More positive indicators for the Costa del Sol

Marbella is not the only large town to be influenced by the huge influx of tourists in 2014. With an estimated 10 billion euros being created in 2014 across Andalucia other councils are also making improvements which is great news for the construction industry.

The influx of tourism to Marbella this year has been so impressive that the town has been added to the small list of areas that is permitted to now start opening shops on Sundays, which is not only great news for the local residents but also for tourists.

In light of the pending local elections which are less than a year away now, one of the most eagerly anticipated projects of this year is due to start after the Summer in Estepona. The so-called Grand Boulevard is a major project which will transform Estepona and the surrounding area and will consist of a new shopping centre, more tourism related attractions and a new recreational centre. This privately funded project has a price tag of 30 million Euros, with the local council also financing a multi-millon euro botanical park boasting the biggest orchid collection in Europe.

Elsewhere on the Costa del Sol there is due to be other development of museums, tourist attractions, theatres, and infrastructure in Velez Malaga, Malaga City, Benalmádena, Mijas (old town), Rincón de la Victoria, Alharurin del Grande, Cartama and Fuengirola. Not only will all of the projects across all of these areas on the Costa del Sol bring in more tourists, but it will boost the economy and reduce unemployment greatly.

Swinging back towards Greece

The European Central Bank
The European Central Bank

In the summertime when the weather is fine euro leaders take their break so after six months during which the unwelcome financial spotlight had shone on Spain, it swung in late August back towards Greece. It was not that investors no longer had any concerns about Spain, more that they find it difficult to panic about more than one thing at a time. With most of Europe – and most European political leaders – on their summer holidays investors recognised that there could be no realistic expectation of anybody doing anything to move the situation forward until September.

Mario Draghi, the president of the European Central Bank, did his best to improve things in late July. At a speech in London he said the ECB would do “whatever it takes” to preserve the euro, “and believe me, it will be enough”. A week later he reiterated his position after the monthly meeting of the ECB governing council. The Bank and the EU bailout funds would, together, apply their theoretically unlimited spending power to support the price of Euroland sovereign bonds, thereby lowering borrowing costs for Spain and Italy.

Investors were quite impressed by the strategy and the euro strengthened in early August. In the space of little more than a week it rose by nearly three cents against the pound and by a cent and a half against the US dollar. But then it all went cold. In the following fortnight the euro made no further ground against the dollar and it fell back by two cents against the pound. In late August the euro was a cent and a half higher against the pound and two and a half cents higher against the dollar than its position a month earlier. Compared with its levels at the beginning of June the euro was unchanged against the dollar and two cents weaker against the pound.

As they have during most of the last couple of years, investors are paying more attention to the political manoeuvrings in the euro area than they are to the minutiae of economic data. As long as the figures announced are within shouting distance of analysts’ forecasts they tend not to make waves. Only a handful of times have off-base ecostats sent currencies adrift.

On one occasion Germany and France reported better than expected figures for economic growth in the second quarter of the year. Investors became excited that Euroland as a whole might avoid a negative reading but it was not to be; euro area gross domestic product shrank by -0.2% in Q2.

At another time, Britain managed to deliver, on successive days, three sets of economic data that exceeded analysts’ forecasts. Inflation, unemployment and retail sales were all more positive than expected for the pound. Sterling went up on the news but was unable to hang onto its gains. Latest news also confirmed that the UK was far from recovering as UK disappointed with the release of data on public finances and factory orders. Unexpectedly public sector net borrowing went up by .6bn so the UK wants its people to spend more!! Not sure where the money is going to come from particularly when you consider UK banks are considering charging you for the “benefits” you get with your UK bank account.

So investors spend their time watching Brussels, Madrid, Frankfurt, Berlin and Athens for hints of what might – or might not – be coming next. In the immediate future they will be keen to find out whether Prime Minister Antonis Samaras can persuade Euroland’s movers and shakers to relax the repayment terms for Greece’s bailout borrowings.

The next scheduled big deal is the ECB governing council meeting in Frankfurt on 6 September. Having been wound up to expect overwhelming force from the ECB in support of Spanish and Italian government bonds, they will be looking for something serious. Experience suggests they will probably not get it, and that Sig Draghi will simply restate his master plan with a warning that national politicians must get on with their budget reforms and banking union. That same experience also suggests a meek response from investors, who have become accustomed to living on a diet of jam tomorrow.

