning up the bailed-out banking sector, and moving Spain forward. He’d point at yields on government debt trending down toward normalcy. No, Spain wouldn’t need another bailout. All due to his excellent governance.
Merkel would endorse him with her benevolent smile. It would cement his political position in Spain. She’d rave about how the country has emerged from the debt crisis thanks to his tireless, bold, and courageous work in tightening the belts of his people.
But instead, Spanish stocks took a nosedive. Yields jumped. And the press conference turned into a slugfest about the corruption scandal in Spain.
The scandal burst into the open when El País published documents, allegedly handwritten by Luis Bárcenas, the ex-treasurer of Rajoy’s conservative People’s Party (PP). According to these ledgers, leading members of the PP had been paid bribes for years, with Rajoy receiving about €25,000 per year. Bárcenas himself is up to his neck in hot water; it was discovered that he had €22 million in Swiss bank accounts. The opposition has called for Rajoy’s head.
So Merkel and Rajoy were confronted with questions about the scandal—and Merkel with a blast from her past, a reference to the “black money affair” of the 1990s when her party, the CDU, under Chancellor Helmut Kohl, used an elaborate system of Swiss bank accounts to hide illegal political contributions.
The scandal broke in late 1999 with the arrest of CDU treasurer Walther Leisler Kiep for tax fraud. It ballooned relentlessly. After a few weeks, even Kohl—by then no longer chancellor—admitted to the “black accounts.” It led to an investigation by a parliamentary committee. Turns out, Kohl had used the funds to support candidates who sided with him. Numerous corporations and politicians were tangled up in it, including current Finance Minister Wolfgang Schäuble.
In short, it was a press conference from hell. Merkel emphasized that the Bárcenas scandal had not been part of their discussion. Instead, they’d talked about educational and health policies and renewable energy. And Rajoy, she said, explained his successes in implementing structural reforms and fighting unemployment….
Alas, Spain’s unemployment rate hit 26% in December, leaving 5.97 million people unemployed, up from 5.27 million when Rajoy took office in late 2011. Youth unemployment surged to 55.1%. On Monday, more bad news: the number of people receiving unemployment compensation jumped in January to the historic high of 4.98 million—up from 2 million in 2007. And the number of employed people dropped by 263,243. El País declared morosely, “the labor market begins the year with the destruction of 8,500 jobs per day.”
Nevertheless, Merkel had the “greatest respect and admiration” for what Rajoy has implemented in terms of structural reforms. It would take time for them to do their magic, she conceded, and youth unemployment was “depressingly” high. Yet she was “convinced” that the Spanish government, “with Mariano Rajoy as head,” would be able to resolve the problems. “Germany will support him with all its power,” she said.
But wasn’t she worried about Rajoy’s loss of authority? Merkel dodged; she’d already said everything, she said. “We will continue to work well together,” she added. “We have a very trusting relationship.”
Rajoy spent his time furiously defending himself. “I have the same desire, the same hope, strength, and courage that I had when I arrived to overcome one of the most difficult situations of the past 30 years,” he said. His ability to lead the government has not been weakened. His party has a “stable majority” and “clear goals” and would continue the reform efforts. And no, he would not resign.
But the questions kept coming. Rajoy had initially denied all Bárcenas-related allegations in their totality. But some of the elements in those documents inconveniently turned out to match reality. So why were these elements true but not those relating to him and other members of the party leadership? Yes, some things were true, he conceded, but “nothing that refers to me and my colleagues in the party is true.”
He was flailing to avoid the dire fate that befell George Papandreou, the conniving prime minister of Greece, and Silvio Berlusconi, the scandal-prone prime minister of Italy. Under pressure from Merkel’s Eurozone clan, they were sacked in November 2011 and replaced by unelected technocrats.
Merkel’s support suggests that replacing Rajoy isn’t on the table just yet, though Spain is sinking deeper into its crisis that started with a pricked real estate and credit bubble, morphed into a debt crisis, a banking crisis, an economic crisis with an unemployment fiasco, and now into a confidence crisis that is sending tremors through the most important institutions of the Spanish democracy.
