Rajoy expecting strikes over labor reforms

Mariano Rajoy
Expecting strikes

The Spanish Prime Minister, Mariano Rajoy, has told European partners he believe’s labor reforms, to be adopted in mid-February, will likely cause strikes.

“The labor reforms will cost me a strike,” Rajoy whispered to Finnish Prime Minister Jyrki Katainen, apparently unaware that the cameras were watching and the microphones listening.

The EU has said Spain should give priority to the labor reforms to reduce the high level of unemployment in the country but Rajoy thinks there is trouble ahead.

“Now comes the hardest thing,” he said to Dutch Prime Minister, Mark Rutte, adding that the reforms will leave “a very bad legacy”.

After meeting with José Manuel Barroso, the president of the European council, Rajoy confirmed that the restructuring of the financial system will be adopted next Friday and the new labor reforms will be ready in February.

I look forward to reading the details of the reforms – some will no doubt benefit but I’m sure the majority of people will be in the same position that there are in now, or worse!

Will restrictions on NIE numbers slow investment?

The Secretariat of Labour and Immigration has ruled that the obligatory NIE number can no longer be applied for by representatives with power of attorney meaning personal attendance is required.

This means anyone wishing to buy a property in Spain will have to arrive at the police station at 7am, wait in the queue for hours, go to a bank to pay the fee, and then return to the police station to apply for the number.

This will be required for anyone wishing to buy a property, set up a business, sign up for employment and many other legal matters.

Antonio Flores, from legal firm Lawbird, says that in Madrid you can expect a 3 month wait for an appointment to apply for the NIE.

Some Spanish Consulates are being used to speed up the process of applications and return an NIE number within 5 working days (RD 557/2011). As part of cost-cutting many consulates have been closed so you will have to find one first.

Flores thinks that this will stop many investors from coming to Spain. The big investors that Spain needs to attract are not going to willingly queue up outside the police station and wait hours for a number. They will take their investment to another, more accommodating country, with less red tape. This is another strange decision by the Spanish authorities at a time when they are actively looking for an increase in foreign investment.

Recently there were rumours that Russian prime minister Vladimir Putin was looking to buy a property in Marbella. Would he have to wait outside the police station on a cold, dark morning?

GDP registered a fourth quarter increase

INEThe Instituto Nacional de Estadística (National Statistics Institute) have released an advanced estimate of the quarterly national accounts.

The report shows that during the fourth quarter of 2011 GDP generated by the Spanish economy registered a real increase of 0.3%, compared with the same period of the previous year.

Although Q4 showed a decrease in domestic demand, this was partly compensated by the increase in foreign demand that grew as compared with the previous quarter.

The quarter-on-quarter GDP growth was -0.3%, as compared with 0.0% for the previous quarter.

By temporary aggregation of the four quarters, the real growth in GDP in the whole of the year 2011 was estimated at 0.7%.

Although this advanced estimate uses the same methodology as that employed in the compilation of the complete estimate, these figures are provided only as a guideline.

The INE will publish the complete tables and charts of the Spanish Quarterly National Accounts for the Fourth quarter of 2011, on 16 February.

You can download the INE report here: Advance Estimate of the Quarterly National Accounts.

Worries for some, Christmas for others!

Spanair now face huge fines

Over the weekend you may have seen something on the news about a little airline called Spanair.

This was an airline started in the 80’s by Scandinavian carrier SAS as a charter airline offering connections to the Balearic islands from the mainland.

Over the weekend the airline landed it’s last flight and suspended its operations without warning anyone, including staff. Around 23,000 passengers were left stranded or trying to reschedule flights.

Spanair were already controversial as, since 2009, they had only managed to stay afloat with the help of some €150 million of subsidies from the Catalan authorities. This had caused other airlines, quite rightly, to question the legality of the payments and there was already an antitrust decision pending by the European Commission.

The Spanish government now intend to fine the airline up to €9 million for the abrupt closure, says Ana Pastor, the Spanish development minister.

