Rajoy will be placed under administration, having to dance to the tune of the powers providing the funds and all sums advanced will have to be repaid, with interest. However, those who will have to pay for the fiesta will certainly not be the bankers but the already roughly treated Spanish people.
I fear the present rescue will be only the first. Who will save the regions, the town halls, the social security system and the almost 5 million unemployed? Will it be the banks? I think not, they will spend the money on getting rid of the mountain of unsold properties and ensuring pensions of up to 20 million euros for their Directors.
We saw it coming
In the Yearly Report 2010 (written in December 2009) we wrote the following:
“2010 will be a dangerous year for Spanish banks which will have to face a landslide of enforced property auctions due to nonpayment of mortgages. The courts have calculated property auctions increased to 115,000 in 2009 and that they will reach 180,000 in 2010.
Even if prices are slashed 50% in auctions, few properties will sell and they will swell further the property portfolio of the banks……..
The European Central Bank has calculated the financial entities in the Euro Zone will lose 553,000 million euros up to the end of 2010, due to the reduction in the value of their assets. Spanish banks will carry a large part of this burden.
Ladies and gentlemen, fasten your safety belts!”
And in the yearly Report for this year (written in December last year), we added:
“Spain will have increasing difficulties in finding new money to repay soaring public debt and subsequently the ‘country risk’ will rise and Rajoy may be forced to ask for a rescue package…….
The banks will be unable to rid themselves of the millstone around their necks (meaning unsold property) and some of them will not survive the year……”
Euphoria of 4 hours
The stock exchange was buoyant the days before the decision on the rescue, with speculators hoping the decision would produce a rally in the share prices. In the four first hours of trading on Monday the euphoria sent the exchange upwards, after the falls over the past months, which we described in last week’s Report, but then the speculators came back to hard reality. The Ibex closed on Monday down 0.54%, the country risk was back at the unsustainable level of 520 points and the interest rate on Spanish 10 year bonds touched 6.8%.
“The men in black…”
The Government has desperately tried to describe the rescue operation as ‘a loan to the banks’ without any political restraints on the Government. The Minister of Hacienda, Cristobal Montoro said that the ‘men in black’ (the representatives of the troika, comprised of the EU, the European Central Bank and the International Monetary Fund) would not come to Spain.
The funds will be channeled through FROB, the government agency for restructure of the banks, and if the banks do not repay, with interest, the government is responsible, which means the tax payer.
The European Commission will produce a document setting forth the exact conditions and the Spanish vice president, JoaquinAlmunia, has made it abundantly clear that the ‘Troika’ will of course supervise the process of bank reform.
More cuts and more taxes
The amount of the rescue is defined by Brussels as “up to 100 billion euros.” The Spanish Government has indicated that the amount they will ask for will be that disclosed in the stress test in the banking sector, at present being conducted by the independent foreign experts Roland Berger and Oliver, whose findings will be presented on 21st June. The International Monetary Fund has given a preliminary estimate of 40,000 billion.
Fearing report of next week
If anyone thinks the worst is now behind us, they may have to think again. This coming weekend parliamentary elections in Greece will take place again and chances are high that the leftist federation Syriza, led by the young and resolute Alexis Tsipras, will win over the old, corrupt parties and form a new government.
Tsipras is committed to tearing up the agreement the old parties signed with the Troika of the European Union, the European Central Bank, and the International Monetary Fund, providing funding for Greek, but with strangling conditions.
If Tsipras wins (I think he will) and if he sticks to his election promises (I think he will) Europe is in its most serious crisis. If the Troika refuses to discuss changes to the agreement, or engages in such discussions but not being willing to bend, the Euro system may disintegrate.
For Spain, in its present situation, such a scenario is devastating.
I fear to have to write the Report of next week.
Comments to the rescue operation:
Charles Svoboda of AUN:
‘There are often two (or more) versions of what should be the same story – one for domestic consumption and the other for the outside world. For a long time Spain relied on the fact or hope that few beyond its borders would either pay attention to, or understand, what was going on here. That barrier, by and large is now down. “No joy” Rajoy not only keeps changing his own messages as often as he does shirts, he doesn’t seem to be able to keep his ministers on the same page when they have their own encounters with the media.