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Moneycorp – costadelsol@moneycorp.com or telephone +34 951 319 700

The battle of rhetoric

The battle of rhetoric across the Channel is heating up, not least in the tactical duel between Spain and the European Central Bank. The ECB says it will provide unlimited support for Spanish government bonds only if Spain makes a formal request for bailout aid. Spain says it will consider making that formal request only if the ECB is supporting its bonds.

For the moment though, this brinkmanship is not unsettling investors. On Friday they were obviously looking on the bright side, optimistic that September would bring the Club Med debt crisis to a tidy conclusion when all the leaders returned, refreshed, from their summer holidays. The euro was the day’s gold medallist, adding two cents against the US Dollar and two Japanese yen. Sterling lost a cent and a quarter to the euro but strengthened by one US cent and one yen. It is firmer against the Canadian dollar, weaker against the Aussie and unchanged against the New Zealand dollar.

The services sector purchasing managers’ index-fest awarded better-than-expected marks to Euroland and the States. The UK reading fell fractionally short of target at 51.0 but was still better than the euro area figures. Another positive surprise came from the US employment report. Non-farm payrolls rose by 163k in July, many more than the forecast 100k. Investors reacted by buying the dollar against the yen and selling it against the euro, the pound and the commodity currencies. The logic this time equated jobs growth in America with the euro’s imminent salvation to equal global economic joy and a shift from safety-first to profit.

Moneycorp

Moneycorp – costadelsol@moneycorp.com or telephone +34 951 319 700

Europe imposes 32 new rules on Spain as a condition of bank bailout fund

Spain will be forced to comply with 32 conditions laid down by the EU if it wants to get its hands on the 100,000-million-euro bank bailout.

IVA will have to go up and tax relief on first homes will be scrapped as part of the list.

The ministry of the economy will have to hand over much of its jurisdiction to the Bank of Spain, particularly in terms of the power to sanction financial institutions and granting licences for them to trade.

Internal audits within the Bank of Spain will be carried out, and the Central European Bank (BCE) will supervise its activities.

The Ordered Bank Restructuring Fund (FROB) will have greater powers, and the government must force banks which are sinking to wind up.

Those which require public funding to stay afloat must hand over their affairs to a liquidation company, cut down branch numbers and slash jobs, sell off investments and shares in industry and limit bank managers’ salaries.

Banks which have received State help will be obliged to float on the stockmarket, and savings banks – effectively, building societies – will no longer be able to manage their own commercial banking activities.

Holders of preferential shares and other ‘hybrid’ investments will be expected to bear a percentage of the loss when a bank needs public funds to be able to continue.

Overall, Spain’s banking sector will be closely supervised by the European Commission (EC), the BCE and the European Banking Authority – the latter taking the place of the IMF – and will regularly audit those institutions which have received bailout funds to ensure they comply with the rules.

This will involve their having to supply weekly data on their liquidity and cash held in deposit in client accounts.

Taxpayers will be directly affected by a rise in IVA – the exact percentage of which has not been confirmed – the elimination of tax breaks on first residences, labour reforms, a rise in State retirement age, and a ‘taxation system which aims at fiscal consolidation’, as yet undefined.

Spain’s State deficit will have to come down from its present 8.9 per cent of its GNP to 6.3 per cent by the end of 2012, then to 4.5 per cent after 2013 and 2.8 per cent by 2014.

The banks for which the bailout fund is destined will include, among others, Bankia, CatalunyaCaixa, NovaCaixaGalicia and Banco de Valencia, being the four most pressing cases.

Article source: ThinkSpain.com

Euro area unemployment rate at 11.1%

Not good news for the unemployed
Not good news for the unemployed

Unemployment in the Euro zone stood at 11.1% in May, a rise of 0.1% from April and up by 1.1% compared to the same month in 2011.

The figure across all 27 members of the EU was at 10.3% in May, up 0.1% compared to April 2012 and up from 9.5% in the same month last year.

This is according to figures released by statistics agency Eurostat who estimate that 24,868 million men and women in the EU27, of whom 17,561 million were in the euro area, were unemployed in May 2012.

Comparing to April this year, the number of unemployed people increased by 151,000 in the EU27 and by 88,000 in the Euro zone. Comparing to May in the previous year unemployment rose by 1,952 million in the EU27 and by 1,820 million in the Euro zone.

The lowest unemployment figures were recorded by Austria (4.1%), the Netherlands (5.1%), Luxembourg (5.4%) and Germany with 5.6% unemployment. The highest, unsurprisingly, was Spain with 24.6%, followed by Greece where unemployment in March stood at 21.9%.

