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An interesting overview by Jeremy Warner of why Spain’s best chance of recovery lies in leaving the Eurozone.
http://www.telegraph.co.uk/finance/comment/jeremy-warner/9572359/Spain-must-leave-the-euro.html
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I think most of us here have argued that the best way for Spain to come quickly out of recession, would be to leave the Euro.
However I don’t think it’s going to happen, don’t ask me why, but the leaders will try their best to sweat it out.
As Spain switches to more of an exporting nation, it’s possible that by the end of 2013 there will be growth again in the economy. Indeed their balance of payments are now positive, for the first time since entering the Euro zone
http://ibexsalad.blogspot.co.uk/2012/09/spain-balance-of-payments-positive-for.html?spref=tw
The trouble is that this won’t alleviate the situation of millions, who will have to leave the country if they want full-time work – I notice Saudi Arabia made an offer this week to employ up to 100000 Spanish nurses.
An additional question is, how is all that debt to be paid off? At some point surely there will be a writing off of some debt?
The budget yesterday predicted increasing tax revenues – I suspect a fair amount of that will come from expat retirees, so we’ve all been warned in advance. 🙁 -
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According to this Reuters article Spain is actually taking the relevant economic steps – but as ever their PR in particular Rajoy’s image, has been the failing point.
http://uk.reuters.com/article/2012/09/27/us-spain-image-idUKBRE88Q1LH20120927
German and EU officials laud Spain’s efforts in implementing structural economic reforms and spending cuts but say fixing the government’s communication policy should be Rajoy’s top priority.
“They are really doing more than anyone would have expected. For an economy of its size, it really is an impressive set of steps that are being taken,” said a senior European diplomat. “But they’ve been really dreadful in their communications.”
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‘M’, as you say Rajoy’s image is not good at present, and it’s not sitting well with the populus, he’s been photographed walking through New York with his cronies, smoking a very large cigar and I read today that he and same cronies spent nearly 1000 euros on a meal aboard a plane coming back on a shortish hop within Europe. Whilst it’s small fry in context with the bigger issues his PR is not doing a good job 🙄
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What do the figures mean though… another bluff by the banks?
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Only 60 Billion required.
All of use here follow the Spanish housing market in some way or other, so we can make our own guess.
5 million properties built in the last 7~8 years of the boom. Lets average the loss on each property at 100k Euros.
That’s 500 billion loss. And the banks are only claiming 10% of it ???? We can see it’s a complete work of fiction, especially when you consider all the other areas of Spanish society that banks have lent money to, which have now failed.
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According to the Economist, the GDP projections for an adverse scenario are of 4.1% negative growth in real GDP this year and 2.1% next year. Those figures are actually below the current worst forecast, so it’s probably a realistic stress figure. However if there is some calamity eg Germany hits economic trouble or real disturbances break out in Catalunya, then obviously things may change.
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Wow! only 60 billion….that’s allright then 😆 😆 Much of it coming from the EU fund that doesn’t yet exist 🙄
I wonder how all the billions Spain’s banks borrowed from the ECB to buy all the Government junk bonds is accounted for on the balance sheets!
Here is one opinion on the budget.
Meanwhile, analysts at Citigroup think Spain’s €40bn austerity budget is still not enough. Jürgen Michels and his team said:
In our view the 2013 budget is based on a too optimistic GDP growth assumption – we expect a contraction by 1.8% in 2012 and by 3.2% in 2013. In that respect, the total fiscal tightening measures of 1.3% of GDP are probably not enough to meet the 2013 deficit target of 4.5% of GDP. On the reform agenda, leaving the retirement age unchanged and only taking measures to restrict early retirement looks disappointing. However, the wage bargaining decree seems to be a good step.
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I think much of Spain’s borrowing will come from the EFSF which is this anomaly which means as one of the largest members of the Euro/zone Spain itself has to guarantee it’s own borrowings to a great extent, how weird is that? I can’t see how they can guarantee any member states borrowings when they are potless themselves, does this mean they just won’t repay what they borrow? Please correct if this is wrong 🙄
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I have an idea to kick start Spain’s economy.
Complete housing bad debt forgiveness across the board and recapitilisation of banks funded by the ESM’s €100bn. Reduce the number of banks by complusory mergers or nationalisation. Most of this debt is unlikely to be recovered anyway. All bank property assets to be nationalised and given to the local authorities for low rent housing. Properties that needed reforming should be demolished including half built developments whose land should be turned into public parks. A moritorium on all new housing builds for five years. 🙂Result more disposable income in the populations pockets, a feel good factor which would result in higher productivity and the banks would be far more careful with their lending in future. Existing home owners would see a value rise and sales would begin again because the property backlog would be gone. 😀
Won’t happen of course, far too radical and practical for this lot in power who are basically the establishments friend..
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I agree Logan.
Public parks would be nice for those who currently have views of concrete and cranes.
It should happen but sadly it doesn’t line the pockets of those in power.