It’s over a century since ( 1910, I think) the Spanish political philosopher Ortega y Gasset wrote “ Spain is the problem- Europe is the answer”. But for some problems there may be no solution- see William of Occam- 13th c. Ortega also described Spain as “invertebrate”- was then, is now.
The Madrid government is in effect bailing out ( or has promised so) the regions now, so that their debts and deficits get rolled into the national ones : that of course erases the “moral hazard” on the part of the truly profligate ones such as Valencia, to take an example at hand.
“Trust the Spanish to get it right- once they’ve tried everything else and failed or got caught.” Wish I had said that. Come to think of it, I did.
Chuck’
El Paїs reported as follows
Spain yesterday did request a loan of one hundred billion Euros to recapitalise the banks that have been severely hit by the building crisis. Economy Minister Luis de Guindos stressed that it was not a bailout request and that the agreement over the loan will not impose any conditions on the wider economy. The financial department of the Rajoy Government had worked very hard to prevent the political humiliation of a bailout for its public finances such as those of Greece, Ireland and Portugal, and Madrid has pushed hard for any EU funding to be targeted directly at the distressed banks, The agreement was hailed by German Finance Minister Wolfgang Schaeuble, but comes as a huge embarrassment to Prime Minister Mariano Rajoy who insisted just ten days ago that the banking sector would not need a bailout. After being voted into office last November, he has walked straight into the financial hurricane left behind by the previous Socialist Government
Below is the main point of statement from the EuroGroup
The Eurogroup supports the efforts of the Spanish authorities to resolutely address the restructuring of its financial sector and it welcomes their intention to seek financial assistance from euro area Member States to this effect.
The Eurogroup has been informed that the Spanish authorities will present a formal request shortly and is willing to respond favourably to such a request. The financial assistance would be provided by the EFSF/ESM for recapitalisation of financial institutions. The loan will be scaled to provide an effective backstop covering for all possible capital requirements estimated by the diagnostic exercise which the Spanish authorities have commissioned to the external evaluators and the international auditors. The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to EUR 100 billion in total.
Following the formal request, an assessment should be provided by the Commission, in liaison with the ECB, EBA and the IMF, as well as a proposal for the necessary policy conditionality for the financial sector that shall accompany the assistance.
The Eurogroup considers that the Fund for Orderly Bank Restructuring (F.R.O.B.), acting as agent of the Spanish government, could receive the funds and channel them to the financial institutions concerned. The Spanish government will retain the full responsibility of the financial assistance and will sign the MoU.
The Eurogroup notes that Spain has already implemented significant fiscal and labour market reforms and measures to strengthen the capital base of the Spanish banks. The Eurogroup is confident that Spain will honour its commitments under the excessive deficit procedure and with regard to structural reforms, with a view to correcting macroeconomic imbalances in the framework of the European semester. Progress in these areas will be closely and regularly reviewed also in parallel with the financial assistance……..
Albert Marcet wrote in
The Guardian Wednesday 6 June 2012
Spain’s economic crisis is fixable – but the government lacks credibility
Its people have made the right choices, but the actions of Spain’s political institutions have failed to inspire confidence
As Spain’s treasury minister Cristobal Montoro warns that financial markets have effectively shut their doors on Spain, Europe’s fourth-largest economy seems to be gripped by panic. There are certainly well-known problems, just as in many other countries, but there is also room to solve them.
The problem is not the Spanish people: they have made the right choices. Recent elections at all levels of government have been won, almost without exception, by parties intending to make necessary fiscal adjustments. An overwhelming majority wants to pay back public debt, and only an insignificant minority are calling for leaving the euro.
There is a lot of room to avoid private losses spilling into public debt. Most of the banks are in a good state. A haircut on private debt is also avoidable. Losses from bad loans can be largely compensated by merging bad institutions into good ones and saving on unnecessary costs. This strategy would improve the efficiency of the financial system – it avoids moral hazard issues, and it is cheap to the taxpayer. But it is also a process that has been lacking in speed and leadership.
Any strategy to save the banking system will need levels of funding that can only come from abroad, but over the course of the last 12 months Spain’s government has failed to create the necessary credibility for this funding to come. The financial turmoil of the last couple of months has therefore been mainly caused by governments.
The last six months of José Zapatero’s socialist government were a disaster, for a start. The current People’s party (PP) government has taken some worthy steps, such as a major labour reform, a plan to fund unpaid bills by local and regional governments conditional on fiscal adjustments, as well as some timid steps to improve efficiency of public spending. It has also declared good intentions on many other fronts. But there have been contradictions and missteps as well.
