End of austerity?

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This topic contains 40 replies, has 11 voices, and was last updated by Profile photo of Anonymous Anonymous 3 years, 6 months ago.

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  • #57427
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    Anonymous
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    Someone will have to pay in the end. Where will the axe fall? I think it will be the German saver. The profligate will be rewarded, the prudent punished.

    I agree that there will be a move to hard assets. Gold, obviously. I also think prime Spanish property is now good investment – not for making money, just for capital protection going forward. It’s one of the only hard assets that has plummeted in the last 5 years.

  • #83968
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    Anonymous
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    I’m inclined to agree, watch out Pedralbes, San Sebastian, Mallorca and whatever the equivalent is in Madrid (if it all goes ahead of course) as for non prime, same same. “

    Que ???????

  • #83967
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    Anonymous
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    @mgspain. Thanks I get the picture.

  • #83955
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    Anonymous
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    I might have agreed but transaction costs are to high. If I allready own property I would keep it at this point though. If there is one thing you can trust politicians it is in end to inflate themselves out of problems. The problem is why would the north go along with this without leaving… and interest rates will sky rocket. If I could I would stay away from the eurozone totaly because if this happens the value of the euro will tank.

  • #83957
    Profile photo of angie
    angie
    Spectator

    Mark, I agree with Ardun that completion costs are too high, therefore that rather negates some of the ‘capital protection going forward’ you mention. To both buy and sell in Spain and some other countries, you need an increase of say 16-20% to break even.

    Is there any other asset you know of that requires 11% up front cost on purchase and at least a 5% on resale, surely this immediately puts that asset into negative equity unless held for a very long time, not forgetting annual charges to hold such an asset? ๐Ÿ™„

  • #83914
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    Anonymous
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    Angie, yes, transaction costs and ownership costs are too high, and that’s a problem for those looking for pure financial returns.

    However, I believe that inflation in the coming years is going to wipe out savings and bonds. Given how much prices have fallen, Spanish property might be a reasonable way to protect capital over 10 years or more. But I don’t think it’s going to be a lucrative investment.

    I’m still in the process of developing my thinking on this. For the last 7 years I’ve been bearish about Spanish property. I’m beginning to question my assumptions. There will obviously come a point in time when you can make a reasonable investment case for prime Spanish property. I think we are at least more than half way there.

  • #83905
    Profile photo of angie
    angie
    Spectator

    I understand your thinking Mark behind your 2nd para re inflation impact on savings and bonds etc.

    Long term, property is a good investment, it has been for us in the UK but there are big differences compared to Spain not least supply and demand. At the moment I believe capital is safer and profitability greater in UK housing with lower transaction costs to boot ๐Ÿ˜‰ Plus less Eurozone concerns to worry about!

    If Spain announced radical and speedy measures such as: halving transaction costs for a couple of years, regulating all agents and developers with bans and fines for those that don’t comply, fast-track court procedures, the end of ‘B’ money deals with property, all properties to be sold with full legal title (no more grey areas), better construction and guarantees, views guaranteed, demolition of unfinished illegal builds, what else, I expect there’s more, then this would send a signal out to prospective buyers? ๐Ÿ™„

    That said, two thirds of Spain’s unsold available homes need to be shifted first somehow, but how and when that will happen is unknown ๐Ÿ˜• ๐Ÿ™„

  • #83881
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    Anonymous
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    @Mark: In times of inflation Property & gold are the best. Gold is dead investment & further leverage will be close to impossible.

    If one needs to invest in property. UK is the place, specially London, the entry levels could be high. There are low taxes & non resident do not pay capital gains tax.

    “If Spain announced radical and speedy measures such as: halving transaction costs for a couple of years, regulating all agents and developers with bans and fines for those that don’t comply, fast-track court procedures, the end of ‘B’ money deals with property, all properties to be sold with full legal title (no more grey areas), better construction and guarantees, views guaranteed, demolition of unfinished illegal builds, what else, I expect there’s more, then this would send a signal out to prospective buyers?”