As Deutsche Bank co-CEO said reassuringly, “In this uncertain world, I cannot exclude anything.” Read…. The Putrid Smell Suddenly Emanating From European Banks
http://www.testosteronepit.com/home/201 … waves.html
Statistics: Posted by yoda — Tue Feb 05, 2013 12:14 pm
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International News • Spain retail sales decimated by VAT hike
Spain retail sales decimated by VAT hike
http://finance.yahoo.com/news/spain-ret … 25z;_ylv=3
Reuters – Mon, Oct 29, 2012 7:30 AM EDT.. .
By Paul Day
MADRID (Reuters) – Spanish retail sales fell at their fastest pace on record in September as already battered consumer confidence took another hit from a hike in value added tax, driving many shoppers to trade down to cheaper products.
Sales fell 10.9 percent year on year, Monday’s National Statistics Institute data showed, reflecting an economy struggling through its second recession in three years and plagued by chronically high unemployment.
The drop was the biggest in calendar-adjusted terms since current records began in January 2004, and marked the 27th monthly decline in a row.
Spain has been in recession since the first quarter of the year and is not likely to grow again until late in 2013, according to official estimates that many economists consider optimistic.
The country had the highest unemployment rate in the European Union in August – 25.1 percent – according to EU data.
That figure is expected to rise further as a large public deficit forces the government to implement deeper spending cuts and further tax hikes to persuade markets it can control its finances. It increased sales tax on September 1.
"It’s clear there are no signs the crisis is abating," economist at Nomura Silvio Peruzzo said.
"The headline (retail) figures show a sharp drop and indicate that domestic demand is not going to be anywhere near what the government is anticipating."
The retail slump is good news for some firms as Spaniards seek out cheaper options along the high street.
Discount supermarket chain Dia (DIDA.MC) said on Monday it almost tripled its nine-month net profit from a year earlier. The chain said the impact of the VAT hike on like-for-like third quarter sales was negligible.
DEBT DILEMMA
The euro zone’s fourth largest economy has moved to the forefront of the bloc’s fiscal crisis on concern that mounting debts owed by its regional administrations could make public finances unsustainable.
Worried over the potential effect of stricter budget conditions on growth, the government is wary of applying for international aid that would kickstart a European Central Bank plan to buy sovereign debt and ease its refinancing costs.
Spain’s economy is expected to have shrunk 0.4 percent quarter on quarter between June and September, according to forecasts of preliminary data due on Tuesday, with sliding domestic demand a major factor.
Prime Minister Mariano Rajoy has already introduced austerity measures worth over 60 billion euros ($77.6 billion) to the end of 2014 to try to deflate the deficit to below 3 percent of GDP from 9 percent last year.
But rising social security costs, unemployment benefits and interest payments on public debt are undermining his cost-saving measures.
($1 = 0.7733 euros)
(Reporting by Paul Day; Additional reporting by Sarah Morris; Editing by Fiona Ortiz, John Stonestreet)
Statistics: Posted by DIGGER DAN — Wed Oct 31, 2012 5:07 am
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American • Will The Collapse Of Spain Put Romney In The White House?
Will The Collapse Of Spain Put Romney In The White House?
MONDAY, OCTOBER 01, 2012
Let’s be clear about this: Mitt Romney can only win the election if the American economy numbers plummet – significantly – in the next 30 days. Mitt’s op-eds about the Middle East are not going to cut it. That is, of course, major caveat, unless Mitt has Diebold firmly in his pocket. But that for us is a known unknown.
There can’t of course be any doubt that the US economy is a really big, if not the number one, factor that decides the presidential elections stateside. If things look good financially, the incumbent president sits pretty; if they are scraping the gutter, (s)he risks getting all the blame for it.
But who really knows whether the economy is looking up or falling down? Just about all the truly relevant data reside either in dark vaults or in some remote region of cyberspace protected by prime numbers and black holes.
Hence, and this is no coincidence, it’s not the real state of the economy that matters, it’s the perception of that state that drives the opinions of experts, analysts, pundits and the public at large. And that is true, obviously, not just in the US, but on both sides of the pond, and beyond. All incumbents across the planet have a huge interest in making their economies look as good as they can get away with. You better look good than feel good.
