Tourist board change tactics

The Costa del Sol attracts millions of tourists each and every year and the crisis doesn’t seem to stop the hoards descending on the Mediterranean coast with predictable regularity.

This year the Costa del Sol Tourist Board (Patronato) have changed the way it promotes the region moving away from the nationalities of visitors and focusing more on their characteristics and tastes. The new plan was presented in Málaga on Wednesday.

The tourist board have set a target of attracting 37% more tourists to the region than in 2011.

Elias Bendodo, president of the tourist board, announced the plans which include 321 advertising and promotional events which, he said, shows the commitment of the organisation to meet the target they have set for themselves.  Despite grim economic outlooks across Europe, they are confident that the Costa del Sol’s reputation as a tourist hot-spot will keep the numbers up.

“We are going to do more for less”, Bendodo said. He added that they want to promote the the Costa del Sol “as the perfect destination”, and as having more to it than just sun and sand.

Focus points of the plan include holiday tourism, residential tourism and leisure, cultural activities and language learning. Along the coast events will further promote golf and green tourism, as well as active and rural tourism.

The main objective of the plan is to attract tourists with money to spend, and show them that the Costa del Sol is a great tourist destination at any time of the year.

General strikes across Spain

Protests were held across Spain today

As promised unions across Spain have gone on strike today in protest against labour reforms which Mariano Rajoy’s government hopes will help cut unemployment and revitalise the country’s struggling economy.

The unions have claimed strong support from the transport sector, manufacturing, and even local television stations which are off-air today.

Despite support from the sector, and in accordance with agreements made with the government, transport workers ensured bus and rail services were kept running but at a minimum, while  domestic and European flights were cut to a fraction.

According to reports there were scuffles between protesters and police in Madrid as workers from Spain’s largest unions picketed outside the capital’s bus depot early this morning. A total of 58 people were arrested while nine were injured, the interior ministry said.

The UGT union said that participation in the strike was “massive” and that virtually all workers at Renault, Seat, Volkswagen and Ford car factories around Spain had walked out in support.

Spain has the highest rate of unemployment in Europe, currently at 23%, and has been struggling to bring it’s finances under control, despite billions of euros of austerity measures already implemented.

“The question here is not whether the strike is honoured by many or few, but rather whether we get out of the crisis,” Finance Minister Cristobal Montoro said.

“That is what is at stake, and the government is not going to yield.”

Other struggling eurozone countries are watching events in Spain closely and some see today’s general strike as the start of a Pan European revolt against the self-defeating policies of austerity implemented by the non-elected.

This is the first real test for the conservative Partido Popular (PP) which took office in November, and with a further 40 billion euros of spending cuts expected to be announced in tomorrows budget this could prove to be the week that seals the future for Rajoy’s government.

Construction declines in Spain

According to new figures released by Eurostat, construction declined across the euro area by 0.8% in January this year, compared with December 2011. Furthermore, across the 27 EU member states construction fell by 4.1%.

Spain recorded the third greatest fall with a decline of 11.5%, just behind Portugal with 11.9%, and Slovenia with a 19.7% decline.

Monthly comparison

Compared to December 2011, construction output fell in January 2012  in seven member states and rose in eight. The largest decreases were registered in the Czech Republic (-20.1%), the United Kingdom (-13.8%) and Italy (-7.8%), and the highest increases in Slovenia (+17.4%), Germany (+4.3%) and Portugal (+2.5%).

Building construction dropped by 1.5% in the euro area and by 4.6% in the EU27, after -0.3% and -3.3% respectively in December 2011. Civil engineering rose by 1.6% in the euro area, but fell by 2.2% in the EU27, after -3.9% and -3.5% respectively in the previous month.

Annual comparison

Compared to January 2011, construction output fell in nine and rose in six member states in January 2012. The largest decreases were registered in Slovenia (-19.7%), Portugal (-11.9%) and Spain (-11.5%), and the highest increases in Poland (+34.2%), Romania (+14.9%) and Sweden (+7.3%).