Any strategy of merging banks has to be clearly signposted: one has to make a realistic estimate of how much can be saved, giving guarantees that there will be no future losses to bond holders. Remember that politicians were once on the boards of the worst banks. One needs a good and credible leader to manage this process, someone who is not easily distracted by the chatter of politicians.
A new governor of the Bank of Spain is due to take office in the next few weeks. The obvious candidate is José Manuel González-Páramo, of the executive board of the ECB. Even though he satisfies all the requirements three times over, it seems he will not be chosen by the government. Why? Some newspapers point to a letter sent by the ECB to the Spanish government last summer asking for some reforms. González-Páramo’s “mistake” is that he did not immediately forward this letter to Mariano Rajoy’s PP (then in the opposition). He was soon regarded as “not one of us”. Amazingly, journalists tell this story as if it was completely normal, perhaps showing that Spain still has some way to go before the rules of democracy are fully understood by all. The fact is that Spanish officials in European institutions should not give inside information to their fellow countrymen.
There is even a second excellent candidate in José Viñals, director of the IMF’s monetary and capital markets department. He played a crucial role in the Bank of Spain, back when it was a model central bank.
The government is considering instead an array of candidates whose main asset is loyalty to the party. They have zero or irrelevant international experience for the job. Some names on the list are truly horrible. One can only guess at the ECB’s astonishment at witnessing this process.
Seeing these contradictions, it’s hard to avoid the conclusion that some very high-ranking advisers to the Spanish government are economic illiterates – in contrast to some cabinet members, who obviously have a very good understanding of the situation.
Fiscal sustainability is not guaranteed, even if a country is fundamentally solvent, not even if the population accepts the fiscal retrenchment. It is also necessary that political institutions work properly. Currently, they are not. This is a pity, especially given that there are ways out of Spain’s current predicament.
The Guardian:
Spain’s 90s greed is at the root of its banking crisis
A collective madness over property speculation made us poor and jeopardised our future. Spain must secure a partial bailout
Robert Tornabell
‘Spain is now a country with a million unsold properties [and] hundreds of housing developments left unfinished.’ Photograph: Arturo Rodriguez/AP
Spain’s banking crisis did not come out of the blue. In the 1990s the Spanish suffered a bout of collective madness. Interest rates fell from 14% (with the peseta) to 4% (with the euro) in a matter of weeks. In 1998 the centre-right government passed a law that significantly increased the amount of land for development. Developers got rich, selling the idea that everyone was going to win because property would always go up – never down – in value. German banks financed Spain’s savings and commercial banks, which needed extra funds for high-risk mortgages. Greed made us rich for a while – but then it made us poor, and jeopardised our future.
This is now a country with a million unsold properties; hundreds of housing developments left unfinished by construction companies and real estate promoters, especially along the Mediterranean coast but also in city centres; 4.7 million people unemployed and an unemployment rate of 24.5% overall, and 50% in the 18–25 age bracket – and that’s without including the student population. The situation of “extreme difficulty” described this week by the prime minister, Mariano Rajoy, has at its root the flats that the banks accumulated when people started defaulting on their mortgages.
As in other countries that experienced bubbles, such as the US and Ireland, it began with a fondness for real estate speculation and a belief that property values would never cease to rise. To be sure, the euro was an incentive for foreign investors eager for a piece of the real estate pie, but this could not stop the bubble from bursting and housing prices from dropping. We should have distinguished currency value from property value; some foreign investors preferred to invest in euros instead of risking their money in countries such as the Balkans.
All of these bubbles were like fires lit by greed: you could buy a flat on the Mediterranean coast (or in a city) for £100,000 and sell it the next day for £150,000; by the end of the month it was worth £250,000. And meanwhile, the flat, purchased off-plan, was still being built. The last buyer still believed that prices would never stop spiralling upward. All this began in 1998, and the bubble burst in 2007. Nine years of speculative madness (10, in Japan).
Banks have now discovered that their balance sheets were filled with non-performing loans and toxic assets: urban land, unfinished housing developments, unpaid real estate loans to developers, and so on.
