-Express- Licence Launched for New Businesses in Spain
Spanish Economy Minister, Luis de Guindos, this week announced the introduction of a new law which abolishes the necessity for pre-authorisation when opening small businesses in Spain, and welcomed the launch of the ‘Express’ licence, already implemented by Madrid President, Esperanza Aguirre, in November. With this new regulatory framework in place, new businesses may be opened without having to wait for prior municipal permission, and the minister said during his appearance before the Congressional Economy Committee that they will negotiate with the Federation of Municipalities with regards to the particular powers of the new licence. He placed special emphasis on the need for comprehensive reforms in the commercial distribution sector, which employs 3 million people. El Mundo reported that the Economy Minister said “the recession forecast for this year should be an incentive for reform”, and he announced that the Government are to approve on Friday further ICO funding for municipalities, in line with that of the autonomous communities, in order that they may pay their suppliers and finance basic services. At the meeting, De Guindos publicly expressed his unconditional support for his colleague, Minister for Employment, Fátima Báñez, and the hard work she faces ahead, and criticised the previous government?s labour reforms saying they “have failed” and that “the deficit problems we are seeing are due to poor budgetary decisions of the past”. The minister then announced that they are soon to embark on a ‘road show’, travelling to key financial centres of Europe, Asia and America in order to explain the reforms being put in place by the Spanish Government.
Company Bankruptcies in 2011
The number of companies and individuals who filed for bankruptcy in 2011 grew by 13.3% compared with 2010, reaching a figure of 6,755. ABC News reported that the number of insolvent companies rose 16.7% in 2011, reaching 5,821, while the number of individuals who were declared insolvent fell by 3.9%, and stood at 934. In the fourth quarter of 2011 there were 1,692 proceedings registered, representing an increase of 8.8% over the same period in 2010, and a growth of 13.6% compared with the previous quarter of 2011. Returning to the annual data, 6,472 of the proceedings were voluntary, 14.5% more than last year, and the other 283 involuntary, 9.3% less than in 2010. By types of companies filing for bankruptcy, the number of individuals with business activity fell 11.1%, while proceedings for limited companies increased by 18.2% and corporations by 14.1%. By region, Catalonia recorded the highest number of bankruptcy proceedings, with 1,507, followed by Valencia, with 995, Madrid, with 849, and Andalusia, with 784. These four autonomous regions accounted for 61.2% of the total. In contrast, the communities with fewest debt proceedings were La Rioja, with 42, and Cantabria, with 60. According to the National Statistic Institute?s report, 65.4% of companies declared bankrupt in 2011 were in the lower turnover bracket (less than two million euros), a level that covered all of the individuals with business activity, 68.3% of Limited Liability Companies and 44.1% of Corporations.
Spain's Public Debt Stable at 66% of GDP
Spain’s public debt remained unchanged at 66.0% of gross domestic product (GDP), equivalent to 706,340 million euros, according to eurozone data for the third quarter of 2011 released yesterday by Eurostat, the European Union statistics office. The eurozone debt declined by three-tenths in the third quarter of 2011 to 87.4% of GDP, while in the whole of the EU the debt rose five-tenths to stand at 82.2% of GDP. In annual terms, public debt increased in both the eurozone (83.2% to 87.4%) and the European Union (EU) in general (78.5% to 82.2%), according the first quarterly data on sovereign debt issued by Eurostat. Specifically, the 17 countries in the eurozone accumulated a debt of 8.2 billion euros in the third quarter, of which 2.8% corresponded to currency and deposits, 79.3% to securities, 18% to loans and 0.8% to intergovernmental loans relating to the financial crisis. Intergovernmental loans refer to the financial aid the eurozone and the EU have provided to other member countries, and Eurostat included this in its statistics in order to obtain a more complete picture of the evolution of public debt in the 17 eurozone countries and also in the EU-27. El Economista reported that in the whole of the EU, the public debt amounted to 10.3 billion euros to September 2011, of which 3.8% is attributed to currencies and deposits, 79.7% to securities, 15.8% to loans and 0.6% to intergovernmental loans. The situation in Spain In Spain, government debt between the second and third quarter of 2011 remained unchanged at 66.0% of GDP, equivalent to 706,340 million euros. However, compared to the third quarter of 2010, the Spanish debt increased by 7.3 percentage points. Broken down, 54.7% of Spanish public debt corresponded to securities, 11.0% to loans, 0.7% for intergovernmental loans and 0.4% to currencies and deposits. Most indebted countries The highest percentages of public debt per GDP were recorded late in the third quarter of 2011 in Greece (159.1%), Italy (119.6%), Portugal (110.1%) and Ireland (104.9%), all – with the exception of Italy ? rescued member countries. The lowest rates were observed in Estonia (6.1%), Bulgaria (15.0%) and Luxembourg (18.5% of GDP). Compared to the second quarter of 2011, a total of 14 member countries recorded an increase of its debt, while 13 experienced a decline. The largest increases were registered in Hungary (4.8%), Greece (4.4%) and Portugal (3.6%). In contrast, the steepest declines occurred in Italy and Malta (both with 1.6%) and Romania (1.0%). Year-on-year, 20 member states experienced an increase in debt per GDP and 7 a fall. The largest increases occurred in Greece (20.3%), Portugal (18.9%) and Ireland (16.5%), while reductions were recorded in Sweden (1.6%), Luxembourg (1.4%) and Bulgaria (0.9%).