Building construction declined by 0.9% in the euro area and by 0.8% in the EU27, after +9.4% and +7.3% respectively in December 2011. Civil engineering decreased by 1.7% in the euro area and by 1.4% in the EU27, after +9.1% and +12.4% respectively in the previous month.

The production index in construction approximates the evolution of output within the sector, broken down into building construction and civil engineering. For the Member States which produce the construction index, but do not provide data for the reference period, Eurostat estimates missing values in order to calculate euro area and EU aggregates.

You can see the full report here: Construction Output Down by 0.8% in euro area

Mortgage Statistics – January 2012

According to figures released by The National Statistics Institute (INE), during the month of January, the average value of the mortgage constitutions recorded in the land registries stood at 122,973 euros, a 5.0% increase compared to the same month in 2011, and 10.6% higher than that recorded in December 2011.

In the case of mortgages constituted for dwellings, the average value was 107,217  euros, 9.7% less than in January 2011, and 3.2% higher than that registered in December  2011.

The value of the mortgages constituted on urban properties stood at 5,308 million euros in January, indicating an interannual decrease of 35.3%. In dwellings, the capital loaned  exceeded 3,127 million euros, 46.9% less.

Mortgages by institution

Banks were the institutions that granted the highest number of mortgage loans in January (64.7% of the total), followed by Savings Banks (18.9%) and Other financial institutions  (16.4%).

Regarding the capital loaned, Banks granted 67.6% of the total, Savings Banks 18.2%, and Other financial institutions 14.2%.

Mortgage interest rates

The average interest rate in January 2012 was 4.42%, indicating a 19.1% increase in the interannual rate, and an increase of 1.6%, as compared with December 2011.

By institution, the average interest rate of Savings Bank mortgage loans was 4.37%, and the average term was 23 years. Regarding Banks, the average interest rate for mortgage loans was 4.55%, and the average term was 21 years.

92.8% of the mortgages constituted in January used a variable interest rate, as opposed to the 7.2% that used a fixed rate. Within the variable rates, the Euribor was the reference interest rate most used in constituting mortgages, specifically in 87.8% of new contracts.

Mortgages with registration changes

In January, the total number of mortgages with changes in their conditions recorded in the land registries stood at 30,571, with an interannual decrease of 6.6%. In the case of dwellings, the number of mortgages with modified conditions decreased 9.0%.

Considering the type of modification to conditions, in January, 25,409 novations (or modifications produced within the same financial institution) took place, for an interannual decrease of 2.6%. The number of transactions that changed institutions (subrogations creditor) was 3,487, 28.2% less. In turn, 1,675 mortgages changed the holder of the mortgaged property (subrogations debtor), which implied a decrease of 6.2%.

Number of mortgages with changes in interest rate conditions

Of the 30,571 mortgages with changes in their conditions recorded in the land registries in January, 40.6% were due to changes in interest rates.

The percentage of mortgages at a fixed interest rate decreased after the change in conditions (from 4.1% to 2.7% of the total), since most of these loans were referenced to a variable interest rate. Within the interest rate structure, the Euribor was the main reference. The lowest average interest before the change was that corresponding to Other interest rates (3.90%). The lowest average interest after the change was that corresponding to the Euribor (4.36%).

After the modification to conditions, the average interest of the loans decreased 0.19 points in fixed interest rate mortgages, and decreased 0.10 points in variable interest rate mortgages.

Registered mortgage cancellations

In January, 40,515 mortgage cancellations were registered, 7.5% less than in the same month of 2011. Mortgages cancelled on rustic properties increased 11.4%, and those cancelled on urban properties dropped 8.1%. Registered cancellations of mortgages on dwellings decreased 9.9% in the interannual rate.

Geographical distribution

The highest number of mortgaged properties per 100,000 inhabitants was recorded in La Rioja (224). There is no community that presented a positive variation rate. The greatest negative variation rates were registered in Aragon (-61.0%) and Galicia (–49.2%).

Comunidad de Madrid registered the highest average amount mortgaged (169,892 euros). Andalucia presented the highest positive interannual variation rate (30.0%).

