Friday, Sep 25, 2009

A taste of things to come?

Telegraph: Spain tips into depression

Spain is sliding into a full-blown economic depression with unemployment approaching levels not seen since the Second Republic of the 1930s and little chance of recovery until well into the next decade, according to a clutch of reports over recent days.

Posted by flintster1994 @ 07:43 AM (1961 views)
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35 Comments

1. happy mondays said...

But the world is in recovery ! Is it not? The glut of building has contributed, but that's the same case here, why do they not prop up the economy with QE & Manipulation of figures/finance...

Friday, September 25, 2009 08:58AM Report Comment
 

2. nomad said...

The bankers are in recovery.

Friday, September 25, 2009 09:20AM Report Comment
 

3. happy mondays said...

Pajero banqueros...

Friday, September 25, 2009 09:30AM Report Comment
 

4. drewster said...

happy mondays,
Spain can't print money / QE because it uses the Euro. Also their glut of building dwarfs the rest of Europe.

Friday, September 25, 2009 09:41AM Report Comment
 

5. uncle tom said...

Earlier in the year I feared the heat of the summer might provoke some unrest in Spain, but as Ambrose notes, things have been eerily quiet.

But does that signal a capitulation to the european dream, warts 'n' all, for fear of the ghost of Franco?

I find that hard to believe. The concept of the euronanny state was sold hard in Spain, and at first it appeared to be working.

It is now emerging as a failure, a cruel delusion; yet the full horror has not sunk in.

The stats quoted by Ambrose, though bad, are still unrealistic. How can the construction sector shrink from 18% of GDP to 5%, but only cause an 11% drop in overall GDP?

The sector does not stand alone. Construction workers wages fuelled every other sector of the economy, so the overall contraction must be much worse.

Meanwhile, the huge inventory of unsold property is still being valued at way above construction cost - typically over 100% in excess; when ultimately it will probably have to be sold at well below cost.

I believe Spain is waiting for a trigger, a catalyst, a rallying cry..

..if Banco Santander loses it's teflon, they'll be out on the streets in seconds..

Friday, September 25, 2009 09:44AM Report Comment
 

6. mark said...

Does anyone have any ideas on how this might affect the UK? Other than holiday homes

Friday, September 25, 2009 09:55AM Report Comment
 

7. happy mondays said...

ut, do you think Spain will pull out of the euro or is it to late, or even the breakdown of the euro nations, financially?
drewster, thanks. but can they still not flood Spain with euros to help stabilize, or better off leaving her to sink?

Friday, September 25, 2009 09:58AM Report Comment
 

8. This comment has been removed as it was found to be in breach of our Blog Policies.

 

9. str 2007 said...

With regard to the holiday home situation.

I think there are quite a few retirees that have bought 2 properties ' off plan' a few years ago with the intention that the 2nd would be sold for an easy profit to reduce that outstanding on the first and are now stuck with both.

Also with regard to Spanish Construction and in particular the holiday home industry, the build quality is very poor.

The holiday home owners who visited 3 or 4 times a year I believe are now finding flights and car hire more expensive.

Add to that the weak £ and how much the holiday (or living there) is now costing in comparison to 3 years ago and things IMO look pretty grim with regards to support from Great Britain.

Wether or not we've been replaced by buyers from other parts of Europe, I'm not sure.

The only saving grace for UK owners of Spanish property is that against Sterling their 'investment' has risen in Euros. If they could just sell and release those Euros.

Friday, September 25, 2009 10:12AM Report Comment
 

10. icarus said...

Spain is the US without the dollar.

Friday, September 25, 2009 10:20AM Report Comment
 

11. uncle tom said...

It does not seem very credible for Spain to remain in the euro, unless France and Germany want to subsidise their economy. Somehow, that does not seem likely!

The rational way forward for Spain is to look at it's assets and talents as a nation, and plan accordingly.

It has a huge army of builders, and a lot of relatively barren land. It gets plenty of sunshine, making it suitable for tourism.

Logic to me says:

1) Break out of the euro, and let the new currency drop sharply in value. Make Spain a cheap destination again.

2) Focus on selling the excess property to retirees from the rest of europe. As the currency will have fallen, the excess property should be easy to sell.

3) Re-invigorate the domestic economy by building yet more property, especially holiday and retirement homes, to keep the construction sector in business in the short term, while gradually diversifying the economy into other fields.

4) With a devalued currency, Spanish export and tourist industries will regenerate and flourish of their own accord.

It is very hard to devise a recovery plan that has Spain remaining in the eurozone, so it would seem very ill-advised to own or buy property in Spain, until they finally throw in the towel.

Friday, September 25, 2009 10:47AM Report Comment
 

12. jack c said...