The total assets of Spain’s banking system amount to about €3tn. The net amount of toxic assets – unsold real estate valued market to market – is not known for certain. We do know, however, that, bar the country’s three largest banks (BBVA, Santander and CaixaBank) and a handful of medium-sized commercial banks, the system needs to be recapitalised. Delinquency rates are increasing, to 9.5% on average and as high as 19% at some banks. The banks need to increase their tangible capital (equity) to €100bn, and the government does not have enough funds for a tough restructuring or a bailout (of the kind applied swiftly by Gordon Brown in the UK four years ago).
At a recent press conference, Mario Draghi, the European Central Bank chief, insisted that the ECB would not force any country – a reference to Spain, no doubt – to request a bailout or a full intervention. Showing his sense of practicality, he urged all countries to assess their particular financial needs and act accordingly. He also pointed out – in an oblique reference to calls for the ECB to once again intervene in the sovereign debt market by buying Spanish government bonds to drive up prices and bring down the risk premium relative to 10-year German bonds – that it is not the ECB’s place to take on roles best played by others.
A less drastic eleventh-hour proposal now appears feasible: the European stability mechanism could provide support to Spanish banks that require recapitalisation, but the Spanish treasury would be responsible for taking measures to guarantee these bailout funds. As this would be only a partial bailout, Spain would not have to meet the stringent obligations imposed on the three countries bailed out to date: Ireland, Greece and Portugal.
Just days after the Spanish finance minister declared that the markets were closed to Spain, he managed to raise over €2bn from the bond markets – though at a higher interest rate, not a good sign. The main problem right now is politics. Spain’s centre-right government has been delaying the inevitable: asking the ECB and the Eurogroup of finance ministers for ESM funds to cover a partial bailout of the country’s under-capitalised banks. Tomorrow’s conference call among eurozone members to discuss a possible bailout must bear fruit. No less than €100bn is needed, at least according to two foreign audit firms. Germany, it seems, opposes this kind of bailout because the ESM requires new rules, to be approved, possibly, in the next few months.
The referendum and general elections in Greece may be highly contagious to Spain’s banking system. Spain could be forced to pay an even higher interest rate, and its banks would not be able to afford to take on debt. Eventually, the same could happen in Italy. In this country we favour a mutual eurobond system, a new European fiscal compact and a real European banking system – that is, more euro and fewer national markets. But our politicians need to ensure this comes about as swiftly as possible.
Another Euro Election
By Gwynne Dyer
It’s probably the first time that events in Spain have decided the outcome of a Greek election. Last weekend the European Union agreed to loan Spain’s nearly insolvent banks 100 billion euros on relatively easy terms. Syriza, the hard-left protest party that came from nowhere to dominate last month’s election in Greece, will therefore almost certainly emerge from next Sunday’s rerun of that election as the biggest party in parliament.
The party that wins the largest number of votes in a Greek election gets an extra fifty seats, so Syriza will probably lead the next Greek government. It would then demand a renegotiation of the EU’s much harsher terms for bailing out the Greek economy – and it might even get it.
That would prolong the agony of the euro, but it wouldn’t actually save it. The common currency is doomed, at least in its current form, precisely because countries like Greece and Spain were allowed to join the euro.
It’s not that they were more reckless and improvident than the northern European countries who were really guaranteeing the common currency’s value (though the Greeks certainly were). What dooms the euro is the fact that the southern European economies are far less efficient.
The fundamental mistake was made in 1999, when the political attraction of a common European currency triumphed over the economic rationality that said countries with radically different economies should not be trapped in a single currency. The current financial crisis, which threatens to destroy Europe’s prosperity and even its unity, is an inevitable consequence of that original error.
The economic logic argues that less productive economies should have their own currencies, which they can devalue from time to time in order to stay competitive. But the political imperative of European unity is still seen as linked to the euro (though it doesn’t have to be). Endless dithering over bail-outs is the result.
What happened to Spain illustrates the problem. Spanish governments were responsible in their euro borrowing: they never ran a deficit of over 3 per cent before the world financial crisis hit in 2008. The euro did, however, let Spanish consumers and companies borrow money at a very low rate of interest, since everybody assumed that the powerhouse economies of northern Europe were the ultimate guarantors of euro debt.
The result was one of history’s biggest housing bubbles, a mountain of corporate debt as Spanish companies went in for headlong expansion – and huge exposure to bad risks by the Spanish banks that lent the money.