The Communities showing the highest numbers of properties with modified conditions per 100,000 inhabitants were Castilla-La Mancha (145) and Comunitat Valenciana (134). Those having the greatest number of registered mortgage cancellations per 100,000 inhabitants were La Rioja (320) and Cantabria (162).

You can download the complete report here: Mortgage Statistics – January 2012

Inheritance Tax‏ in Spain

Many people have been in my office, asking me what happens when a person dies in Spain, as far as their assets are concerned. Some were inheritors and others were trying to make things as easy as possible for their heirs when the day finally comes.

For most people, they want to make things as easy as possible for their heirs and a Spanish Will is the first step in the process. Many people think about making a Will but never actually get round to doing one.

Whatever people say to you regarding these three possible situations, there is a simple solution. A client told me the other day that he thought that the Spanish government would take everything if there was no Will. This is not the first time I have heard this rumour and it is totally unfounded.

There are three possible situations:

1. You have a Spanish Will
2. You only have an English Will or
3. You do not have a Will

1. The deceased person has made a Spanish Will

A. Some documents must be gathered

• The original death certificate. If the testator died in Spain, we have to apply for a Spanish death certificate, but if the testator died in England, the death certificate will need the Apostille affixed (Hague’s Convention). It will also need to be translated by an official Spanish translator, or by the Spanish Consulate in England.
• We also need to write to the “Registro de Últimas Voluntades” (Register of last Wills) in Madrid on your behalf so that they certify that a Will was made, that the Will in question was the last one and which Notary has the original documentation. Even if you already have a copy of the Will, we must write to the Register, so that they can certify that there is no other Will with a later date. Most solicitors have a collaborating firm lined up in Madrid to avoid the procedure by post which tends to be lengthy. In our case, we can obtain certification within two weeks.
• Gather the original escrituras de compraventa (title deeds) and bank account details. If you cannot find the deeds, do not panic, a certificate from the property register can be obtained and will work just as well.
• Your last Patrimonio declaration. If you have never made one, a written declaration to the effect of not having an estate worth more than 500,000 Euros.

B. You must have an acceptance document drafted, which must be signed in front of a Spanish Notary, exactly the same as when you are purchasing a property in Spain.

C. You then have one month to pay the inheritance tax or claim part or total exemption depending on your situation. The tax has to be paid in Madrid if both the deceased and the heirs are non-residents. If any of the people involved is a resident then one can present the forms at the local tax office. If the heirs are group 1 or 2 (spouses or direct descendants) there is a major benefit of Andalucían Jurisdiction (which you can only claim if the deceased or one of the heirs are residents in Andalucia and can prove it). The benefit consists of an exemption rate of 125,000 Euros for each heir instead of 16,000 Euros for each heir.

D. As soon as the Inheritance Tax has been paid or the exemption is claimed, you can go to the bank where the deceased person held his/her money and the bank will release the money to the person the Acceptance Escritura confirms has inherited.

When this is done, you must deal with whatever property you may have inherited. You must go to the property register and ask to register the Escritura of acceptance (In the same way one does when purchasing a property with the purchase escritura). It will take approximately one month for the register to be handed over to the registered title. After this deed is completed, plusvalia needs to be paid to the Town Hall to which the property belongs.

2. The testator has made a Will in England, which refers to his / her assets and properties worldwide

A. You must obtain the Grant of Probate in England. You must then get the Hague’s Apostille affixed and send it to an official translator in Spain, or to the Spanish Consulate in your home country. (If the English Will mentions the word “trust”, then you have a problem, as trusts do not exist in Spain).

B. You must take the same steps as if the translated document is a Spanish Will.

3. The deceased person has not made a Will.

A. If the deceased person is English, his heirs should appoint an English solicitor, who will need to obtain letters of Administration in England. You then need the Apostille affixed. Next, the document needs to be translated by the Spanish Consulate in England, or by an official translator in Spain.