I jokingly said to my husband that Spain should split up, especially with the Catalunya situ. Why not let all the regions form their own countries and fund themselves? Andalucia could be sold off to Morocco for a few euros as well? 😉
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Maybe it’s Germany who should leave the Euro, not Spain. Good article in the DT:
http://www.telegraph.co.uk/finance/comment/rogerbootle/9592817/If-Germany-were-to-leave-the-euro-it-would-be-better-off.html -
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Data I saw on CNBC over weekend showed Spain is fairly competitive for its exports and is in much better position than Italy. Maybe this is because of lowwages many get -slave labour some seem to get. But it seems some small shop keepers in my village are having to pay quite a lot to employ part time staff. May be that is because some are too honest with a system that does not give credit to honest people and asumes all to be dishonest !!!!
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Yes tourism has done better than I expected in Canaries -reason being Arab Spring ! In fact I think the winter climate in Canaries gives it a certain amount of insulation. If you want strong sunshine and to swim in the sea in the middle of winter – Canaries is the only destination within reasonable and cheap flying time. Property is in a buyers market but generally speaking has held up better so far. You don’t see the very low prices available on some web sites on the mainland . People who buy in Canaries go there above all for winter climate . Summers can be too hot at times with the Calima from Africa -but is not climate change affecting Spain too !
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According to this tourism is down in the Canaries.
http://amigoscoffee.com/canaries-experience-tourism-drop-during-july-2012/
On another forum a poster said you can now pick up an apartment for 60,000€. As I said above depends where the articles got their stats from. All last year Spain was saying that tourism was up, by early this year 2011 had turned into a fall in tourists. Like the property sales figures it seems they think if they come out with optimistic figures they will somehow turn out to be true
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@katy wrote:
According to this tourism is down in the Canaries.
http://amigoscoffee.com/canaries-experience-tourism-drop-during-july-2012/
On another forum a poster said you can now pick up an apartment for 60,000€. As I said above depends where the articles got their stats from. All last year Spain was saying that tourism was up, by early this year 2011 had turned into a fall in tourists. Like the property sales figures it seems they think if they come out with optimistic figures they will somehow turn out to be true
Nice try, Katy, in attempting to deny facts. That blog, YES blog (and you accuse others of linking to crappy websites 😆 ) even contradicts what you are saying. Can’t you even get your knocking posts right??? 😆
Since January (2012), the Canary Islands have been visited by 5,805,175 foreign tourists, up 0.1% compared to the same period in 2011, a year that ended beating the record of foreign tourist arrivals to the Canary Islands, with more than 12 million people visiting the islands.
After that MASSIVE fail in trying to deny tourist figures, may be time to try a different approach????
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May have been a blog butIf you read my link properly you would see those figures were Government figures. Anyway I was pointing out that on the very first page of google you can find contradictory figures. As someone said on another forum you are on, you can prove/disprove anything on the web. It is only looking back later you will find who is correct and Angie and I have been spot on up to now.
BTW lots of stuff from Jet2 saying tourism is up. Also read today that thousands of S. Americans are leaving the Canaries through lack of jobs.
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@katy wrote:
May have been a blog butIf you read my link properly you would see those figures were Government figures. Anyway I was pointing out that on the very first page of google you can find contradictory figures. As someone said on another forum you are on, you can prove/disprove anything on the web. It is only looking back later you will find who is correct and Angie and I have been spot on up to now.
You seem to be consistently wrong on most things this year, from it being cold most of the time in winter in Valencia, to this latest link where you tried to prove that tourism figures were bad in the Canaries (I don’t even know why you tried, your documented field of knowledge is Marbella).
Of course I’ve not been on this forum as long as you. You may well have got things right in the past. From the Murcia/Paramount thread you’ve constantly said it won’t happen, and we should find out by next year if you’re proven right. It does seem to have dragged on for a long time. -
Haven’t been proved wrong on anything…everyone knows it is cold in valencia except your twitter friend. You only need to look at weather stats. Strange stuff coming from someone who has taken a couple of sleazy jet weekendsto Spain in a few years. When will you admit you are a loser with a dream
Getting back to Spain leaving the Euro…Spains borrowing costs going up again!
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@katy wrote:
Haven’t been proved wrong on anything…everyone knows it is cold in valencia except your twitter friend.
You’ve just killed any credibility you may have had. If you had stuck to “you do get a few cold weeks in winter” you may have been able to retrieve the situation. Never mind…
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@katy wrote:
Piss off and google valencia weather stats from Nov to March 😆
😆 😆 😆
Haven’t been proved wrong on anything…everyone knows it is cold in valencia except your twitter friend.
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Meanwhile back to the Euro.. this commentator is claiming that Spain may be about to leave the Euro
Some good points in there.
However I am not convinced that Rajoy will avoid asking for a bailout, on the grounds it will mean breaking an election promise. Hasn’t he done that several times already? He may however choose not to take that step, as any leader who does so, ends up losing office. -
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There is not a cat in hells chance Spain will leave the Euro, it’s total nonsense. Rajoy is as dependent on the Eurozone as an addict is for a drug.