World Bank: -The measures taken in Europe only buy time?
In his speech at the Herzliya Conference held in Israel last week, the President of the World Bank, Robert B. Zoellick, warned that “the measures adopted in Europe for now only buy time. We are facing one of the key moments in the future of European construction”. Zoellick addressed the economic crisis gripping the World and Europe in particular, without sparing criticism, saying “the leaders of the developing countries are viewing Europe’s inability to find a solution with embarrassment which is turning into scorn,” in a talk being followed by experts, economists and politicians from various countries. The World Bank President said that debt and the banking sector are major challenges for Europe and pointed to the political class as being the main problem, which in his opinion, is failing to carry out reforms when we are already in the fourth year of crisis. “In principle, the World Bank and the International Monetary Fund anticipate a downturn in economic growth this year. One of the main dangers is the eurozone,” he said, at the same time calling for European leaders not to fall into “protectionism and populism”. After praising the technology and innovation in Israel, Zoellick also outlined the positive aspects in Europe: “The actions the European Central Bank are taking are significant .(…) It is important that there is a government in Italy and I hope that Spain also is taking difficult decisions. I hope they are good measures. If the Italian Prime Minister, Mario Monti, does not succeed with his reforms, it will be a serious problem for Europe?. El Mundo reported that Zoellick also praised Chancellor Angela Merkel but demanded that “Germany step forward and indicate measures that they will carry out if other countries take actions on the right track.” According to the World Bank President, in Germany there is a political sensitivity and effort that has lasted more than 60 years to avoid being seen as the leading European country, but “now it is the only one who can play this role.” “This is one of the ironies of history. The Germans, who have always demonstrated their role as a committed partner in Europe, must now take the lead if Europe wants to be saved,” he added. Asked about the differences between his country and the EU, he said, “In the United States there are still serious problems but they are less immediate in comparison to those being suffered in Europe.” To what extent should the State intervene in the economy? “The countries play a large role in the economy but we must remember that they are not as fast and innovative as the private sector. They have difficulty adapting to the changes,” Zoellick responded.
Foreign Tourists Spent Almost 8% More Last Year
International tourists who visited Spain in 2011 spent 52,796 million euros, representing a 7.9% increase, according to figures from the Tourism Expenditure Survey (Egatur) prepared by the Ministry of Industry, Energy and Tourism published on Monday. The average expenditure per tourist stood at 934 euros in 2011, 0.2% higher than the same period in 2010, while average daily spending rose by 4.6% to 102 euros. UK and Germany lead the total tourist spending with 10,377 million euros (up 2.1%), and 8,669 million euros (also up 2.1%), respectively. Tourists from Scandinavia and France were those who most increased their spending, with increases of 10.1% and 12.8% respectively. By region, Catalonia, with 21.4% of the total tourist expenditure and a growth of 7.4%, stood in the first position among the target destinations for 2011. In December, foreign tourist expenditure increased by 5.2% to 2,811 million euros. Last month the average daily expenditure increased by 17.8% to 104 euros, while the average expenditure per tourist fell 0.4% to 1,033 euros. El Mundo reported that the markets which contributed most to the growth of spending in December were Japan, United Kingdom, the Nordic countries and Switzerland. The Canary Islands gathered a major part of the total revenues received with 32.7% of the total, or 918 million euros, and 14.5% more than in December 2010, followed by Catalonia, with 17.6% of the total expenditure, at 494 million euros, representing 1.7% less than the same month last year.