B. Then we take the same steps, as if the translated document is a Spanish Will.

IMPORTANT THINGS TO REMEMBER

• From the moment of death, the heirs have a maximum of six months to pay the death duties. If you do not think you can sort things out within that time limit, you can ask for a 6 month extension, but you must ask for it in writing, within the first five months.
• Any document signed by an English public official will need the Apostille affixed before it is valid in Spain.
• Any document that is written in English will need to be officially translated, before it is valid in Spain (Consulate or official translator).
• The information I have provided is only a guideline and in no way substitutes my legal advice for your own particular situation.

There is no doubt that the best situation is to have a Will in your country of origin concerning your home assets and one in Spain for your Spanish assets. This will avoid a heavy legal bill later on and save a lot of time and distress.

In the absence of a last Will and testament, you will need judicial or notary documents declaring you are a legitimate heir and provide evidence of the laws of the late person’s country of origin in order to justify your claim to the inheritance. These documents, together with the rest of the papers required to formalize the inheritance, will then be taken to a Notary to allocate the inheritance.

By Raquel Perez

NIE Numbers and why they are important

Spanish Residency Form

If you have recently moved to Spain or are planning to purchase property here it is vital that you apply for an NIE number. The NIE (or Número de Identidad de Extranjero to give its full title) is an essential piece of paperwork, since it registers the holder for tax purposes and must be obtained before the deeds of purchase (known in Spain as the escritura) are signed. Indeed, its essential to have an NIE to buy anything of significance. The good news is that it is a fairly straightforward process and once you have obtained your NIE you will find it useful in all manner of situations!

You can apply for this document at the immigration office at one of the designated police stations. Most towns with significant foreign populations will have such a facility, along with resident translators to assist the process for non-Spanish speakers. Once you have submitted your application you will be given a receipt that you will need to bring with you when you return to collect your NIE certificate – usually about two weeks later.

When you apply for your NIE number these documents will be needed:

• Your passport, plus a photocopy of the main page
• Two recent passport-sized photographs
• Any documentation that includes a reason for the application. For instance, if you are in the process of buying a house, bring with you a copy of the escrituraor deed of sale. This might be deemed unnecessary, but it will help to offer this additional information.
• Two completed copies of the application form Solicitud de NIE (Ex-15).

You will be able to fill this in at home by following this link (http://www.interior.gob.es/modelos-de-solicitud-37/extranjeria-342 ), downloading the appropriate document and printing it .

Recent changes to NIE procedure

Previously, it was possible for foreign property purchasers and immigrants to request that a lawyer or gestor (a clerk who is experienced in acting as a conduit between the client and all aspects of the Spanish bureaucratic system) handle the process. However, new legislation that was brought in at the beginning of 2012 means that every applicant must apply for the NIE in person.

There has also been some confusion of late about the status of the NIE certificate, which itself is only valid for three months, however the NIE number allocated remains with the applicant for life. This has unfortunately led to some so-called experts stating that NIE numbers have only a very limited shelf life, which is totally untrue.

However, for those planning a more permanent stay in Spain, it might be more sensible instead to register as a foreign resident. One of these certificates (Certificado de Residencia), which have replaced the old style residency cards, can save time in the long run.

In order to do this you will need to fill out an Ex-18 form which you can print out from the following address: http://extranjeros.meyss.es/es/ModelosSolicitudes/Mod_solicitudes2/18-Certificado_Residencia_comunitaria.pdf.

by Campbell D. Ferguson

About the Author

Campbell D. Ferguson, FRICS, is a chartered surveyor in Spain. His company, Survey Spain Network arranges valuations and surveys by RICS chartered surveyors anywhere in mainland Spain and the Balearic and Canary Islands, and Gibraltar. This includes valuations, building surveys, structural surveys, building inspections and investment and development appraisals.

Part 8 – Spanish Bank Accounts

The accounts of residents and non-residents differ in that different regulations apply to money transfers for the resident and the non-resident. The main difference is that Spanish withholding tax of 19% is not withheld from the non-resident account.

If you are a resident, 19% of your interest earnings will be withheld and paid to the Spanish tax authorities in your name, just as for Spaniards.

If you are a non-resident, no tax will be withheld, but you will be liable for tax in your country of residence.

Any bank transaction of more than 3,000 euros requires the payor and the payee of the amount to be identified.