In 2008 the inflated property values crashed and the foolish investments came home to roost. The Spanish government’s borrowing ballooned as it poured money into saving the banks – and when it could not raise any more funds either, the European Union stepped in last week with 100 billion euros to stave off a default.
Well, it had to. A Spanish default would bring the whole rickety structure crashing down, and nobody has yet figured out how to dismantle the euro without a huge amount of collateral damage. The EU is merely doing crisis management and has no strategy for fixing the euro (other than a unified European state, which is not going to happen). But what interests the Greeks is the terms of the EU loan to Spain.
It was made directly to the troubled Spanish banks, with no obligation for the Spanish government to raise taxes or cut spending further. That is exactly the deal that Alexis Tsipras, the charismatic leader of the Syriza party, says he can get for Greece, and in this last week before the Greek election he will use the evidence from Spain to good effect. He will, of course, make no mention of the fact that Spain’s crisis and Greece’s are very different.
From the day the euro was launched in 2002, Greek governments borrowed like there was no tomorrow, and lied to the EU both about the scale of the country’s indebtedness and the purposes of the loans. (Much of the money went into the pockets of their own cronies and supporters.) The entire country was living far beyond its means, which is why the decline in Greek living standards since the crisis struck has been so steep.
Greek voters don’t want to hear about that. They just want the pain to stop, and many of them believe Tsipras’s promise that a new government led by the Syriza party can renegotiate the terms of the bailout so it hurts less.
He may be right, at least in the short run. Even if there were some super-secret team of financial experts in Frankfurt working out how to wind the euro up without too much damage to the German economy, they would need to time their move very carefully. They would not want a Greek default to cause the euro to unravel prematurely, and a flat ‘no’ to Tsipras could bring that on very fast.
In fact, there almost certainly is no such team. There is no ‘Plan B’, and all the EU authorities are doing is endless, day-to-day crisis management. One day it will fail, but they’re not ready to admit that yet. So the Greeks may actually win some short-term relief by giving Syriza a mandate.
Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries
New York Times:
Spain to Accept Rescue From Europe for Its Ailing Banks
Responding to increasingly urgent calls from across Europe and the United States, Spain on Saturday agreed to accept a bailout for its cash-starved banks as European finance ministers offered an aid package of up to $125 billion
“What we are asking is financial support, and this has absolutely nothing to do with a full bailout,” Luis de Guindos, the Spanish economy minister, said.
European leaders hope the promise of such a large package, made in an emergency conference call with Spain, will quell rising financial turmoil ahead of elections in Greece that they fear could further shake world markets.
The decision made Spain the fourth and largest European country to agree to accept emergency assistance as part of the continuing debt crisis. The aid offered by countries that use the euro was nearly three times the $46 billion in extra capital the International Monetary Fund said was the minimum that the wobbly Spanish banking sector needed to guard against a deepening of the country’s economic crisis.
The announcement of a deal came amid growing fears that instability in Spain could drag down an already sputtering world economy. The decision was the culmination of weeks of a contentious back-and-forth between Spain and its would-be creditors in which it was hard to tell how much of Spain’s resistance to financial help was tactical maneuvering for a better deal and how much a refusal to admit the depth of the banking sector’s troubles.
The escalating tension prompted President Obama to push Friday, in unusually explicit terms, for quick European action.
European officials have said they wanted their offer to go well beyond Spain’s immediate needs to shield the country from any destabilizing effect from next weekend’s Greek parliamentary election. Spain has fought to avoid the stigma of a bailout and on Saturday portrayed the Europeans’ offer as coming with few strings attached. Although the European statement on the aid package gave few details, it did not mention new austerity measures and said the conditions of the agreement were focused instead on banking reforms, as Spain had requested.
Spanish officials on Saturday denied that their country was in the same position as Greece, Portugal and Ireland, which have all received bailouts that demanded they slash spending.
“What we are asking is financial support, and this has absolutely nothing to do with a full bailout,” Luis de Guindos, the Spanish economy minister, said at a news conference in Madrid announcing the request, saying the assistance “allows us to have an ample safety margin” and “will return trust and confidence to the euro project.”