    The pigs will fly first !!! Any move/announcement will be as normal on paper & no one will take any notice. The problem in Spain in enforcement & a timely one.

  • #83867
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    Anonymous
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    Any real commodity that can be hidden from the tax authorities would be my best bet if you still want stay in “europe”. If I had money to throw around I would be looking at countries with low debt level and high economic freedom http://www.usdebtclock.org/world-debt-clock.html.

  • #83824
    Profile photo of logan
    logan
    Participant

    Announced this morning Spanish GDP contracts 0.5%. The seventh month of shrinkage in a row.

    CMC markets quote:
    The Spanish economy continues to buckle under record high unemployment of 27% and rapidly declining house price values.
    With ratings agency Standard and Poorโ€™s predicting that property prices could fall another 13% by year end the prognosis looks grim not only in Spain but for the rest of Europe as well.

    About right in my estimation. I don’t buy the government expectation of a return to modest growth in 2014. Not without a change of tack from austerity.

    That seems to be on the agenda as Italy’s new PM Letta announces an end to tax rises of โ‚ฌ6bn. No sign of where the money to plug the hole in the budget will come from.

    Merkle and Osborne are starting to look politically isolated in Europe.

  • #83812
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    Anonymous
    Participant

    Merkle and Osborne may be politically isolated. Each economy has its own dynamics, we maybe in EU.

  • #83273
    Profile photo of angie
    angie
    Spectator

    Have it on good authority and also some 1st hand knowledge that lots of French are buying in the UK, especially in the South of England, to escape Hollande’s taxes. A property near us has just sold to a French couple for well over a ยฃmillion ๐Ÿ˜›

    Anywhere along the fast rail-link is attracting attention from nos cousins over there, and, have noticed more Spanish people in our towns. ๐Ÿ˜› Our local agents told us today they’re extremely busy for some weeks now ๐Ÿ˜‰

  • #83275
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    Outside of London, house prices are now falling throughout the UK. Communist propaganda? No – from the Mail!

    http://www.dailymail.co.uk/news/article-2316654/House-prices-London-rising-90-day-flat-falling-EVERY-OTHER-major-UK-city.html

    The report highlights the gulf between the capitalโ€™s property market, where prices have reached an all-time high, and the rest of the UK, where they are falling by up to 16.5 per cent a year.

    Prices need to fall before the economy can recover, so maybe that is a good sign!

  • #83257
    Profile photo of angie
    angie
    Spectator

    It seems few countries are willing to state that austerity isn’t working, that includes the UK, however they seem slow to change tactics or simply consider a Plan B, something Osborne seems bereft of ๐Ÿ™„

    UK price rises in more affluent areas probably due to market manipulation ie Funding For Lending Scheme.

    Spain’s property ‘bumping along the bottom for some while’, I think someone posted an article saying they’re expected to fall further, and judging from our quick trip and offers being invited by certain agents on already slashed prices not sure what to think of that, doesn’t inspire confidence. There’s a hell of a lot on the market for ages, we know of various properties now on the market still after 7 years despite belated reductions ๐Ÿ™„

    Apparently Germany is now not going to drop austerity according to the Telegraph ๐Ÿ˜•

  • #83251
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    Anonymous
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    Why do you think Osborne had tears at Mrs Thacther’s funeral ??? He took it from as gospel to not to turn even if he is in a cul de sac.

  • #83195
    Profile photo of angie
    angie
    Spectator

    That’s fine mg, I picked up on it because I don’t think anyone really knows what’s happening with the market in Spain. I appreciate that properties are cheap enough to start selling again, but then we also hear that they might fall further which makes it risky, and, as others sometimes say ‘you can’t wait forever’ ๐Ÿ™„

    My biggest fears for Spanish property are mainly threefold:
    The huge oversupply, I’m unsure how and when this will really clear.
    The excessive transaction costs.
    Full legal title.