Some banks charge more than 4% when transferring money out of Spain. Other banks charge fees of around 21 euros per 6,000 euros of transfer so make sure you discuss the conditions which apply to your bank account at the time you open it.

I feel I should add that there are many Spanish banks, and each has a plethora of accounts to choose from. To be sure you get the right kind of account for you I would recommend taking a Spanish speaker with you. There are free-to-run accounts, and accounts with monthly charges, as there are in most countries. Some are NOT cheap so beware and be sure the bank gives you full details of any and all charges associated with running your account. I have been with Solbank (part of Banco Sabadell) since arriving in Spain. There are minor charges monthly but I hardly notice and the service I receive far outways the cost. I am not “recommending” them, just saying I have had no problems with them in over eight years.

So that’s it! All you need to know before you buy or sell a property in Spain!

All eight parts of the series will always be here for your reference. Of course, as and when changes are made to the processes or fees and taxes I will make the necessary updates.

Permalink: Spanish Property: The Buying/Selling Process

Once again, a big thank you to Raquel Perez at Perez Legal Group for providing the information.

Tel: +34 952 833 169

www.perezlegalgroup.es

Elections, strikes and budgets – a busy week for Rajoy

In the days after Mariano Rajoy’s Partido Popular (PP) won the regional election in Andalucía, people may be asking “what happens now?”

The first thing that happened was that Spanish stocks fell across Europe.  On Monday the Spanish IBEX index was down 1.7 percent as economists looked ahead to Rajoy’s mandate to deepen cutbacks  in public spending as part of his efforts to  drag Spain out of the euro zone debt. Rajoy is expected to announce a further 40 billion euros to be cut from expenditure, in addition to the 15 billion already saved.

Andalucia, one of the most indebted regions in Spain relative to its output, and has the highest jobless rate, at over 31 percent of all of Spain’s regions. Part of the planned reforms will hand more power to the regions to cut health care and education spending, something which local councillors have long been asking for.

Rajoy may not have won a majority in Andalucía but he still has an absolute majority in the national parliament and will press ahead with further cuts despite a general strike, planned for this Thursday.

“A day after the polls, the PP is still the dominant power in Spain … but electorally it is starting to suffer the effects of the (economic) situation it has to deal with,” El Pais reported.

However, with the combined total seats of the Socialists, with 47, and the United Left with 12, the possibility of a leftist ruling coalition is an option for the opposition parties, but analysts think the negotiations will not be easy.

“Today we’ve seen that the majority of voters in Andalucia have not voted for the right. They want change that defends the social model and equality of opportunity,” United Left leader Cayo Lara said in a television interview.

“The people of Andalucia want change, but they want change through the left,” she added.

With a strike due on Thursday and a budget due on Friday, it seems the PP has work to do to impress itself upon Andalucía, and the rest of Spain. The people will speak on Thursday when the number of protesters will act as a good indicator of public confidence in Rajoy’s plans.

Part 7 – Spanish Wills and Inheritance Tax

Should I have a Spanish will?

If a non-resident dies in Spain, without a will, the estate in Spain will be distributed according to the Spanish laws of inheritance.

Let us take as an example a man who dies leaving 3 children and a spouse. The only property is the house they are living in. If the widow’s name is in the title as half-owner, she continues to own half the house. The other half of the house constitutes the estate which is divided equally between the 3 children. When the estate is settled, each child will own one third of the title in half of the house, i.e. each of them owns one sixth of the house, and the title deed has four names on it (the widow and each of the three children). The widow is, however, entitled to hold a usufruct (lifetime use) of the children’s share. This means she can stay in the property until she dies.

However, all parties must then agree and sign the deeds if the house is to be sold. It is this provision of inheritance law that causes the situation frequently seen in the Spanish countryside and villages where six brothers are part-owners of a finca.

Dying without a will can give rise to time-consuming and expensive legal procedures for your heirs, so if you really want to look after them and if you have definite ideas about how you want your estate to be apportioned, you should make a Spanish will. It is a simple procedure and you will feel more secure.

All the tax rates and exemptions refer to national inheritance law, and apply to almost all non-residents. Residents will find regional differences.