@str 2007 - just to back up your thinking I can provide you with a couple of real life examples

(1) Couple who marketed their property in Spain 2 years ago - valuation Euros 275K currently on market for Euros 175K with absolutely no takers
(2) I normally take 1 week in Spain (accomodation free) in the Autumn - my share of 1 week car hire last year was Pounds 186 - the same deal this year is minimum Pounds 350 which coupled with increased cost of supermarket shopping (as we go self catering) and Euros 6 per pint in parts of the Costa means I am giving it a big miss this year - it just isnt good value out there any more.

Friday, September 25, 2009 10:51AM Report Comment
 

13. cynicalsoothsayer said...

Apparently Spanish banks "loans outstanding with Spanish developers have increased from €33.5 billion in 2000, to €318 billion last year, representing a rise of 850%."

http://www.bankingtimes.co.uk/26082009-spanish-banks-hiding-losses-report/

Friday, September 25, 2009 11:13AM Report Comment
 

14. str 2007 said...

Thanks Jack, that beer price should at least solve the problem of drunken Brits.

Uncle Toms idea seems a good way forward.

Perhaps with that Atlantic Coast and Sunshine they could start to expeort some Enviro Energy around Europe.

Friday, September 25, 2009 11:15AM Report Comment
 

15. cynicalsoothsayer said...

A couple more lines from that article:

“Investors are smoking crack if they believe that Spanish banks are amongst the strongest in Europe”.

“We believe that Ireland’s experience is what Spain will see more of in the months ahead.”

Friday, September 25, 2009 11:19AM Report Comment
 

16. uncle tom said...

OK, lets consider a cheap and cheerful Spanish construction company - Barato y Alegre SA

They are sitting on debts of 70m euros to Santander, and have property that is valued at 100m to sell.

That property cost 40m for the land, and 40m to build, so their books show they fronted 10m of past profits and expect to pocket 20m profit when the last property is sold.

On paper, everything looks fine Buen negocio

But with such an oversupply, no-one is buying, not at 100% of valuation, not at 80%, not at 60%...

In fact, if he is lucky, the company liquidator might eventually scrape the construction cost - 40% of current valuation.

With rolled up interest and costs, the bank may get half its money back, or less..

- How much of that 318bn euros will ever come home..?

Friday, September 25, 2009 11:38AM Report Comment
 

17. Rk said...

@11 Uncle Tom

5) Spain runs out of drinkable water and all the golf courses die.

Friday, September 25, 2009 11:58AM Report Comment
 

18. drewster said...

uncle tom (and Ambrose),

Is it possible that Spain's unemployment stats aren't very good? Maybe there's a lot of undeclared work, which could explain the lack of social unrest.

Friday, September 25, 2009 12:02PM Report Comment
 

19. mr g said...

UT @ 11

Have you a recovery plan for UK plc?

Friday, September 25, 2009 12:23PM Report Comment
 

20. mountain goat said...

mr g - Have you a recovery plan for UK plc?

I suspect that would be devalue GBP even more.

Friday, September 25, 2009 12:59PM Report Comment
 

21. uncle tom said...

Mr G,

The UK, like Spain, must look at its strengths and assets.

Although liberal forces like to portray our colonial past as an embarassment, the reality is that we were not only the largest colonial power, but also the most benign. Across the globe we have an enduring reputation for being the world's honest broker.

That we need to foster and build on, and in that regard, the EU is a major obstacle.

We are a very inventive and creative nation - something like a quarter of the world's significant inventions come from these shores, even though we have just 1% of the global population. Inadequate teaching of maths and engineering, and over restrictive planning constraints, put this asset at risk.

We are not desperately strapped for living space, but further population growth is undesirable. That said, we need a little more living space for those we have.

Over the last forty years or so, the education system has steadily lost touch with the needs of the workplace, while the expectations of the older generation of the younger have become ever more onerous. These are not good trends.

The combination of political correctness with health and safety obsessions have produced a stifling bureaucratic blanket that stigmatises those that speak out. This is not healthy.

Those who live outside the law are no longer adequately punished, while the state often seems hell-bent on criminalising those who are essentially law abiding. There needs to be a bonfire of excess legislation.

- So many things to do..

What do we need right now?

1) A bold, intelligent, and courageous government.

2) A sovereingty act, making it clear (in the nicest possible way..) that the final word on all matters will now come from Westminster, and not Brussels.

3) A major program of home building, to keep people working.

4) The neutering of the BBC's political bias.

5) Rigorous boot camps for youth who get into trouble.

Friday, September 25, 2009 01:17PM Report Comment
 

22. str 2007 said...

Uncle Tom for President, sorry Prime Minister.

Yes Uncle Tom, leader of the HPC party.

Friday, September 25, 2009 02:11PM Report Comment
 

23. mountain goat said...