The deal to shore up Spain’s banks is only the latest in a marathon crisis that has seen one stopgap solution after another over the last three years. The 11th-hour fixes have always given way to new speculation about the long-term solidity of the currency union, and European leaders remain deeply divided about the way to carry out a more lasting solution. Ahead of a summit meeting this month, members of the euro zone are debating a variety of fixes related to forming a tighter political and fiscal union.
The amount of the financing package is expected to be completed after two consulting firms publish their audit reports on Spanish banks on June 21.
The maximum figure of $125 billion was intended to cover the “estimated capital requirements with an additional safety margin,” according to the statement issued by euro zone finance ministers. The statement also said that the euro group “supports the efforts of the Spanish authorities to resolutely address the restructuring of its financial sector.”
Christine Lagarde, the managing director of the I.M.F., said the scale of the proposed financing “gives assurance that the financing needs of Spain’s banking system will be fully met.” And the United States Treasury secretary, Timothy F. Geithner, called the support European partners were showing Spain “important for the health of Spain’s economy.” He said that Spain’s request for aid and Europe’s agreement were “concrete steps on the path to financial union, which is vital to the resilience of the euro area.”
“It’s a calming signal at a time when calming signals are badly needed,” said Jens Boysen-Hogrefe, an economist at the Kiel Institute for the World Economy. But Mr. Boysen-Hogrefe said it did not solve the underlying problems of Spain or the euro area as a whole. “The uncertainty is still high and bad news can pop up anywhere in the euro area. This is not a final solution.”
Many financial analysts expect the Greek elections next week to spook the already unsettled markets and test the very cohesion of the euro zone.
Before Saturday, Prime Minister Mariano Rajoy of Spain had tried to hold out against the withering pressure of capital markets, which drove up Spain’s borrowing costs, and the lobbying of European leaders, led by Chancellor Angela Merkel of Germany, to come up with a plan to recapitalize the banks hit worst by the bursting of Spain’s property bubble. Mr. Rajoy wanted the rules changed, or at least bent, so the money went directly to the banks and Spain could claim more convincingly it had not received a bailout.
The money, however, will be channeled through the Spanish bank-bailout fund, and the Spanish government will ultimately be responsible and will have to sign the memorandum of understanding and the conditions that come with it.
Still, Mr. de Guindos said that, based on his discussions with euro zone ministers, he expected the terms of the emergency loan to be “very favorable.” He noted that not all of Spain’s banks would need help, adding that “the problem that we face affects about 30 percent of the Spanish banking system.”
European leaders have underscored previously, and reiterated in their statement on Saturday, that Spain had made significant budget cuts and labor market reforms. Germany’s finance minister, Wolfgang Schäuble, praised the steps undertaken thus far, calling the teleconference “constructive” and saying in a statement that “Spain is on the right path and Germany, just like the other countries and institutions of the euro zone, as well as probably the I.M.F., will support Spain on that way.”
Robert Tornabell, a banking professor at the Esade business school in Barcelona, said that despite the government’s insistence to the contrary, “What has just been agreed is in fact a bailout, just like what had to be done for Ireland because of its banking problems.”
He said Spain’s rescue request would “clearly hurt” the credibility of the government of Mr. Rajoy, as well as that of the Bank of Spain, following their repeated claims that Spain would not require European emergency funding in
order to keep its banking sector afloat. Still, Mr. Tornabell said, “This is good news for our banking system, as is the fact that the euro group is not imposing such strict conditions and seems willing to offer Spain an interest rate well below that of the market.”
The real test will begin when financial markets reopen Monday and, in particular, when Spain tries to borrow money again from private lenders. The country’s borrowing costs have been pushed to close to record highs in part because of the problems at its banks, which are struggling under the weight not only of significant losses in their real estate loan portfolios, but also the country’s broader economic malaise.
By resisting harsh bailout conditions, Mr. Rajoy was hoping to escape Greece’s fate. Tough conditions there have caused political upheaval, with the left-wing party led by Alexis Tsipras vowing that if it comes to power, it will refuse to live up to the nation’s bailout terms.
European officials hope an infusion of cash for Spain’s banks will strip some uncertainty from the markets, which will be agitated enough if Mr. Tsipras’s party wins.
The good news of the week:
FINCA PARCS ACTION GROUP WON IN COURT
The Judge found the developer Cleyton GES SL and the Bank – Caja de Ahorros del Mediterráneo (CAM) jointly and severally liable for the repayment in full of the deposits paid (1,494,710 euros) under the 55 Sales Contracts which were the subject of the Lawsuit, together with legal interest and costs.