Comparing to May 2011, unemployment fell in eight member states, increased in 18, while remaining stable in Hungary. The largest fall recorded was in Estonia where the figure fell from 13.6% to 10.9%. In Lithuania a fall of two points from 15.7% to 13.7% was recorded. The highest increases were recorded in Greece and Spain jumping from 15.7% to 21.9% and 20.9% to 24.6% respectively. In Cyprus, the latest country to ask for help, the figure increased from 7.5% to 10.8%.

By Sex

The rate of unemployment between the sexes remains similar across Europe. In the Euro zone the rate for males increased from 9.8% to 10.9%. Across the EU27 the rate increased from 9.5% to 10.3%. For females the rate in the Euro zone increased from 10.3% to 11.3% while in the EU27 the rate increased from 9.6% to 10.4%.

Youth Unemployment

The picture for young people (under 25) continues to be bleak with higher overall figures.

In May 2012 there were 5.517 million young persons claiming unemployment in the EU27, of whom 3.412 million were in the Euro zone. Compared to May 2011, the number of young people out of work increased by 282,000 in the EU27 and by 245,000 in the Euro zone. In may of this year youth unemployment was at 22.7% in the EU27 and at 22.6% in the Euro zone, compared to the previous year when the figures were 21.0% and 20.5% respectively

The lowest rates of youth unemployment were recorded in Germany (7.9%), Austria (8.3%) and the Netherlands (9.2%), and the highest was in Greece (52.1% in March 2012) and Spain (52.1%).

You can see the full report from Eurostat here: Euro area unemployment rate at 11.1%

Bank recapitalisation agreed

Mr Rompuy said the deal was a "breakthrough"
Mr Rompuy said the deal was a “breakthrough”

Spain has received a lifeline from Europe as the direct recapitalisation of it’s banking sector was approved in the final hours of a long summit in Brussels.

German Chancellor Angela Merkel appeared to yield on tough reforms in exchange for rescue money after saying earlier that her country would not put up any more cash.

The European Council president, Herman Van Rompuy, said the decision was a “breakthrough that banks can be recapitalised directly”.

Spain had requested that any bailout be directed to the banks as it did not want to increase the government debt, and this decision appears to be exactly what they wanted.

The new agreement makes it clear that the EU’s existing bailout fund will put up the money until the new fund, the European Stabilisation Mechanism (ESM), becomes operational.

Eurozone leaders agreed to begin implementing the rescue plan by 9 July but warned that it could be the end of the year before the money become available.

Spanish newspaper El Pais reported that Mariano Rajoy didn’t want to comment on the agreement when he left but he was visibly satisfied. Italian PM Mario Monti recognised that the discussion had been “hard and full of moments of tension”, but that it had been worth it also adding that Italy did not intend to apply for a bailout.

German chancellor, Angela Merkel, said she was “very satisfied that we took good decisions on growth”.

The 17 leaders of the eurozone also agreed to a joint banking supervisory body and the full 27-member European Union agreed to a general long-term plan for tighter budgetary regulations and political union.

Gibraltar and Spain warned over fishing dispute

Spain and Gibraltar must "work together"
Spain and Gibraltar must “work together”

Following increasing tensions between Spanish and Gibraltarian fisherman Europe has warned both country’s to work together to protect the Site of Specific Cultural Interest (SCI) which runs alongside the rock.

Environment commissioner Janez Potocnik says that both country’s have legal obligations to protect the area and they should work together on protecting it from damage and spend less time arguing about who’s water it is.

However, Gibraltar’s response is that Spain has no say in the matter as the area is within British waters and it has full backing from the UK who refuse to recognise the ‘Spanish designations within British waters’ even though the EC approved the site in 2008.

“The response from the EU Commission is erroneously based on the false premise that the waters around Gibraltar are anything other than exclusively British,” a spokesman for the Gibraltar government said.

A UK foreign office spokesman added: “Neither Spain nor the Commission alerted the UK to the Spanish SCI proposal. The UK does not recognise the Spanish SCI listing and is challenging the listing in the European courts.”

The EU have become embroiled in Gibraltar-gate after Gibraltar MEP Sir Graham Watson asked the commission about Spain’s failure to notify the UK about the filing of its designation.

The tension between Spain and Gibraltar has been escalated further after numerous conflicts between Spanish and Gibraltarian police, anger from Spain over Prince Edwards visit, and the provocative visit from King Juan Carlos who met with Spanish fisherman while visiting Algeciras.