Surely if Spanair had €9 million they wouldn’t be closing? Maybe a better use of your time Ms. Pastor, would be to look at the reasons for the closure and try to ensure the same thing doesn’t happen to other struggling carriers.

Maybe the fine could be paid by Mr Francisco Luzón, executive director of Santander (Americas division).

Christmas seems to have come early for him as he is stepping down after 15 years and will be taking a generous €56 million retirement package with him.

Santander say the Americas contributed €4.8bn to the banks total profits in 2010, and therefore the retirement package is in line with achievements.

A quarter of Spanish people are out of work. Half of young people are out of work. Is it right for one man to receive such a payment when so many others in Spain are on the poverty line?

This isn’t the first Spanish bank to make such an award. When José Ignacio Goirigolzarri retired early from Santander rival BBVA, his €3m annual pension was called an “obscenity” by a member of parliament.

I think the UK has had the most public outcry over executive pay and pension awards but this is sure to rattle the Spanish and I’m sure there will be a backlash of some sort.

Spanish banks report fall in profits

IMS - International Mortgage SolutionsThis week has started to see the Spanish Banks publish their results for 2011.

La Caixa, now renamed CaixaBank, and floated last year, has reported profits are down 13%.

Sabadell group profits are down 39% and Banesto has seen profits tumble by three quarters.

On the positive side they all at least still made a profit.

Most of the down turn in profits is due to the drop in income between the interest payable and interest earned and the higher provisions they have been forced to make to cover bad assets on their balance sheets.

Loans in default, as a percentage of their loan books, continue to rise each month partly driven by more defaulters and partly driven by the fact that every bank is decreasing its loan book size.

Risk departments who were on the back foot during boom times and forced to bow to commercial pressures are now very much ruling the roost. They are by nature normally cautious and, with no pressure being applied from sales, are wielding their new found power in a dictatorial and intransient manner.

There is on most occasions little common sense or commerciality being applied. Any deviations from criteria are rejected and ability to look at an application in its entirety to assess  risk properly  has all but disappeared. A well constructed challenge to an initial decision can still bear fruit but experience and a good understanding of risk managers psyche is paramount to making this happen.

Many branch staff are finding it difficult to come to terms with the new world and often still over promise direct clients both in terms of what is possible and costs. We are back to the days of Spanish banks working on the basis that if a client applies for a mortgage, no matter what is finally agreed, the client will complete even if the terms bear no resemblance to what the client was expecting to get.

Many, including Lloyds and Barclays, are focusing solely on a certain type of client by having minimum levels of income required, minimum value of property or minimum loan sizes but have pricing that a “vanilla client” would not want, or need to pay. It is difficult to see how these banks are going to square the hole on pricing against the type of borrower required.

Loans above two hundred thousand euros are becoming more difficult to find, whatever the strengths of the client’s situation. Again this makes no sense as there is no evidence that one larger quality loan is worse to have than 10 poorer quality loans, in fact for most sensible people the reverse would seem to be true.

Potential borrowers can expect the Banks to be very pedantic on paperwork requirements, to request what clients may feel is unnecessary, to have unusual and unfathomable idiosyncrasies to their risk assessment and appear on many occasion to have issues with perfectly good applications.

Matching a clients profile to the current banks available has now become one of the most important things upfront. There is no point in applying as a single applicant to a bank that will only lend to married applications. There is no point in applying to a Bank that will not lend if more than one property in the applicants country of residency is owned, if you own more than one property. There is no point in applying to a Bank if you are self employed if they will not take into account dividend income.

Once access has been ascertained the next consideration is best terms of those lenders available for that application. The rate range from worst to best is the largest it has ever been. Margins above Euribor range from 1.70% at bottom end to a massive standard rate of 3.85% at top end.  The linking of compulsory products also means all costs need to be taken into consideration. It may be better for instance for certain clients to have a higher rate and no life costs versus another client who may find it more beneficial to have life cover and a lower rate.

Any clients who want to brave the battlefield without professional assistance need to make sure the bank explains all the terms clearly and they should shop around.