Spanish Will

There are four points to consider:

1. You should make a Spanish will which disposes of your Spanish property in order to avoid time-consuming and expensive legal problems for your heirs. Make a separate will to dispose of assets located outside Spain.
2. As a foreigner, Spanish law does not require you to be subject to the Spanish law on the statutory division among the heirs according to which you must leave two-thirds of your estate to your children. Most foreigners enjoy free disposition of their estate so that you can bequeath your Spanish property to any person of your choice as long as your own national law allows this. Your estate will, however, be subject to Spanish inheritance tax, which can be high when property is left by a non-resident to non-relatives. The law also states that any foreigner officially resident in Spain is subject to Spanish inheritance tax on his worldwide estate. However, in practice the authorities will not ask the testator if he or she is an official resident or not. The only requirement enforced by Spain is the payment of the inheritance tax on the property or assets held in Spain.
3. There are a few ways around the inheritance tax and these legal ways require advance planning. Spanish law does not allow any large exemption from inheritance tax, as many other countries do where the family home is concerned. Tax is payable after the first 16,000 euros for each beneficiary.
4. If you are an official resident of Spain leaving your property to a spouse or child who is also resident, you may be eligible for a 95% reduction in the value of the property for inheritance tax calculation. This is not available to non residents, and the reduction applies to the first 120,000 euros.

Amongst the perfect legal possibilities is the formation of a family corporation or “trust”, in which the family’s assets pass into the hands of the company, with each family member becoming a director of the company. So when one member of the company dies, it involves only a reorganisation of the board of directors and a transfer of some of the company shares, thus ensuring very little tax.

However, in Spain, trust documents do not exist under Spanish law, so instead a Spanish company is used.

Equity Release, Reverse Mortgage

A wide variety of plans are now available from Spanish lenders. You may borrow half the value of the property and pay back nothing until the property is sold or you die, at which time the full amount plus interest becomes due. Your heirs can repay the loan and take possession of the property or sell the property and repay the loan, dividing up whatever is left over. As the loan is a charge against the property, the inheritance tax is greatly reduced.

Offshore Company

For non-Spaniards, the constitution of a Gibraltar based company or other offshore operation in order to own property in Spain has been another way to avoid Spanish inheritance taxes. When the founder of the company dies, he leaves his shares in the company to whomever he chooses, in a will made outside Spain. As far as the Spanish authorities are concerned, the same company continues to own the property and no transfer has taken place, hence there is no tax or any other costs to pay.

Four Year Limit

The statute of limitations on inheritance tax runs out after four years. The state cannot collect the tax once four years have elapsed. At the end of this time the beneficiary opens the will and applies to register the property, free of any inheritance tax, in his name. Spanish law requires that an inheritance be declared within six months of the death. If not you can be subject to a surcharge of 35% on the tax due. This period of six months is included in the statute of limitations, so in reality four years and six months is the period for prescription.

Power of Attorney

Many foreigners have been confused by the reference in English to an “enduring power of attorney”. This POA does not mean that it endures beyond the death of the person who grants it. A POA dies with its maker, in Spain and in the UK. The “enduring” only means that it has no other fixed date of expiry.

Part8: Spanish Bank Accounts – Available Wednesday 28th

The accounts of residents and non-residents differ in that different regulations apply to money transfers for the resident and the non-resident. The main difference is that Spanish withholding tax of 19% is not withheld from the non-resident account. Continued tomorrow…

Tel: +34 952 833 169

www.perezlegalgroup.es

Andalucian Regional Elections: the background

On Sunday elections for the Junta de Andalucia (Andalucian Parliament) took place. A president was chosen, who will now form a government responsible for an annual budget of €33 billion and an ever increasing range of public services.

This campaign has been relatively low-key, as it is the third time Andalucians have been called to the polls in the last 10 months, following local elections on 25 May last year and national elections on 20 November.
Although I probably understand Andalucia and its politics better than many, having lived here for 22 years, and run a business for 16 years, like other EU nationals I will not eligible to vote in these elections. In the UK, by contrast, EU-national residents can vote in devolved parliamentary elections such as Wales and Scotland.