There were also minor clashes during the Diamond Jubilee celebrations when provocative gestures from a small group of Spaniards prompted an angry crowd to gather around them. They were subsequently escorted over the border by police “for their own protection” after one of them kissed the badge on his Spanish football shirt during the playing of the British National Anthem. A police spokesman compared the provocation to ‘going round Tel Aviv celebrating Hitler.’

Please sir… I want some more!

Sr. de Guindos formally requested assistance
Sr. de Guindos has formally requested assistance

In a letter to the president of the Eurogroup, Jean-Claude Juncker, Spanish economy minister Luis de Guindos has formally requested assistance to recapitalise Spain’s financial institutions.

In the letter the minister said he wanted to accept the EU offer of up to 100 billion euros in capital to inject into the country’s banking sector.

“I have the honour to address you on behalf of the Government of Spain, to formally request financial assistance for the recapitalisation of the Spanish financial institutions that require it.” the letter said.

However, a specific sum was not mentioned as the minister said this was still under discussion but he hoped to have the details settled and the package finalised by July 9th.

Following two independent audits carried out over recent weeks Spain will carry out another stress test of its banks by October. This is intended to focus on seven lenders who do not currently requires help but who remain vulnerable.

This extra test will give Spain at least a couple of months to carry on negotiations for capital to be directed to the banks. The government wants to avoid taking the bailout itself and then channelling the money to the banks as this would affect public debt and could further increase the country’s borrowing costs worsening the crisis.

Spain’s Foreign Minister Jose Manuel Garcia-Margallo said Spain would insist on long maturities and low interest rates on the loans and that direct European aid to the banks was still an option.

“The way Spain complies with any and all of its commitments will be looked at with more attention than for a country which has not sought financial assistance,” said EU competition chief Joaquin Almunia yesterday.

Pessimistic Spaniards

According to a new study, Spain is amongst the 10 most pessimistic countries in the world.

The study, carried out by Nielsen Global Consumer Confidence Index, gauged how people were feeling during the last quarter of 2011.

The report showed that 92% of Spaniards considered the country to be in recession while 70% believed the recession would not end this year.

Although pessimistic, Spain only scored 55, well below the European average. Confidence fell in 24 of the 27 European countries. Only ten countries worldwide scored above 100.

Across Europe the number of people feeling that their financial situation would get worse over the coming months continued to increase.

The report also showed that an increasing number of people are changing their spending habits trying to make savings across the board.

“Overall, consumer discretionary spending will remain restrained and cautious in the first half of 2012,” said Dr. Venkatesh Bala, Chief Economist at The Cambridge Group, a part of Nielsen.

Spain was less pessimistic than Greece, no surprise there, who scored 41 and Portugal who scored 36, which Nielsen described as “alarming”. Why Portugal is more pessimistic than Greece is not clear.

Employment prospects don’t look good with 88% of those interviewed thinking their job prospects for 2012 were not good.

Spain is Europe’s cheapest holiday destination

The Post Office
Report shows Spain is Europe's cheapest

New figures released by the Post Office show that Spain has overtaken Portugal to become Europe’s cheapest holiday destination, narrowly beating the Czech Republic and Bulgaria and over a third cheaper than Turkey.

The Post Office’s “Worldwide Holiday Costs Barometer 2012” shows that Spain has the cheapest in-resort costs in Europe and is only second worldwide, behind Sri Lanka.

The report looks at the costs of eight everyday items that are common holiday purchases. These include a cup of coffee, a packet of cigarettes and a three course evening meal for two adults.

The total cost of the items in Spain was £37.72 (€45.59) narrowly beating Prague in the Czech Republic with £39.57 (€47.87) and Sunny Beach in Bulgaria with £39.65 (€47.92).

The most expensive in Europe was Sorrento in Italy where the items total cost was a staggering £89.03 (€107.60) while Brisbane, Australia, was the most expensive worldwide with a total of £115.60 (€139.72) for the items.

Spain’s winning prices were as follows: Cup of coffee – £1.09 (€1.31), bottle of local beer/lager – £1.82 (€2.20), bottle/can of Coca Cola – £1.09 (€1.31), 1.5l bottle of mineral water – £0.35 (€0.42), suncream – £4.50 (€5.44), insect repellent – £2.50 (€3.02), a pack of 20 Marlboro Lights cigarettes – £3.64 (€4.39), a 3-course evening meal for 2 adults (incl. bottle house wine) – £22.73 (€27.47) – giving a total of £37.72.

Download the Post Office Worldwide Holiday Costs Barometer 2012