For the challengers that is not exactly true. They can score credits by pointing out where things are not working, and by talking about how – and how much – they would do better. But they can’t really go all out, because perception and opinion have reached a certain more or less stable level, which doesn’t allow for an overdose of difference. Metaphorically speaking, you have space for perhaps a 10 or 20 percentage point deviation from perceived wisdom, but never 90%.
Go too far and you risk you entire nation’s ridicule. It doesn’t matter whether you’re right or not. And on top of that, all your potential voters have a vested interest in the same illusion that the incumbent has: too rosy a picture of their own circumstances. A very human condition, we’re all great liars.
So what’s a challenger to do? Not a lot of room to maneuver. Then again, it seems quite simple really: Mitt Romney would seem to need a dramatic event that changes everyone’s perception of the economy. Headlines such as "Republicans Want Mitt Romney To Destroy Obama On Libya This Week" clearly won’t do it.
Ergo: ideally, the Republican team must push the button on Greece or Spain. Make sure that for either, or both, or a dark horse (Ireland, Italy), there’s a strong hint, danger, or just the perception thereof, that they will leave the eurozone in the near future, if not tomorrow morning. That would cause an earthquake across the world’s stock exchanges. And that might suffice to shake up American voters enough to cause a dramatic shift in the polls and eventually the election.
It would, however, also cause a huge move into the US dollar, perhaps gold, temporarily, and that might not be all that great for Mitt once he’s taken up domicile at 1600 Pennsylvania Avenue. Would he care? Doubt it.
But does it really matter if Romney would speed up the demise of Greece or Spain? They’re going down anyway. It might turn out to be a blessing in disguise for them. The ones really hurt would be the banks and their owners. Come to think of it, that might be precisely the reason Romney won’t try.
At the same time, it should be clear both to him and to his backers that he has no chance of winning if things remain as they are today. So why haven’t they pushed those buttons yet? Good question. Known unknown again. Spending hundreds if billions of dollars on luke warm TV ads just to see the other guy take it with ease, and a big smile to boot, where’s the fun in that? Makes you wonder who backs Romney, and why? And why are they satisfied with this boring "race" to nowhere? Walter Mondale ran a more exciting campaign than this, for pete’s sake.
If I should venture a guess, I’d lean towards the idea that Romney and all his über-rich "friends" (he doesn’t strike me as a man with an overdose of real friends) are stuck inside their own paradox. To make him win, they need to cause or hasten an economic disaster. But that would cost them a lot of money, far more then they spend on the campaign. Big gamble. One which by now, 30-odd days before the election, they are undoubtedly aware of. And that can only mean that anything can happen. Only chaos is certain. Unless Mitt’s been a set-up patsy boy from the get-go. Hey, at least that would explain Romney’s non-campaign so far.
As for the global economy, at least the fundamentals are clear, even if everyone and their pet parakeet are still watching the S&P for their work-daily feel-good dose. To wit, here’s my daily grab:
EU unemployment rises to record. Mass protests in Portugal and Spain; teargas, rubber bullets and all. Ireland becomes a nation of feeders. Japan sentiment more pessimistic than it has been in ages. Spain needs €60 billion bank bailout, Spanish banks will need up to €105 billion, warns Moody’s, Spain wants to borrow $267 billion in the bond markets. Iran’s economy "is not collapsing, but it is on the verge of collapse". Dutch home sales down 5%, prices down 8% yoy. UK housing prices keep falling. UK manufacturing downturn deepens. France manufacturing nosedives. Car sales collapse in Spain and France. ‘Six-month real M1 money’ is contracting even faster in France than in Spain. Greece enters 6th year of recession. Chinese manufacturing contracts. Australia contraction in manufacturing new orders extended into a seventh month. Australia is "a credit bubble built on a commodity market built on an even bigger Chinese credit bubble," wrote SocGen’s Dylan Grice. Yada yada.
Easy pickings for Mitt, one would say. Bulldoze Greece, hammer Spain, deplete Portugal, delete Ireland. From that point of view, it’s potentially going to be a great next 30 days. Will Romney step up to the plate and do to a country what he routinely did to the companies he bought at Bain? He is sort of a specialist at bankruptcies, lest we forget. Convenient. Very.
Honestly, it seems a bit late in the day, but then, this is a world full of unknown knowns. If Mitt Romney and Paul whatshisface don’t do something spectacularly dramatic soon, they’ll have lost the election. They have nothing left to lose. That is, unless they’re patsies, and were set up to lose.