The PSOE (Socialist) party has governed Andalucia since its first elections as an autonomous community in 1982. If the opinion polls and are to be believed, the PP (conservative Partido Popular) will win either an absolute majority of seats, or a narrow majority with the need to form a pact with another party.

The statistics

The Andalucian parliament has 109 seats, of which 55 are needed for the crucial absolute majority. The current composition is PSOE 56 seats, PP 47 seats and IU (Izquierda Unida, United Left) 6 seats.

There have been eight four-yearly elections since 1982 – the PSOE has won an absolute majority five times and governed in the others through a pact with the PA ‘Partido Andalusista’ (Andalucia Nationalists) in 1994,1996 and 2000, when the PA was rewarded with responsibility for Tourism.

The PA transformed itself into the CA (Coalicion Andalucista) before the 2008 election and, as an unfamiliar name, lost all its seats. The other party that might gain a few seats on Sunday is the UPyD (Union Progreso y Democracia).
In the municipal (local) elections of May 2011, the PP won 39% and PSOE 32% of the vote. In the national elections in November 2011, the PP increased their share to 46%, while the PSOE had 37%.

Examining the municipal election results, the PP controls all eight provincial capitals’ ayuntamientos (town halls), yet only 246 of the 730 town halls around the region. This demonstrates how rural Andalucia is the socialist heartland of Spain, with its agricultural and tourist-service economy. There are only 12 cities with more than 100,000 inhabitants, and one-third of the population live in villages of under 20,000.

The Junta de Andalucia: how the region has changed

So much has been achieved in the last 30 years of the Junta de Andalucia. Thirty years ago, the annual GDP of Andalucia was €11 billion; today it is about €150 billion. That is thanks to consistent annual growth rates of five to ten per cent, although since 2008 it has been practically zero, or negative. Illiteracy has been reduced from 1.3 million to almost zero. People are generally much better educated. Women’s rights and their place in society have been improved immeasurably. Healthcare meets any EU standard, as do freely subsidized prescriptions. The motorway network is almost complete and traffic density relatively low. Five international airports now transport 20 million passengers a year. Modern high-speed AVE trains connect the region to the capital, their network is being further expanded, with more lines under construction. Whatever metric you use, there has been a huge improvement in every aspect of life in Andalucia.

Strangely, however, amidst all this success, the per-capita GDP of Andalucia is still 25 points below the Spanish average. The region occupies the penultimate position of the country’s 17 regions, only ahead of Extremadura. Something has gone wrong, the structural take off has not happened and Andalucia is not the California of Europe as was promised in the eighties.

The PSOE will probably lose the election on Sunday, and the myth that “Andalucia will always be socialist” may be broken. This may be partly due to the departure of the ever-popular Manuel Chaves, former Junta president and PSOE Andalucia leader since 1990. Chaves stepped down suddenly on 7 April 2009 when he was offered a ministerial post in the Zapatero government’s Consejería de Presidencia. He apologized to the Andalucia people not only for leaving, but for doing it during Semana Santa. Jose Antonio Griñan was invested as president, but he has never enjoyed quite the same warmth nor control of the party in Andalucia, which he formally took over a year later.

Corruption and a bulging public sector

Thirty years is a very long time for any party to be in power in a democracy, and such a seemingly inviolable position causes complacency in any government, not to mention a far-too-strong party network within the Civil Service. This inevitably leads to corruption, an over-reliance on spending EU funds without necessary restructuring, an ever-increasing head count in the administration (funcionarios, public sector employees), and not paying enough attention to unemployment.

Corruption was always said to be rife in Andalucia at all levels, and many liberally accused the Junta of their share. Having said that, all the significant cases which queued up in the courts related to town hall mayors and other senior figures. The Junta were either above corruption or too clever, depending on which side you were on. That all changed in February 2011 when Francisco Javier Guerrero, ex-director of employment, testified to police about a secret €700-million fund which was being used to help companies in trouble offer their employees early retirement via a procedure called the ERE (Expediente Regulacion de Empleo). This turned out only the tip of the iceberg, as long lists of party members were given early retirement, including some had never worked for the companies in the first place. Francisco appeared in court last week and was remanded in prison on €700m bail. Unlucky timing for an election.