The fact is he is playing the political game of both ends against the middle. He wants better terms for a bailout and knows Spain cannot tolerate any more austerity imposed by Brussels. Any current EU bailout would come with such strings attached.
Germany and France could not allow Spain to leave the Euro because of the massive indebtedness owed by Spain to their banks. The financial hit would seriously damage their economies.
So Rajoy plays hardball and prevaricates hoping all the time the markets will buy it and move Spain’s borrowing costs lower and he can avoid the ‘men in black’ running his country.
In the end it will be who blinks first.
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@logan wrote:
There is not a cat in hells chance Spain will leave the Euro, it’s total nonsense. Rajoy is as dependent on the Eurozone as an addict is for a drug.
The fact is he is playing the political game of both ends against the middle. He wants better terms for a bailout and knows Spain cannot tolerate any more austerity imposed by Brussels. Any current EU bailout would come with such strings attached.
Germany and France could not allow Spain to leave the Euro because of the massive indebtedness owed by Spain to their banks. The financial hit would seriously damage their economies.
So Rajoy plays hardball and prevaricates hoping all the time the markets will buy it and move Spain’s borrowing costs lower and he can avoid the ‘men in black’ running his country.
In the end it will be who blinks first.
Have to say I agree with much of that. But there is the Catalunyan complication. If extra austerity means the break-up of the Spanish state, then they may be tempted to leave the Euro (which means a devalued currency and printing, but the chance to grow again).
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Marcos the Catalonia referendum has been blocked by the Spanish Parliament any attempt to continue with it would be deemed unconstitutional. I doubt the regional government of Catalonia wants to put their €5m bailout in jeopardy.
S&P said that their decision to downgrade Spain to BBB- was fuelled by a declining capacity of the nation’s political institutions to deal with the current economic crisis. A polite but accruate understatement.
I couldn’t agree more.
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Bootle states the Euro should be broken up – will be interesting to see if this happens in this way
http://finance.fortune.cnn.com/2012/09/25/euro-break-up/
Here’s how the mechanics might work if, say, Spain decided to withdraw. The government would announce the decision on a Friday, shortly after the Prime Minister and cabinet reached the decision. It would state that by 12:01 a.m. Monday all wages, bank deposits, pensions, and prices would be reset in pesetas at a 1-to-1 ratio with the euro. Over the weekend, all ATMs and bank branches would be closed and no electronic transfers allowed, to prevent citizens from moving money to, say, Switzerland before the conversion. Bootle recommends that departing nations start printing notes and coins only after the announcement. In the interim all transactions would be via credit or prepaid cash cards. Euros would also be accepted for cash purposes for a fixed period. Starting on Monday morning, the euro would make its debut as a foreign currency. Its value would rise sharply against the new peseta. So a taxi fare priced at two pesetas might go for just one euro within days.
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mgspain, I know several Brits who live in Spain who do as you’re doing by just keeping sufficient Euros in Spanish Banks for day to day living, it makes a lot of sense to me whilst this uncertainty lingers on. 😉 Don’t think what you’re doing and keeping some gold handy is OTT either, and it’s expected to break through $2000 per oz sometime 😯
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“and it’s expected to break through $2000 per oz sometime :shock:”
Its also expected to breakthrough $500 sometime. the question is when.
“So a taxi fare priced at two pesetas might go for just one euro within days.”
Argentina now has a 5:1 ratio against the Dollar rather than 1:1 before devaluation a decade ago.
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yes, and I bought US dollars at 2.05 to the pound and sold them at 1.65 once, I don’t see your point peterhun. The gold price will fluctuate up and down but recently several reports say it could well go to $2000 per oz, I don’t set markets BTW.
You might still get your equivalent of a 2 peseta taxi fare in your Polish agricultural speculative area to get to your hot property market there 😆
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Things could get interesting on the Euro front over the next 6 months.
Berlusconi is coming back into the picture in Italy. There is speculation that Italy and Spain will threaten to break the Euro if Germany doesn’t relax lending conditions. But is there really any chance of Merkel giving handouts out of hard earned German cash in an election year? -
The election in Italy is likely to be dominated by two men, one representing austerity Monti or public spending Berlusconi. The latter is a proven rogue but that will not bother the Italians who are fed up with austerity after only just over a year.
In the unlikely event Berlusconi is returned to power that will present a huge problem for Merkle in her drive to screw other EU states down to rigid austerity programs.
We are constantly being told that there is no alternative to one economic philosophy of austerity, cuts and unemployment. Almost five years now and this process is failing. Even the IMF now believes it risks damaging some EU economies beyond repair.
Europe needs politicians brave enough to take an alternative road. If further austerity means misery and poverty for millions for another decade what is the point?
There is a tipping point where social unrest can lead to bloody revolution. How far we are away from it is anyone’s guess but with each passing year that becomes an increasing reality.
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The social unrest problem is potentially destabilising for countries like Spain, Greece and Italy (Portugal too), Spain could leave the Euro because of this threat as if they go for the big bailout it comes with further severe austerity measures which the populus probably cannot stomach any more. 🙄 Possible mayhem 🙄
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