All the opportunities are there, let’s see if they grab on to them. If they don’t, let’s wonder why. Come to think of it, they may be aiming to expose Obama as a child molester or something weird like that, but that, though a winner, looks to be a long shot. Obama’s machine is not entirely clueless.
No, if they want half a chance, it has to be either the economy or the Diebold machine. Me, I’m planning to sit back and enjoy.
Just a side word of caution: all those economies that try to make you believe they’re recovering, doing well, great: they’re not. The whole kit and kaboodle is broke as can be. And that can be used for political purposes, but Romney has to be clever about doing that.
For now, Europe seems to be in line with Obama’s request to let Greece, Spain remain in the eurozone until after the election. That makes the EU a pretty big factor in the US elections. Well, unless you believe that Greece et al can stay in the eurozone forever. If you don’t, the perception – and deception – being perpetrated these days keeps the S&P where it is, and thereby Obama where he is. So what will Mitt do? Sit back and let Europe decide the US elections? Makes him a patsy!
I already said it’s going to be an interesting next 30 days, didn’t I?
http://theautomaticearth.com/Finance/wi … house.html
Statistics: Posted by yoda — Mon Oct 01, 2012 10:15 pm
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International News • Nine die in Spain floods
British woman missing as nine die in Spain floods
JENNIFER COCKERELL , DAVID MERCER SATURDAY 29 SEPTEMBER 2012
A 52-year-old British woman has been reported missing in severe flooding
which has so far claimed nine lives in southern Spain, authorities said
today.
Hundreds of people have been evacuated from their homes after torrential rain led to flash flooding in the Andalucian provinces of Malaga, Almeria and Murcia.
The woman, who has yet to be named, was reported missing in Almeria, a spokeswoman for the regional government of Andalucia said.
The Foreign and Commonwealth Office said it was looking into the reports as "a matter of urgency".
Heavy downpours and resulting high waters have killed five people in the province of Murcia, three in Almeria and one in Malaga. Five people originally declared missing had been found alive.
Jackie Broad, 58, said her home in Mojacar, Almeria, was too high up to be flooded but she had seen cars get washed away by raging torrents of water.
She said: "The river at the bottom of our road has burst its banks. There was a lot of water, in some places up to the roofs of shops and houses.
"The water has run away now but it’s left about a foot of mud everywhere. A lot of the roads are closed so we’re having trouble getting around."
Those who have died include two children who were found drowned in a car in Puerto Lumbreras in Murcia, Spanish national radio reported, while it said an elderly man was found dead near the town’s cemetery.
The heavy rain started yesterday morning throughout Spain and follows months of drought and soaring summer temperatures which helped trigger thousands of wildfires.
Meanwhile, 35 people were injured when a tornado swept through a fairground and knocked down a Ferris wheel in Valencia last night.
The tornado damaged several rides and cut electricity at the temporary fair set up in the main square of Gandia, according to its town hall website. It said 15 of the injured were seriously hurt, all of whom were treated on site.
http://www.independent.co.uk/news/world … 90627.html
Statistics: Posted by yoda — Sat Sep 29, 2012 12:36 pm
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International News • Spain to Recapitalize Bankia After 4.5 Billion-Euro Loss
By Charles Penty – Sep 1, 2012
Spain will inject capital into the Bankia (BKIA) group after the nationalized lender posted a 4.45 billion-euro ($5.6 billion) first-half loss.
The nation’s bank rescue fund, known as FROB, will pump from 4 billion euros to 5 billion euros into Bankia, Spain’s third-biggest lender, in the next two weeks, said a person familiar with the situation who asked not to be identified because those details aren’t public.
Bankia SA’s plea for a bailout pushed Spain toward requesting a 100 illion-euro rescue for its banking system from the European Union earlier this year.
The capital is an advance on money Bankia is due to receive once a reorganization plan is completed in October and approved by European authorities in November, FROB said in a statement yesterday. Bankia’s May request for 19 billion euros in state aid followed a 4.5 billion-euro bailout in 2010 and came two weeks after Economy Minister Luis de Guindos said 15 billion euros would be enough for the whole industry.