Families Spent More on Housing in 2011
In 2011, families dedicated 29.1% of their gross income, counting deductions, on housing, which is almost two percentage points more than a year earlier, when this figure stood at 27.3%, according to data from the Bank of Spain. This increase is striking since, according to the Ministry of Development, during the past year the average price of private housing fell by 6.8%, which, in principle, should have reduced the amount for this expenditure in household budgets. The Bank of Spain statistics indicate that, for its part, the deduction for home purchases, which last year was limited to incomes of up to 24,000 euros per year, served to reduce the wage effort of families to below the 33% recommended by the State Plan for Housing and Rehabilitation 2009-2012. So, without the benefit of this tax relief, households spent up to 36.1% of their gross income to the end of 2011, up to seven percentage points more. In this case, the increase over the fourth quarter of 2010 was 2.3 percentage points despite the price cuts. Europa Press reported that the Government has approved in general the reinstatement of the deduction for the purchase of a main residence, although the G-14 group of major real estate agents, as well as the Association of Spanish Promoters and Constructors (APCE), have claimed that this also extends to second homes.
Brussels to Send Employment Experts to Spain in February
The European Commission President, Jose Manuel Durao Barroso, sent the Spanish Government a letter yesterday announcing his intention to send EU employment experts to Spain in February in order to help fight youth unemployment. The initiative will also take in the other seven Member States whose youth unemployment rates exceed 30%: Greece, Portugal, Ireland, Italy, Slovakia, Latvia and Lithuania. The youth unemployment rate in Spain reached 48.7% in December, the highest in the EU, according to data released by Eurostat on Tuesday. The EU executive’s spokeswoman, Pia Ahrenkilde, said of these figures “We must act now, and in the short term, to do more to combat the urgency of youth unemployment. It is unacceptable to have these very alarming rates of youth unemployment in some Member States”. The EU experts are ?to visit each of the countries concerned in February, for one or two days, to identify where the EU contribution could be useful to help develop a youth employment plan”, said the spokeswoman. These missions were endorsed by EU leaders at their summit on Monday. Europa Press reported that the EU officials will form ‘action teams’ along with the Spanish authorities, employers and unions. These teams must then consider how best to use the 10,700 million euros in European aid which has been assigned to Spain up to 2013, and which has not yet been spent. “One of the objectives of these ?action teams? should be to agree on how to accelerate and, where necessary, redirect these uncommitted funds”, said Ahrenkilde. They must also “review the priorities of existing programs in order to have more impact on measures for young people and job creation in SMEs”, she added, stressing that “there are no new funds” for fighting youth unemployment. Another of these teams? tasks will be to determine how to promote the use of the EU exchange programs for Erasmus and Leonardo students and trainees. The ‘action teams’ will have a period of eleven weeks, until mid-April, to develop an action plan to combat this problem. On Monday the Prime Minister, Mariano Rajoy, made it clear he was prepared to send his own experts to Brussels in order to accelerate the implementation of these measures.
Spanair Closure Sees Vueling Stocks Soar
The Spanish Stock Exchange believes that Vueling, the low cost airline owned by Iberia, will be one of the companies to benefit most from the closure of Spanair, after seeing them lead the markets with their stocks rising by over 20%. Spanair had a market share in Barcelona, where they had their headquarters, of around 13%. All eyes are now pointing to Vueling, also based in Barcelona, to be the big beneficiary following the demise of its former rival, who announced the halt of their business at the weekend. Cinco Dias reported that other potential winners in business, due to the cessation of Spanair could be Aer Lingus, which rose 7% on the Irish Stock Exchange, and Ryanair, which saw an increase of more than 1%. Vueling, which is 49% owned by IAG, is the most likely candidate to gain a large number of the routes formerly operated by Spanair. Some of these have limited profitability, but others are of great value, such as the routes to the Scandinavian countries, industry sources explained. “The most logical approach is that the remaining routes stay with the low-cost airlines, since they are the best able to promote them,” said one Spanish broker?s analyst. It is possible that the new Iberia Express may be interested in some of the routes, but these will be isolated cases, since the new IAG company will be focused on long haul routes. Vueling announced yesterday that it will increase its seating capacity during the summer season by up to 25% over the capacity of the previous year, and by up to 50% in Barcelona airport. “With this new situation, Vueling will incorporate 33 extra flight frequencies on already scheduled flights, and five new routes; from Barcelona, Berlin and Hamburg, and from Bilbao, Tenerife, Las Palmas and Lanzarote in the Canary Islands,” the company said in a statement sent to the CNMV.