International Mortgage Solutions

( p.s. Many thanks to Heather at International Mortgage Solutions for her informative updates. )

Unemployment in Spain still increasing

Spain's Unemployed
Unemployment in Spain at highest for 17 years

The National Statistics Institute has released figures showing that 5.3 million people were out of work in Spain at the end of December 2011, up from 4.9 million at the end of the third quarter.

This sets a 17 year high for unemployment in Spain with 22.8% of the population out of work. This is more than double the average across the 17 members of the Euro zone, which stood at 10.3% in November, according to the report.

Furthermore, the figures show an alarming rate of unemployment for the younger generation with almost half of all 16-24 year-olds being jobless – 48.6% now, compared with 45.8% in December.

Men are faring slightly better than their female counterparts with male unemployment increasing to 22.46%, whilst 23.32% of females are unemployed.

Some sectors did show a decrease in unemployment. In Agriculture, for example, there were 42,300 fewer unemployed and, surprisingly, the construction industry also saw a small decrease with 2,900 fewer people losing their jobs.

New conservative prime minister Mariano Rajoy has pledged action from his government to improve the job market but he isn’t working fast enough for some people. A number of public service employees held a series of demonstrations across Spain earlier this week to protest against unemployment and the governments austerity measures.

The situation with rising unemployment is a bit of a catch-22 for Mariano Rajoy’s administration. As more people register to receive benefits the governments bill increases and fewer people in work means fewer people paying income tax, so less revenue is generated. Add this to the fact that fewer earners means fewer spenders and the economy seems sure to head back into recession.

Huge numbers attend Fitur 2012 in Madrid

FITUR 2012
Over 200,000 visitors this year

Madrid hosted the annual International Tourism and Trade Fair (FITUR) last weekend and this years event was a great success, attracting more than 200,000 visitors.

The fair was inaugurated by the Prince and Princess of Asturias, Don Felipe de Borbon and Doña Letizia Ortiz.

Organisers said there were more attendees and exhibitors than last year with 10,100 companies presenting their products from 167 countries.

Representatives from troubled Egypt and Tunisia were in attendance keen to woo back the tourists lost following recent uprisings and violence. Japanese officials were also in attendance as part of efforts to revive the tourism industry following the earthquake and tsunami in March 2011. Tourist numbers in Japan had fallen 29% by November.

Officials from Tunisia said they had lost most of their Spanish trade following last years troubles.

“We have lost 30 to 40 percent of tourists. The Spanish market is the one that has caused us the most difficulties. It has fallen 60 percent”, they explained, adding that this is because many Spanish tourists have instead chosen to visit the Canary Islands or Turkey.

Based in Madrid, the United Nations World Tourism Organization said on Monday that “tourist numbers across Europe surged in 2011 as conflicts drove many tourists away from the Middle East and North Africa.”

MacAnthony may face prison in fraud case

‘The Posh’ chairman may face prison

On Wednesday this week 51 complainants from across the UK attended Marbella criminal courts to ratify the case against former property mogul Darragh MacAnthony and his former chief executives Michael Liggan and Dominic Pickering.

The judge will now decide whether to proceed with criminal charges in a case that could last up to two years.

Antonio Flores, from legal firm Lawbird which represents the claimants, told me that the defendants could be looking at a prison term of between 4 and 12 years if found guilty of fraud and misappropriation of client funds, as well as having to repay the clients money.

“The claimants want their money back,” Antonio told me. “They paid money for furniture for their new homes and the furniture didn’t arrive leaving them out of pocket.”

Collectively the claimants lost over 600,000€, which may seem like a large amount to most people but maybe not so to millionaire businessman and football club owner, Mr. MacAnthony.

Antonio Flores said “MacAnthony does have the option to settle with the claimants out of court but the time for that is running out.”

“If he doesn’t do it soon the chance will be gone and a court case will be unavoidable,” he explained.

The case continues and I will be keeping a close eye on it. I will keep you updated as often as I can.

As I had his attention I asked Antonio what he thought about the property market in Spain at the moment and what effect recent corruption trials, and the MacAnthony case, had had on the market.