Another recent example of corruption in Andalucia was the Invercaria scandal. This was the Junta’s flagship venture capital company, helping start-ups in the region. An audit commission report http://www.ccuentas.es/camara-cuentas-informes.html on its 2009 accounts found that there was €21m unaccounted for; directors´ salaries were a staggering €110,000 (later reduced to €80,000); and some “employees” didn’t even work at Invercaria. The director was taped asking the then-promotions director to falsify and backdate investment reports (he refused, so she dismissed him; she resigned when the recording was played in court – you can read transcripts here). The figure quoted for missing Invercaria funds has now grown to €200m.

A recent poll on 15 March in El Mundo says that 53% of voters will be influenced by the numerous corruption scandals, including the ERE.

Paro (unemployment) is currently over 30% in Andalucia, and 35% in Cadiz province. How can this not lead to civil disturbance and crime? Perhaps only thanks to the family structure, the mattress, and unemployment benefits which are generous by the standards of any EU or developed nation. Of course, a large part of these statistics are influenced by the openly black economy. Even during the property boom of the last decade in 2007, the lowest unemployment rate in Andalucia was 12.3%.

EU funding and subsidies

EU structural funds have poured into Andalucia; since 1986, when Spain joined Europe, Andalucia has received about €72.5 billion. This is running at about €3 billion a year – in other words, ten per cent of the €33 billion annual budget of the Junta de Andalucia is allocating EU money.

The administration are masters at managing EU funds, which have been largely allocated as part capital investment in infrastructure. Much of it is useful for important projects, such as for motorways, but is also used to build white elephants and countless projects such as information centres that cannot be staffed or maintained. Or virtual worlds such as envivo.andalucia.org (link does not work anymore, here is how it looked and here is the spin) with a budget of several millions of euro that are quietly dropped when found to be lacking. If the PP do win the election, expect an audit (or witch hunt) which will uncover many more such examples. As a taxayer, I am uncomfortable with cost of severing, US style political apointments in the Andalucian adminsitration when combined with Spanish labour law.

Since 1986 Andalucia has received olive oil subsidies amounting to €15 billion, and olive oil production has reached record highs, with the help of drip irrigations and more mechanised cultivation. There are 600 co-operatives in Andalucia and 80% of production is exported to Italy and other countries as unlabelled oil, leaving the bottling and branding to others. Europe pays a per-kilo subsidy, a situation with which Andalucia is comfortable – it hasn´t used these funds to build brands to compete with the Tuscans’.

The wealth transfer has served to create a very large regional public administration. Seventeen people out of every 100 employed work in public sector administration. This is the highest level of public sector employment in Spain, with Madrid next at 15, down to Extramadura at six. Outsourcing would have been a more cost-effective strategy, especially in a downturn when budgets need to be cut.

The learning curve for EU grants is steep, with excessive and complicated paperwork for applicants. There does seem to me to be a landscape of haves and have nots. I remember first noticing this in my role of “journalist” at Airtec (the aerospace supply industry trade fair) in Frankfurt in 2008, when I interviewed exhibitors on the Andalucia stand and asked if the regional government had helped them. The answers were distinctly polarized; a strange by-product of this EU grant divide is the unhealthy jealousy felt by the have-nots – even the flamenco singers are tired of it. They recently complained and forced a meeting with Paulino Plata, the Culture Minister, over so much going to so few.

At least the sun continues to shine in Andalucia, and the foreign tourist arrivals are increasing again – but this in itself will not be enough to take the region forward. Exports are presently so low that whoever wins the election will need to give a sharp kick-start to the “Plan de la Internacionalización de la Economía Andaluza” and the “Plan de Fomento del Plurilingüismo”, so that when the next generation of school children are asked what career they aspire to, the majority won’t answer “functionario” (public service worker).

by Chris Chaplow

You can find the original article here: Andalucia Regional Elections: The Background