10% less tourists

Publi deficit accelerating

Spain expelled from Euro?

Luxury cars down 32%

More than 10% less tourists

In their ‘cosmetic figures’ for tourism to Spain, The Ministry of Tourism admit to a 10.3% fall in the first half of the year.  From UK there were 7.7 million visitors, 16.2% less than last year; Germany 5.2 million, down 10%.

The reduction in the number of tourists is in spite of cheaper hotel prices. Prices for hotel rooms are down 8.8% in Catalonia; 5.6% in Andalusia; 5.6% in the Valencia Region; 2.3% in the Baleares and 5.6% in the Canarias.

Public deficit accelerating

The Government fiscal deficit rose to 38,607 million euros in the first half of this year.  Carlos Ocaña, the Secretary of State for Taxes, estimates half of the deficit stems from lower tax income due to the recession and the remainder to the cost of the support programs initiated by the Government. This explosive mixture may lead to a public deficit of 9.5% of the Gross Domestic Product by the end of the year, more than tripling the limit for public deficits permitted by the EU.

Employees paying more taxes

Workers and retired people are paying increasingly more in taxes. The Ministry of Finance has calculated that their declared income is on an average 4,975 euros higher than independent employees and 6,833 euros higher than those with small businesses. The Ministry experts complain that the tax collection agency (Agencia Tributaria) is not concentrating enough on the main source of the black economy, the property sector.

Foreigners invited to denounce

The National Police on Costa del Sol are inviting foreigners to denounce any criminal activity they become aware of. The police guarantees the confidentiality of any reports sent to e-mail This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , which can be reached in English, Russian, Italian, Romanian, Dutch, French or Bulgarian, in addition to Spanish.

Spain expelled from Euro?

In an interview, the renowned Catalan economist Xavier Sala i Martin, raised the possibility of Spain being expelled from the Euro-zone “due to Spain having ignored the limits on the public deficit in an extravagant manner and that it will have difficulties in returning to the 3% maximum rule.” He pointed to the lack of control in the monetary policy which has made Spain “A problem for Europe.”

(Read our article on “Debt failures building up” at the end of this report.)

75.3% of Spanish still Catholics

According to a recent investigation published by the Ministry of Justice, 75.3% of the Spanish continue to declare themselves Catholics. However, only 19.9% go regularly to mass and 46.7% never go. 14.9% declared they do not believe in God and 37.9% doubts his existence. Especially important is the declaration by 81% that, “The religious authorities should not influence political questions.”

More than half of tourists fly low cost

The costly, traditional airlines are the big losers. In addition to the fall of more than 10% in foreign tourism in the first half of this year, the low cost carriers – principally Ryan Air, Easy Jet and Air Berlin – have attracted 51.9% of foreigners visiting Spain. The turnover of the traditional airlines in this sector fell 13% in the first half of the year.

Luxury cars down 32%

The sale of luxury cars with a price tag of more than 50,000 euros has fallen 32% in the first half of the year with just 7,000 such cars sold. The Association of Concessionaries places the blame on high registration costs of the vehicles, the bad image of the big cars, increasing interest rates and the general indebtedness of Spanish families.

Saving on toilet papers

A study shows that Spanish families are saving – on toilet paper. Between July 2008 and June 2009, they purchased 2.4% less paper than last year. However, due to price increases, they spent almost the same amount of money for several metres less.

Employment Minister attacks banks

In an answer to the critique from the banking sector directed at the trade unions, not agreeing to lower the labour costs by reducing salaries, the Employment Minister, Celestino Corbacho, said, “The banking sector is responsible for the situation in the property market. There would have been less construction if the banks had not advanced mortgages up to 120% on the value of dwellings and had not financed the purchase of building land for such projects .....”

Basque Government fight against ETA

The new Socialist Government in the Basque Region, supported by the Partido Popular, has initiated fight against the terrorist organization ETA and its supporters.  Police, both in Spain and across the border in France, are arresting all known terrorists, seizing their arsenals of weapons and explosives and all demonstrations and posters trying to create heroes of the criminals have been strictly forbidden.

Debt failures building up

In the coming months Spanish families and banks will have to face the backlash of the sub prime mortgages advanced in the boom years of 2003 to 2007. As our readers know well, during that period bank and saving banks offered mortgages at more than 80% of valuations, which were based on completely unreal property prices and expectations that property values in ‘Sunny Spain’ had no limits.

Together with greedy promoters, builders and real estate agents, the banks must take a great part of the blame for the property bubble. With a small down payment from the buyers (mainly to pay the sales commissions) and a lax attitude towards the possibilities of clients being able to repay the loans on a ‘rainy day’ the banks assured their Spanish and foreign clients that property prices would only go one way – upwards, and that they could resell the property and the mortgage at any time.   Mortgages were invariably advanced on a floating interest.

2.88% mortgage failures – so far

The Bank of Spain reports the families at present (mostly Spanish) have 670,112 million euro mortgage debts with banks. The cases of failure to serve mortgages stand at 2.88%, with an increase of 0.9% in June. In money this is 41,775 million euros, 158% more than a year ago. A more recent study places failure to meet repayments by Spanish families at 4.3% and, as more and more Spaniards become unemployed, and the possibilities of the families being unable to meet repayments becomes more and more likely.

Some banks have an especially high level of bad debtors: Banco Sabadell 7.4%; Banco Popular 7% and Banesto 5.42.

All banks are increasing charges on services to try to stem the coming storm.

Decrease in values

20% of Spanish mortgages are now considered as high risk and liable to become non-performing. The greatest being risks on mortgages advanced after 2005, on more than 80% of the valuation.  In 2006 and 2007, 17.7% of all mortgages were for more than 80% of the “bubble price.”  Since prices are now heading back to the 2005 level, banks are asking their unlucky clients for additional security to compensate for the decrease in values.

Many clients were persuaded to buy “off plan” apartments at ridiculous prices with maximum loans, as a speculation. Some of them have given up paying the monthly instalments, as prices have dropped and the possibilities of selling such mass produced properties have vanished. Banks have tried in overseas courts to force investors to pay or guarantee assets in their home countries as additional security on the loans.

Banks are forced to seize properties their clients default on (so far 41,775 million euros) in addition to the 20,000 million euros worth of property they have acquired from their principal clients and their collaborators ‘the promoters.’   As property prices continue to fall, the banks must readjust the value of such assets.  Several are already in the danger zone due to these Spanish “toxic assets” and more will become so as unemployment increases and no clients can be found for “Homes in the Spanish Sun.”

The weak and fumbling Spanish Government is implored to “save” the banks and the property sector from their own follies.

Some commentators consider this to be the “rip-off of the century.”