    One thing’s for certain, and back to austerity, this could become a lost decade for most countries employing these measures and it still might not work. Today in Greece there’s more protests going on, it seems any of these countries’ populus could explode anytime ๐Ÿ™„

  • #83196
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    Anonymous
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    @angie wrote:

    That’s fine mg, I picked up on it because I don’t think anyone really knows what’s happening with the market in Spain. I appreciate that properties are cheap enough to start selling again, but then we also hear that they might fall further which makes it risky, and, as others sometimes say ‘you can’t wait forever’ ๐Ÿ™„

    I think it really depends on why people are buying. If there are hoping to use the property as some sort of investment, then the current cost is really important. The last thing you would need is for your property to go down so much in value that to break even would take 20 years. However, if you are looking for a place to live, and it is at a cost you can afford, it matters less what happens to property prices.

    From the reading I’ve been doing, it seems that in many places, particularly amongst the financial gurus who are supposed to know something, the general consensus is that there is still another 10-15% to be lopped of property prices. The only people who are disagreeing are the Estate Agents. No surprise there. However, the confusing thing is that there are pockets of resistance to the downward trend, so it is difficult to come to a universal conclusion.

    From my point of view there are so many properties available that being too slow to pick up one that I like doesn’t matter. There are plenty of other fish in the sea.

    D

  • #83159
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    katy
    Spectator

    @mark wrote:

    I agree that there will be a move to hard assets. Gold, obviously. I also think prime Spanish property is now good investment – not for making money, just for capital protection going forward. It’s one of the only hard assets that has plummeted in the last 5 years.

    Eh…hello, is this a mark clone along with the new forum layout ๐Ÿ˜ฏ ๐Ÿ˜†

  • #83157
    Profile photo of logan
    logan
    Participant

    I ask the fundamental question if a second home in Spain is not for making money what on earth is the point in buying one?

    Tying up capital that could make money elsewhere, paying high taxes and overheads and a small fortune at peak times to travel to use it. Why would anyone do it? It’s pointless.

    The only real point is perhaps to make the property pay for itself by renting it out or by capital gain. Both now very tenuous prospects at best.

    A house is now a place to live work and raise a family. The exception is the buy to let market in UK which is booming largely because of legal constraints on tenant rights and responsibilities and a stable market.

  • #83141
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    Anonymous
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    @logan wrote:

    I ask the fundamental question if a second home in Spain is not for making money what on earth is the point in buying one?

    Tying up capital that could make money elsewhere, paying high taxes and overheads and a small fortune at peak times to travel to use it. Why would anyone do it? It’s pointless.

    The only real point is perhaps to make the property pay for itself by renting it out or by capital gain. Both now very tenuous prospects at best.

    A house is now a place to live work and raise a family. The exception is the buy to let market in UK which is booming largely because of legal constraints on tenant rights and responsibilities and a stable market.

    Well, if you can afford the luxury then it’s a personal choice. It’s always nicer to stay in your own property – a home from home. I would be prepared to pay more to own and stay in my own holiday-home in a place I love to visit than to go to hotels/rentals.

    It works for some people. For example forum memeber Ashtondav describes how they get a holiday-home that covers its running costs plus some holiday expenses (not including cost-of-capital / opportunity costs, I assume) in this post.

    But if you can’t afford the luxury, or don’t value having a home from home, you’re obviously better off renting or going to hotels.

    My point is there are non-financial reasons for owning a second home in Spain.

  • #83140
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    logan
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    @mark wrote:

    My point is there are non-financial reasons for owning a second home in Spain.

    Yes I agree Mark it’s horses for course in the end and we on this forum write and describe our own individual perspective. I don’t invest money unless there is a calculated prospect of a financial return.

    I would disagree that the alternative of staying in good hotels for Spanish holidays is a luxury. The luxury in my view is holiday home ownership purely on cost basis alone.

