Good News For Spain

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11 Apr 2011 12:00 AM by rod Star rating in Uk and Spain. 468 posts Send private message

Received this e mail today hope its true

/www.themovechannel.com/news/44f606c5-f5c4/?utm_source=newsletter&utm_medium=email&utm_campaign=daily





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12 Apr 2011 12:19 PM by EOS Team Star rating in In Spain of course!. 4015 posts Send private message

EOS Team´s avatar

That is good news and I hope it remains true.

The last thing the EU needs is to bail out Spain.

More good news please!

Justin



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12 Apr 2011 1:30 PM by Sanchez1 Star rating. 853 posts Send private message

12 Apr 2011 1:59 PM by Honeywater Star rating. 68 posts Send private message

What makes you think your argument (if it can be called that)  carries more weight than theirs?





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12 Apr 2011 2:21 PM by normansands Star rating in Kent. 1281 posts Send private message

Dear All,

how do you uplift your simple understanding of finance to National finance?????

are these bailouts actually working????

are Greece, Ireland and Portugal actually saved?????

can they afford and are really paying the bailout costs?????

If I am overspending I can resort to one of a number of credit cards, unfortunately  cannot afford their ridiculous interest rates which would just get me further into trouble, then the only bailout worth while would be a write-off one, or at least a re-negotiation to lower terms.

How are they doing to date?

Regards

Norman

 



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N. Sands



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12 Apr 2011 8:32 PM by Pitby Star rating in Andalucía. 1904 posts Send private message

Pitby´s avatar
From yesterday's Financial Times:


Complacent Europe must realise Spain will be next

By Wolfgang Münchau

Published: April 10 2011 21:04 | Last updated: April 10 2011 21:04

European politicians have every incentive to postpone crisis resolution indefinitely, as I argued last week. In the meantime, the debt of several peripheral eurozone countries continues to build up. On Wednesday, Portugal finally accepted the inevitable and applied for a financial rescue. European officials quickly pronounced that this would be the last rescue ever. Everyone in Brussels fell over themselves to argue Spain would be safe.

On Thursday, the European Central Bank raised its main refinance rate by a quarter point to 1.25 per cent. This was a well-flagged move, but more are likely to follow. I expect the ECB’s main policy interest rate to rise to 2 per cent by the end of this year and to 3 per cent in 2013. This trajectory, while consistent with the ECB’s inflation target, will have negative consequences for Spain in particular. Apart from the direct impact on economic growth, higher interest rates will hit the Spanish real estate market. Almost all Spanish mortgages are based on the one-year Euribor money market rate, which is now close to 2 per cent, and rising.

Spain had an extreme property bubble before the crisis, and unlike in the US and Ireland, prices have so far fallen only moderately. According to data from Bank of International Settlements, real house prices in Spain – price per square metre adjusted by the personal consumption deflators – rose by 106 per cent from the beginning of monetary union and to the peak in June 2007. They have since come off by 18 per cent as of end-2010. Calculations such as these are sensitive to the starting date, but Spanish real prices were relatively flat throughout the 1990s, so this is a relatively safe starting point.

Where will it stop? I would expect all of that increase to be reversed. The total peak-to-trough fall would be more than 50 per cent, and prices would have to fall by another 40 per cent fall from today’s level. Is that a reasonable assumption? In the US, real house prices stagnated for most of the 20th century. Increased demand, through immigration for example, should not affect the price level, as long as supply can adjust.

The situation is different in countries with natural or artificial supply constraints, like the UK. But in terms of supply conditions Spain is more similar to the US. I have yet to hear an intelligent reason why Spanish real house prices should be any higher today that they were 10 years ago, and indeed why they should keep on rising.

The most important housing market statistic in Spain is the number of vacant properties, about 1m, which means that the market will suffer from oversupply for several years. This will be the driver of further price declines. Given the stress in the system – recession, high unemployment, a weak financial sector, higher oil prices and rising interest rates – one might even expect house prices to overshoot below the horizontal trend line.