“I think it’s safe to buy a property in Spain after everything that’s happened”, Flores said.

“Corrupt officials were exposed and removed from their posts and buyers are well informed these days.

“Many Spanish banks have a huge stock of properties and these cost money to maintain – community fees, local taxes etc – so the banks can’t hold on to them forever without suffering significant losses.

“When the banks do sell their properties they will be with discounts up to 35% off the original value, maybe more, and some banks are offering 110% finance on their own properties.

“This makes it much easier to find a real bargain on the coast”, he added.

I told Antonio that I think UK buyers are nervous about buying here following recent events and much negative media coverage and asked him if he thought their absence would damage the market further.

“The British media only shows British people being affected by corruption or price crashes and this is simply not the case,” he explained.

“There are people from all over the world buying property in Spain, including the Spanish, many of whom have found themselves in debt or, in the worst cases, homeless.”

Tighter regulations and the removal of corrupt officials means buyers are now unlikely to find themselves at risk of losing their homes and generally Antonio thinks the market here is safe. The banks have a lot of discounted stock, finance is available and there is a large amount of empty properties on the coast and for those reasons he thinks now is a good time to pick up a bargain.

He did stress however that no matter where or when you buy a property make sure you use a lawyer who speaks the language and knows the system.

Antonio Flores is a lawyer with legal firm Lawbird, in Marbella, and has been involved with many high-profile cases over recent years. He is a well known and respected lawyer on the Costa del Sol and I thank him for taking the time to speak to me.

Lawbird Legal Services

Phone: +34 952 861 890 | info@lawbird.com

MacAnthony does have a case to answer

MacAnthony Case
A small group of protesters outside court

Yesterday, 51 British expats, from England and the Republic of Ireland, attended a Marbella court at the request of the judge to ratify their lawsuit against Darragh MacAnthony.

The football chairman and his former chief executives Michael Liggan and Dominic Pickering, are accused of “theft by swindle and misappropriation of funds” amounting to 600,000€.

The claimants say they gave various amounts of money over to MRI Overseas for furniture packages for properties purchased through MacAnthony’s business but the furniture failed to appear.

The Spanish judge has considered the facts and decided that the three men accused do have a case to answer.

There was a small protest outside the court in which around 40 former MRI clients who had been affected by the case held placards and demanded action against the millionaire businessman.

In 2008, as a result of the many complaints against MRI, a tribunal was held by the National Federation of Property Professionals who were said to be “appalled to hear of the company’s misleading business practices”.  The tribunal resulted in fines of £5,000 and Darragh MacAnthony was forced to withdraw his membership of the Federation.

There must be days in Darragh’s life when he wishes he’d played it straight and by the book. How much easier his life would be today.

37,000 Empty properties in Malaga province

spain construction
Many developments are unfinished

Following the construction boom of recent years Spain now has over 800,000 properties waiting to be sold with 16% of them in Andalucia, mostly in the provinces of Malaga and Almeria. This is an increase of 19,000 since the end of 2010.

Only 2,000 new homes have been sold in Andalucia in the last year according to new research from Spanish bank Catalunya Caixa and the report doesn’t see this number falling too quickly.

With many urbanisations currently under construction the number of new, unsold properties is likely to increase by around 18,000 this year, the report estimates.

The report also showed an increase in the number of state-subsidised houses in the region increasing from 7.1% of the total in 2007 to 34.4% in 2011.

Analysts think this is a contributing factor preventing the construction sector from improving over the last 12 months and it is unlikely to show significant improvement in 2012.

Another reason many of these properties sit unsold is the recent media coverage of corruption trials in which officials are accused of accepting bribes for granting planning permission and residency licences. Many potential property buyers are worried that they could find themselves in a similar situation to the unfortunate people who watched their homes demolished in front of them. Buying a resale property is far safer as the necessary licences are likely to be in place and any construction issues have usually been resolved.

Whether you’re buying a new property or a resale, ensure you use a lawyer and check everything before you sign anything!