    Personally I don’t understand this ‘home from home’ view point. It’s very strange. Home is where you leave to travel and enjoy something different, not try and create a mirror image which is not really real. Perhaps it’s emotional insecurity. Hotels give you flexibility choice a total change from home which is actually the point is it not. ๐Ÿ™‚ However each to their own.

  • #83138
    Profile photo of katy
    katy
    Spectator

    Yes, we had a second home in Spain for years when the children were young. They loved the continuity of going out for school holidays. however, when they got to their teens they didn’t want to go so much as it interfered with lots going on in their lives. We were getting fed up of the same ole too. I think a real holiday is a luxury hotel with every need catered for…who wants to be traipsing around supermarkets in 30C+ heat ๐Ÿ˜ก If you only visit about 6 weeks per year there are community fees of at least 2000pa. council tax about 500pa. notional income tax a few hundred. Spanish houses are also high maintenance cost and if not there all the time usually paying through the nose.

    We started to rent out and then sold, in those days rentals were easy as there weren’t a lot of properties available. Easy to quote people who say they do well with rentals now but most who say that seem to have the property on sale ๐Ÿ˜†

  • #83135
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    Anonymous
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    I bought my property for retirement. Not as an investment, buy to let or holiday home. It was the right kind of property in the right place for my current/future requirements.

    I am/was well aware of the workings of the Spanish society in its entirety. I also know that no where in the world the rules, law remain the same so had a very clear perspective of how things could turn out band have regrets about out.

    Forum users are well aware of my postings. I can assure you that none of my postings will have a hint of regret.

  • #83134
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    Anonymous
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    Isnt the bragging rights one of the biggest factors? Shallow I know but deep inside even I wouldnt mind being able to throw that around. Only reason today to buy is if one is going to live there/retirement in a few years.

  • #83133
    Profile photo of angie
    angie
    Spectator

    I can understand buying overseas property for lifestyle change such as holidays or future retirement, although I agree with those who believe hotels, rental villas etc offer more variety and change without worries of security issues whilst away, but I can’t understand people saying I bought my overseas home ‘not as an investment’. Surely all purchases of property are viewed as investment, otherwise it doesn’t seem financial sense to me, why throw money away if it’s not bought as investment.

    I would never buy property that does not represent some sort of financial investment, or as Mark said, ‘to secure future capital protection’ over other assets ๐Ÿ™„

    We know someone with plenty of money who bought one of several building plots near Alozaina some 6-7 years ago with permission to build, buyers paid over 250k each for outstanding plots. One man got on with his and built a lovely hill-top property all rubber-stamped and legal, the other buyers dilly dallied and building permits were later overturned, money down the drain for lovely half acre pieces of picnic gound. ๐Ÿ™„

  • #83129
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    GarySFBCN
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    My point is there are non-financial reasons for owning a second home in Spain.

    As an avid art collector, the first rule is to never buy something as an ‘investment’. Only buy art that you like.

    I’m guessing that this holds true for Spanish real estate for the next 10 years.

  • #83126
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    angie
    Spectator

    Who would be a property advisor/expert, most have got it wrong in the last 7 years or so apart from initial surges of interest? ๐Ÿ™„

    I would hate to advise anyone on perhaps the biggest or 2nd biggest investment they will make in their lives! ๐Ÿ˜•

    My advice would be to trust your own instincts having rented first, and having asked many questions as well as turned up at all hours outside locations to check for annoyances/problems. Who wants to lose money, get it wrong and you face your own austerity? ๐Ÿ™„

  • #83122
    Profile photo of logan
    logan
    Participant

    Well said Angie. ๐Ÿ™‚

  • #83101
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    Anonymous
    Participant

    Does the momentous ECB decision to cut the interest rate yesterday signal the end of austerity measures across Europe? I think it does, the EU has finally listened to the US.

    It was all so inevitable, with bad numbers coming out of every EU sector with alarming regularity. Will the quarter point be enough? I hope so, because it has taken them four years to come to this decision and the world can’t wait another four years if more is needed.