“The important thing for Bankia is to clean up the balance sheet because it’s already known that they’re going to have very big losses this year,” said Carlos Joaquim Peixoto, an analyst at Banco BPI SA in Porto, Portugal.
The unraveling of Bankia, with an asset base almost a third the size of the country’s economy, focused investors on the costs of fixing Spanish lenders and helped push the government to seek as much as 100 billion euros of European bailout funds in June to shore up the banking system.
Bad Bank
Spain’s cabinet set out a framework for restructuring the banking industry yesterday, including a bad bank that will take soured real estate from rescued lenders and seek to sell the assets over 10 to 15 years. The European bailout requires the government to spell out procedures for dealing with failed lenders that limit costs to taxpayers.
Spain is tightening bank regulation against a backdrop of doubts about the nation’s finances that spurred the government to call on the European Central Bank to buy its bonds to rein in financing costs. Spanish lenders have about 180 billion euros of troubled real estate assets, according to the Bank of Spain.
The “gigantic” financial reform announced yesterday will bring benefits to Spain’s economy over the medium long-term and the process of cleaning up the banking system is on its way to completion, Prime Minister Mariano Rajoy said today in a speech to party members at Soutomaior Castle in Galicia.
In its third reform of the financial system this year, the government also bolstered the powers of FROB to restructure troubled banks. The fund will be able to take on debt to a limit of 120 billion euros in 2012, the economy ministry said.
Santander, Sabadell
Spanish banks rose in Madrid trading after de Guindos announced details of the bad bank. Banco Santander SA (SAN), Spain’s biggest lender, climbed 6 percent and Banco Sabadell SA jumped 10 percent. Bankia rose 6.3 percent. The company released earnings after the close of trading.
The Bankia group set aside 6.8 billion euros in the first half to provision for bad loans and real estate, and a further 6.9 billion euros of charges are expected this year, the bank said. The group lost 12.8 billion euros of deposits in the first six months of the year, a 10 percent decline, it said.
Bad loans as a proportion of total lending jumped to 11 percent in June from 7.63 percent in December, while customer funds plunged 37.6 billion euros, or 18 percent, over that period, the bank said. Lending shrank 2.9 percent from December and the group’s core capital ratio under Basel II standards, a measure of financial strength, dropped to 6.3 percent from 8.3 percent, the bank said.
Capital Injection
Olli Rehn, the EU’s economic and monetary affairs commissioner, said in a statement that Spain’s commitment would pave the way for the capital injection’s approval in November.
“I am very happy with the declarations by the Spanish and European authorities because they mean a great support for our project,” Jose Ignacio Goirigolzarri, Bankia’s chairman, said in a statement sent by e-mail. “It means a commitment by these authorities to Bankia’s future.”
The FROB will first pass funds to the Bankia group parent Banco Financiero y de Ahorros, which will then in turn recapitalize the listed Bankia SA unit, the person familiar said. Other government-controlled banks also reported big losses yesterday.
Catalunya Banc, another lender nationalized last year, reported a first-half loss of 1.44 billion euros. De Guindos said yesterday the bank’s soured real estate would be passed to the bad bank before it is put on sale. NCG Banco, a Galician lender also taken over by the government last year, posted a 1.4 billion-euro loss.
Wider Consequences
Bankia’s woes piled pressure on other Spanish banks because it stress-tested residential mortgages and company loans, as well as real estate, to calculate the size of its bailout request to the government. Spain nationalized the group in June after experts appointed by the country’s bank rescue fund said its parent company had a negative value of 13.6 billion euros.
Bankia’s travails have also had wider consequences for the government and its own former management.
The practice by Bankia and other lenders of selling subordinated debt such as preference shares to retail clients has come back to haunt the banks as European officials demand these investors absorb losses under terms of the bailout. The new regulation passed yesterday enshrines the principle that holders of subordinated debt at banks receiving state aid should be made to bear losses.
“This is never going to happen again,” said Rajoy, referring to the “lamentable” situation facing retail clients sold subordinated debt. He said the government was working on ways to ease the impact of the losses facing affected customers.
http://www.bloomberg.com/news/2012-08-3 … -loss.html
Statistics: Posted by yoda — Sat Sep 01, 2012 4:41 pm
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