Gets my vote, many good points today from UT

Friday, September 25, 2009 02:34PM Report Comment
 

24. enuii said...

Drewster @18,

You are right with the observation about the official unemployment stats in spain as if I remember rightly somewhere around 20-30% of spaniards work off the books for cash and family especially in the inland rural regions is a big thing. Can't remember where I read the stats but they came from a reliable source and I found them quite revealing at the time as it explained a lot of what you see when over there especially when you leave the tourist areas and mingle with the locals.

Friday, September 25, 2009 04:01PM Report Comment
 

25. letthemfall said...

UT: 4) The neutering of the BBC's political bias.

Would that be their right-leaning or their left-leaning bias?

Didn't we have all that in 1979?

Friday, September 25, 2009 04:11PM Report Comment
 

26. uncle tom said...

letthemfall,

BBC appointments are exclusively advertised in the Guardian, and their editorial stance is very close to that paper's left wing position.

Clearly the most left wing of the three 'serious' daily papers, the Guardian only sells 358k copies, while the Telegraph sells 783k and the Times sells 617k.

If you look at the other papers, only one, the Mirror, can be placed to the left of the BBC editorial position. The Mirror sells 1,367k, and is decisively outsold by the Sun at 3,146k and the Mail at 2,200k.

So if you take the newspaper buying habits of the public to determine the politically neutral position, it is clear that the BBC is well to the left of the spectrum.

My biggest issue with the BBC editorial stance is their ready willingness to use the word 'extreme' when addressing views that are not within a tight centre left spectrum.

To my mind, that is a word they should avoid..

Friday, September 25, 2009 04:44PM Report Comment
 

27. uncle tom said...

I forgot to mention the Independant - it is so excruciatingly boring, that it is easily forgotton, but it deserves to rank as a 'serious' daily.

It only sells 215k copies - not surprising, really...

Friday, September 25, 2009 04:48PM Report Comment
 

28. letthemfall said...

uncle tom
I don't think you can define political neutrality according to the best-selling newspapers, though you might like to use that criteria to define political leanings of the population, though even there I doubt it would be valid.

On the question of BBC bias, the first politician I recall complaining of BBC bias was Harold Wilson. I don't notice any obvious BBC bias, though that is not to say that BBC journalism is consistently good. A lot of people here complain about the website, but I think that is more a reflection of the ropey and skimpy nature of the articles on that medium. I tend to judge the BBC by its best people, the Robert Pestons, John Simpsons, etc.

Incidentally, I recall Douglas Hurd saying that only 1 paper reported accurately. He didn't say which, but I inferred he meant the FT.

Friday, September 25, 2009 05:19PM Report Comment
 

29. uncle tom said...

I always had time to listen to Douglas Hurd, a vocational politician, and a very clever guy.

Wilson was very much in the mould of the current crowd - no regard for truth whatsoever.

We can argue the defintion of political neutrality another time..

..I've just extracted a bottle of Ch. d'Issan '82 from the cellar - roll on the weekend!

Friday, September 25, 2009 05:49PM Report Comment
 

30. mdmick said...

UT,

about boot camp,
some people would say that we should start with educating the parents
BUT what if the parents are already scum bags aka victims of society?
It's not straightforward at all.

I like the idea about getting Spain to invest in building solar technology -
it's a no-brainer!

Friday, September 25, 2009 06:36PM Report Comment
 

31. letthemfall said...

UT, Nice cellar! Should be taxed. Don't forget to decant to the right.

Friday, September 25, 2009 07:36PM Report Comment
 

32. Mr G said...

Mountain Goat @20 "mr g - Have you a recovery plan for UK plc? I suspect that would be devalue GBP even more"

I would not presume to be so clever as to have a recovery plan for the UK.

However, I've just returned from my local hostelry where a myriad of recovery plans were put forward most of which were probably equal to, if not better than the plan that Crash, Badger and Merv are currently using.

Friday, September 25, 2009 09:41PM Report Comment
 

33. mr g said...

mountain goat @20 said..."mr g - Have you a recovery plan for UK plc? I suspect that would be devalue GBP even more".

I would not be so presumptuous as to say I have a recovery plan for the UK and if I had, it would not involve devalueing the pound as I am not up to my neck in debt.

However, I have just returned from my local hostelry where I heard a myriad of recovery plans put forward, most of which were equal to if not better than the supposed plan which Crash, Badger and Merv are using.

Friday, September 25, 2009 09:50PM Report Comment
 

34. uncle tom said...

Good cellars should be tax free for eternity...;)

I shall decant a Warre '60 tomorrow..

Friday, September 25, 2009 10:31PM Report Comment
 

35. This comment has been removed as it was found to be in breach of our Blog Policies.

 

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