  • #83102
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    logan
    Participant

    Austerity for the ECB is still the mantra. Read his speech and you will see they still embrace it. The interest rate cut was designed as a signal to the markets they are willing to soften monetary policy to try to encourage growth.

    It’s too little too late. Will not make any difference until bank lending to business across Europe gets going again.

  • #82860
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    Chopera
    Participant

    @angie wrote:

    I can understand buying overseas property for lifestyle change such as holidays or future retirement, although I agree with those who believe hotels, rental villas etc offer more variety and change without worries of security issues whilst away, but I can’t understand people saying I bought my overseas home ‘not as an investment’. Surely all purchases of property are viewed as investment, otherwise it doesn’t seem financial sense to me, why throw money away if it’s not bought as investment.

    Yes I never understand that one. Although I often hear people say they bought a property “as an investment” when to me it seems obvious that they are going to lose money on it. It’s as if they think just by holding a non-cash asset they are “doing the right thing” regardless of the whether that asset is going to return more money than they put in. Either way, there is no escaping that property is a form of investment, it’s just that sometimes certain investments should be left well alone.

  • #82840
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    Anonymous
    Participant

    People use the word investment very loosely. They have not done the ROR, period to hold the property for, opportunity cost etc.

    They may not be aware or understand other financial instruments/commodities and as I have said before Banks will not lend you for other investments. If you can convince them, the interest rates applied will be high & this will diminish/negate the return.

    They see a property as safe and for a longer period to pass it on to their off springs.

  • #82779
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    Anonymous
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    Krugman goes to his favourite pizza joint and orders a normal pizza. The “chef” asks him if he wants it sliced in 6 or 8 slices. Krugman tells him he wants it sliced in 8 slices since he is really hungry. The chef hands him his pizza and walks back into the kitchen making jokes with his fellow staff about the absurdity of this highly esteemed nobel prize winners way of looking at his pizza.

    If you believe like Krugman that you get more total food by making more slices then go ahead and support his camp. If you look at it as a necessary evil to transfer wealth from one group to another I can at least respect it for being a pragmatic choice for trying to fix an allready bad situation. My gripe with this is that it doesnt fix the underlying problem and it will just come back again and again. If you want to keep the eurozone the EMU needs to be redone from scratch “mutual tax system etc, more like one nation”. If you want to stop crizises like this in the future you need to look at the way money is being created but thats never going to happen until the real chaos begins.

    *edit Krugman is far from stupid but he is not being honest.

  • #82776
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    katy
    Spectator

    @dbmarcos99 wrote:

    Outside of London, house prices are now falling throughout the UK. Communist propaganda? No – from the Mail!

    http://www.dailymail.co.uk/news/article-2316654/House-prices-London-rising-90-day-flat-falling-EVERY-OTHER-major-UK-city.html

    The report highlights the gulf between the capitalโ€™s property market, where prices have reached an all-time high, and the rest of the UK, where they are falling by up to 16.5 per cent a year.

    Prices need to fall before the economy can recover, so maybe that is a good sign!

    According to Halifax Uk houses increased in April.

    http://www.telegraph.co.uk/finance/personalfinance/houseprices/10043215/House-prices-highest-since-2010-says-Halifax.html

    Could be good for Spanish house sales as many of the British buying did it through releasing equity in their UK home

  • #82771
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    Anonymous
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    @katy wrote:

    @dbmarcos99 wrote:
    Outside of London, house prices are now falling throughout the UK. Communist propaganda? No – from the Mail!

    http://www.dailymail.co.uk/news/article-2316654/House-prices-London-rising-90-day-flat-falling-EVERY-OTHER-major-UK-city.html

    The report highlights the gulf between the capitalโ€™s property market, where prices have reached an all-time high, and the rest of the UK, where they are falling by up to 16.5 per cent a year.

