Spain Business Brief - Monday October 6 2008

Spain Business Brief - Monday October 6 2008
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By h.b. - Oct 6, 2008 - 1:12 PM

The Bank of Spain - Archive Photo EFE

Stock markets on the slide again across Europe as Zapatero meets with Spanish bankers this evening.

There have been heavy falls on European Stock Markets today including here in Madrid which was down by more than 4% after a few hours trading, following the fear that the bank crisis has now crossed the Atlantic and is about to bite deep in Europe.
The decision of Germany to join Ireland and cover 100% of investors has not been welcomed by other members of the union who are trying to organise a coordinated response across the continent.
In Spain the Prime Minister is preparing high level meetings this week designed to stimulate the economy and increase the all important confidence. Europe apparently not convinced that the Bush rescue plan will work.
Zapatero is planning to meet with the leader of the opposition Mariano Rajoy this week and also with Spanish bankers this evening who he wants to start offering credit to businesses again. All the main Chairmen from the BBVA, Popular, Caja Madrid, La Caixa and Unicaja. Banco Santander is sending a top director.

Spanish banks are reported by El País today to be trying to stimulate the real estate businesses, as a way of safeguarding their loans to them and to avoid a spiral of increasing debt in the sector. The paper reports that a third of the debt awarded by the Spanish bank is destined to real estate activities and companies already owe a total of 313 billion €. Some banks are strengthening their real estate arms, others are creating joint companies with the promoters and most, such as the Santander and Popular are purchasing property.

Autonomous self-employed workers in Spain are beginning to note the economic crisis, with latest figures from the National Federation of Autonomous Workers ATA saying that more than 300 a day have given up their business over the past five months. The Federation says in a report, that the worst ‘is still to come’.
Construction has been the most affected sector, losing some 22,358 workers over the first nine months of the year, some 4%. Agriculture follows with a 3% loss of 9,766 workers.
By regions, La Rioja has been most affected, followed by Navarra and the Valencia Region.

Minister for Tax and the Economy, Pedro Solbes, speaking to the El Mundo newspaper has admitted that ‘the rapid increase in bad debt is something worrying’. It comes as the numbers of banks and savings banks clients who cannot meet their mortgage payments continues to increase. Solbes says he has called on the Bank of Spain to be ‘very rigorous’ in the supervision of banks, although he repeats that he thinks the Spanish financial system has the capacity to face the crisis, although ‘it would be bold
to say that we are protected from everything’.
Meanwhile the leader of the Partido Popular, Mariano Rajoy, speaking at the PP congress in Cantabria, has described the 2009 budgets as ‘a lost opportunity’.

The Government is reported to be studying a plan to offer tax breaks to those who reveal the black money they have previously obtained in real estate deals. It’s the Government’s belief that the strength of the black economy in Spain, as indicated by the number of 500 € notes in circulation, is the secret weapon which some think shows the strength of the economy.
El Mundo reports that the cabinet is split on the plan to try and get some of the 108 million 500 € notes currently in circulation into the banks. It’s a total amount of more than 54 billion € and its entry into the banks would certainly improve liquidity for Spanish banks and Savings Banks. The Prime Minister is reported to back the idea, but Pedro Solbes and the Bank of Spain are said to be against as it would in effect be a fiscal amnesty for opaque and illegal real estate transactions previously carried out across the country.
Meanwhile a survey in Público newspaper this morning has revealed that the Spanish people are in favour of the state helping out banks in the face of a crisis, but not of helping out real estate companies.

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