This is a significant judgment as none of the buyers received the Bank Guarantees as required by Spanish Law, LEY 57/1968.
The Finca Parcs Action Group are represented by Costa Luz Lawyers and De Castro Gabinete Jurídico. We are truly grateful for their dedication, hard work and support during the past 4 years. Special thanks go to María de Castro – back in 2008 she was one of the only Lawyers who believed in my view that the Banks had a liability in such cases and to Jaime de Castro, our litigator, with whom I have worked very closely during the past 2 years.
Keith Rule
Fitch reduce value of Spanish debts
The rating agency Fitch has reduced the value of Spanish debts 3 points to BBB. The main argument is the cost of recapitalisation of the banks, which Fitch estimate to be between 60,000 and 100,000 million euros.
Fitch has also reduced the notes of 18 Spanish banks.
Employer’s president yacht restrained
Gerardo Diaz Ferran, former President of employers union in Spain and owner of travel agency Marsans’, 27 meter yacht has been prevented from leaving the port of Barcelona as the court fears it may be taken to a country outside the EU and sold. Diaz Ferran is suspected of fraud in the financial collapse of Marsans.
Ex President Chavez denies knowledge of fraud
Manuel Chavez, Ex President of Andalusia and Vice President in the former governments of Rodriguez Zapatero, has vehement denied any knowledge of the illegal employment and pension cases, which have cost the regional government hundreds of millions of euros, benefiting friends and members of the socialist party. Chavez accused the Guardia Civil of committing ‘grave errors’ in their report on the investigation.
PP spokesman in Valencia parliament accused
Rafael Blasco, the ‘chameleon’ of Valencia politics and at present PP spokesman in the regional parliament, has been accused in a case of embezzlement of funds which were destined to assist third world countries. A further 26 people are implicated, for supposedly embezzling public funds, involvement in subsidies frauds, the laundering of black money and falsification of documents.
800 politicians in corruption cases
Eight hundred politicians and public employees stand charged in corruption cases. One hundred of whom were on the candidate lists at the last elections. In the book “The Ali Baba Syndrome” the author Maria Angeles Lopez de Celis calculates that over the past 10 years more than 4,000 million euros has been paid in bribes.
Letting prices fall to 40%
According to the letting agency Homeaway, rental charges have fallen 17%. In some places on the coast they are down 40%, compared with 2011. The cheapest place is Costa Calida (Murcia) where one can rent a house for 24 euros per person per day, 40 to 56% less than in 2011. On the Canary Islands rentals charges have fallen 38 to 85%, followed by Costa del Sol, 31 to 51% and on Costa Tropical (Granada) they are down 23%.
On Costa Blanca, rents are more expensive this year than last, up 18%, on Costa de la Luz up 13.3% and Valencia 4.57%. The Balearic islands have the highest prices, at 54 euros per person per day, but even that is 21.6% cheaper than in 2011.
Has President of Supreme Court cheated?
Carlos Divar, President of the Supreme Court and the Council of the Judicial Power, is under scrutiny for his many expensive travels at the expense of his office. These include a number of visits to Marbella, Panama, the Dominican Republic and Chile, each time accompanied by a body guard who acted as his ‘personal assistant’.
Divar will have to report to Parliament on his tourist activity.
Judges lowest estimation
According to government agency CIS, judges have Spaniards lowest approval rating. 58.2% of those polled said they had ‘little or no’ confidence in the work of judges. In the poll judges are followed by tax inspectors and diplomatic personnel.
No legalisation of illegal dwellings
The Minister of Development, Ana Pastor, has categorically denied that the Government intends to legalise dwellings which were built illegally. She said she knows nothing about the notice published in several newspapers and that such a proposal has not been on her desk, in the committee of her department nor in the council of ministers.
Cement production at lowest level
Cement production is at its lowest level for 50 years. To the end of March production fell 34% on the already low 2011 figure. In 2007 3,300 million tons were produced, this year the estimate is 800.
Less new companies
The number of new companies incorporated in April was down 0.8% compared with the same month last year. The capital of the new companies formed amounted to 277 million euros, 22.3% less than in April 2011.
1,411 companies folded during April, 17.2% more than last year.