EP Approves New Directive on Granting of Mortgages
The Internal Market Commission of the European Parliament gave the go ahead on Thursday, to a draft directive that prohibits the granting of mortgages to consumers who do not have the capacity to repay the credit. The directive “on credit agreements for residential property” requires lenders to refuse loans which do not have payment guarantees, and requires EU Member States to ensure that this is complied with through using consumers? solvency databases. “Whenever the evaluation of the consumer’s creditworthiness returns negative results regarding their ability to repay the loan during the term of the contract, the lender must refuse credit,” says the draft directive. Under this initiative, Member States shall ensure that consumers provide to lenders, and other credit intermediaries, complete and accurate information about their financial situation in the context of the credit application process. To support this information “documentary evidence may be requested from sources that can be verified independently.” In addition, Member States must ensure that the lenders, principally financial institutions, are able to access a database on consumer creditworthiness, in order to verify that the consumer can comply with the credit obligations during the term of the mortgage contract. These databases are to be managed by credit reporting agencies or private credit reference agencies and public credit registries, reported euroefe.com. Solvency criteria must also be unified in the EU-27 so that all consumers in the EU have the same obligations and rights to a mortgage – the same criteria for measuring the creditworthiness of the applicant, equal rights in the period of reflection in order to compare offers, and the same prerogative to an early repayment under certain conditions. This policy will also be put to a vote in the Economics Commission of the European Parliament,and will need the full approval of the plenary meeting before being adopted definitely. For 70% of EU citizens, mortgages are the most important and prolonged financial commitment in their life. In 2009, the total value of mortgage loans amounted to 6,126 million euros, i.e. 52% of the GDP of the EU. While most mortgages were granted by financial institutions, in at least five member countries the small lenders accounted for 12% of the market share.
The IMF Forecasts Spain's Deficit at 6.8% this Year
According to the Institution?s updated ‘Fiscal Monitor’ report, the International Monetary Fund (IMF) has drastically worsened its deficit forecast for Spain in 2012 and 2013 to 6.8% and 6.3% respectively, figures which double the 3% deficit target the Spanish economy must achieve in the next year. The organisation, chaired by Christine Lagarde, revised its forecasts sharply upwards for the September issue of its report, namely by 1.7% for 2012 and 1.9% for 2013, representing the worst forecast for the Spanish economy for these two years of all the years analysed by the Fund. Similarly, the Institution has updated its estimate of the deficit the Spanish economy recorded in 2011, raising it from 6.2% to 8%, which is consistent with that forecast by the PP Government emerging from the general elections on 20th November. The IMF believes that Spain is moving further away from the targets set for 2012, when it must reach 4.4%, and for 2013, the year in which the European Stability and Growth Pact indicated they should close at 3%. In the same vein, the IMF has revised upward by 2.6% its forecast of debt in respect of the gross domestic product (GDP) for 2011, up to 70.1%, compared with the September report. However, this deterioration will be even greater in the next two years, since they have adjusted their estimates by 7.9% for 2012, up to 78.1%, and 11.2% for 2013, up to 84%. Despite this upward revision of its projected deficit, the IMF notes that Spain, like many other advanced economies, has already approved new measures to achieve their deficit targets. They emphasised that the first package of measures adopted by the new Spanish government, which is equivalent to 1.1% of the GDP, includes spending cuts and temporary tax increases on income, capital and higher value housing, but also entails a limited increase in social and fiscal spending, such as tax deductions for housing. Consolidation and Growth In its report, according to Diario Sur, the IMF says that continuing with the adjustments is necessary for debt sustainability in the medium term, but argues that these should ideally be carried out at a rate that ?adequately” supports the growth of production and employment. “Given the big adjustment already underway this year, Governments should avoid responding to any unexpected fall in growth by further adjusting its policies, and should instead allow the automatic stabilisers to operate as long as funding is available and allows doubts over the sustainability,” they suggested. Reconsider the Pace The Fund emphasised that the deficits in many of the advanced economies fell significantly in 2011, placing the average cut in deficit among the IMF’s member countries at 1%, while stressing that many countries also plan to carry out “significant” adjustments this year. For this reason they believe that those economies with sufficient fiscal space, including some in the eurozone, should reconsider the pace of adjustments in the short term, while at the same time they called for the United States and Japan to clarify their strategies for reducing the deficit in the medium term. The IMF also insisted on the necessity for adjustments to be supported by the availability of adequate funding outside of the markets, as must happen in the eurozone, where market confidence is slow in responding to the reforms. “A major adjustment during a fall may exacerbate rather than ease tensions in the markets through its negative impact on growth,” they added.