Falling house prices and rising mortgage payments are bound to push up the still moderate delinquency rates and the number of foreclosures. This will affect the balance sheet of the cajas, the Spanish savings banks. The balance sheets carry all property loans and mortgages at cost. As default rates rise, the savings bank system will need to be recapitalised to cover the losses. The Spanish government implausibly estimates the recapitalisation need to be below €20bn, while other estimates put the number at between €50bn and €100bn. The assets most at risk are loans to the construction and real estate sector – €439bn as of end-2010. Spanish banks also have about €100bn in exposures to Portugal, a further source of risk.

The good news is that even under a worst-case scenario, Spain would still be solvent. The Spanish public sector debt-to-GDP ratio was 62 per cent as of end-2010. Ernst & Young, in its latest eurozone forecast, projects the debt-to-GDP ratio to increase to 72 per cent by 2015 – still below the levels of both Germany and France.

But the Spanish private sector debt-to-GDP ratio is 170 per cent. The current account deficit peaked at 10 per cent of GDP in 2008, but remains unsustainably high, with projected rates of more than 3 per cent until 2015. This means that Spain will continue to accumulate net foreign debt. The country’s net international investment position – the difference between external financial assets and external liabilities – was minus €926bn at the end of 2010, according to the Bank of Spain, or almost 90 per cent of GDP.

If my hunch on the Spanish property market proves correct, I would expect the Spanish banking sector to need more capital than is currently estimated. It is hard to say how much because we are well outside the scope of forecasting models. When prices drop so fast, there will be much endogenous pressure that no stress test could ever capture.

The mix of high external indebtedness, the fragility of the financial sector and the probability of further declines in asset prices increase the probability of a funding squeeze at some point. And that means that Spain will be the next country to seek financial assistance from the EU and the International Monetary Fund. As for the large number of official statements that Spain is safe, I think they are merely a metric of the complacency that has characterised the European crisis from the start.




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12 Apr 2011 9:04 PM by Pitby Star rating in Andalucía. 1904 posts Send private message

Pitby´s avatar
Sorry, Rod - I didn't mean to hijack your Good News thread and maybe should have posted it elsewhere. Just thought it was interesting reading.



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12 Apr 2011 9:38 PM by rod Star rating in Uk and Spain. 468 posts Send private message

No problem I am getting fed up with the talk on recession this recession that GOOD NEWS travels SLOWER than BAD NEWS we all could do with just helping it along a bit

Rod





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12 Apr 2011 9:45 PM by Pitby Star rating in Andalucía. 1904 posts Send private message

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I agree - you always hear about the bad first! Just balancing it out I suppose.



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13 Apr 2011 12:30 PM by Costachris Star rating in Yorkshire and Arroyo.... 38 posts Send private message

I'd welcome any good news whatsoever on the Spanish and EU economies as the current situation does absolutely nothing to improve peoples futures and living standards whether living in the UK, Spain, Ireland or anywhere else for that matter. The banks and Governments have let down the very people who trust them, walked away and saddled all of us, that had little or nothing to do with the collapse, to pick up the pieces.

Long may the good news continue to trickle in. However, I do think it needs to come with a health warning so that the ill-informed or the downright gullible are protected. The original link is written by Sarah Kendell of The Move Channel.com and in this weeks Eye on Spain newsletter there is another article written by Dan Johnson from, I think, the same company. They seem to be saying that Spain has avoided a bail out and the economic situation is improving - hence, it is a good time to buy property.

Now I hope that they are 100% correct. I have a home in Spain which, although it is a home and not investment, I would rather see it be worth more rather than less. I would like to see less inflation and lower prices (as per the "good old days"). I love Spain and it's people and would wish nothing but good fortune on them and that they prosper once again. But what of the people who use this site for information? Who read the posts for sound, independent advice and may not delve as deeply as they should to get a balanced view before taking the absolutely massive step of leaving the UK and investing in property in Spain and/or seeking work and starting new lives here. Surely we owe them some health warning that although these "experts" who, let's face it, have a real interest in the property market doing well as their livlihood depends on it, have one view but their are still many experts who are very, very cautious about Spain being out of danger.

The sooner this crisis is resolved and we go forward the better for all of us but I do feel that at the moment one (or even two) swallows does not a summer make.

 



This message was last edited by Costachris on 13/04/2011.



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