    Prices need to fall before the economy can recover, so maybe that is a good sign!

    According to Halifax Uk houses increased in April.

    http://www.telegraph.co.uk/finance/personalfinance/houseprices/10043215/House-prices-highest-since-2010-says-Halifax.html

    Could be good for Spanish house sales as many of the British buying did it through releasing equity in their UK home

    Currently the only sensible reason for getting a Spanish mortgage seems to be that you can offset the cost against rental income. If the threats against holiday home rentals come to fruition, there will be no reason not to re-mortgage in the UK. For a start, the interest rates are cheaper, the set-up fees are lower, many people will have more equity in their houses in the UK, and there will be no money lost converting mortgage payments to Euro.

    D

  • #82756
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    The Spanish recovery, which looks promisingly like it started in Spring this year, will have nothing to do with British people buying houses – the figures are down from peak years. Yes, people like the French and Russians are buying more houses, but the main impulse of the recovery will be from other sources:
    i ) Companies like Jazztel, Ford, Peugeot, Seat, Amazon, Eroski etc expanding their staff
    ii ) The return of outsourced work to Spain
    iii ) The increase in funding being made to SMEs by the EU and also by local councils
    iv ) The huge growth in eCommerce and also an increase in people going autonomo in 2013, now the new lower cost schemes are being introduced
    v ) The benefits of fantastic growth in exports, finding markets where few thought possible. For example, just in the field of construction exports to Africa, revenue has doubled in a year to 1,069 million euros. http://www.construmat.com/en/news/-/noticias/detalle/758069/noticia_informe

    The impetus of emerging countries will create 12,500 new jobs every year in the Spanish construction industry

  • #82754
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    katy
    Spectator

    According to official data, the number of companies which filed for bankruptcy in Spain jumped by over 20pc in the first quarter.

    A total of 2,854 companies filed for insolvency during the first three months of the year, a 22.8pc increase over the same period in 2012 and a 10.4pc rise from the previous quarter, the National Statistics Institute said.

    One quarter of the firms that filed for bankruptcy came from the construction sector, 17.1pc came from the commercial sector and 16.3pc were from the industry and energy sector, it added.

  • #82753
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    DBMarcos99
    Participant

    @katy wrote:

    According to official data, the number of companies which filed for bankruptcy in Spain jumped by over 20pc in the first quarter.

    A total of 2,854 companies filed for insolvency during the first three months of the year, a 22.8pc increase over the same period in 2012 and a 10.4pc rise from the previous quarter, the National Statistics Institute said.

    One quarter of the firms that filed for bankruptcy came from the construction sector, 17.1pc came from the commercial sector and 16.3pc were from the industry and energy sector, it added.

    it’s vey noticeable that the gloomsters are having to stick to articles from the first quarter (which did have bad stats) for their gloomy reports. We’re well into the second quarter, and with big firms hiring, unemployment falling, and even foreign purchases of houses holding up (we were told that January figures were just a blip from late December completions), it’s going to get even more difficult for gloomsters to push their narrative.
    “The number of freelance workers registered with the Social Security system climbed by 11,900 in April, the biggest increase in five years.”

    Things are looking up – great news for the Spanish people and their economy!
    “Peugeot sees double digit growth in Spain car sales for 2014. ” !!
    http://www.expansion.com/2013/05/07/empresas/auto-industria/1367939785.html

  • #82745
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    katy
    Spectator

    ๐Ÿ˜† ๐Ÿ˜†

    Of course they will stick to the Q1. We are only 5 weeks into Q2…a bit premature to be counting chickens ๐Ÿ™„

  • #116814
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    Anonymous
    Participant

    A strange world we live in. I read today that 23pc of Spanish pensioners now earn more than people working for a living.

  • #116820
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    Anonymous
    Participant

    That is really absurd but I’m not surprised. My father in law had a very low paid job in Sweden and is living like a king on his spanish and swedish pension in Spain at the moment.

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