“Tsunami of corruption in Spain”

Jesus Sanchez Lambas, leader of “Transparencia Internacional” in Spain (the organisation measuring the level of corruption in various countries) claims the “tsunami of corruption” sweeping the country, started with the liberalisation of land in 2002, which lead to the property boom.  The BBC recently published an article headed “Corruption, the mode word in Spain” describing the avalanche which has hit the country.

For several years we have been reporting details of major corruption cases for our readers, almost all associated with the property sector.  One can refresh their memory by visiting www.c-euro.org  ‘Information on Spain / The Political Scene’  and looking under:-   “The Corruption” and “Corruption in the political parties.”

Corruption has a substantial influence on the lives of foreign property buyers and owners:  Many property projects have stalled after corruption, which was their creator, has been revealed.  Important promoters and builders have gone bust, ended up in prison, or moved to Morocco, Brazil or Guinea and the tsunami wave has not yet abated.  Over the past months it has risen to a crescendo and now involves almost all parts of Spanish Society.

Whilst we cannot report on all corruption cases, many are still to be revealed, we make the following interim report:

·        The Catalan corruption case we reported on last week is extending to more municipalities.  The two ex-leaders of the previous governing party CiU, Macia Alavedra and Luis Prenafeta, have been taken to prison in handcuffs.  Prenafeta received payments amounting to at least 637,590 euros in the “Niesma” and “Badalona” cases and  Alavedra has whitewashed a similar sum outside Spain.  Both are temporarily expelled from the party.  Prominent members of the Catalan socialist party are also involved.    Four of the accused (three promoters and the Director of Services in the municipality) have deposited 625.000 euros bail money which the judge imposed to avoid them being remanded in custody.

·        Since April 2006, eighteen mayors have been arrested in the Malaya case (centred in Marbella).

·        Jaume Matas, the former President of the PP Balearic islands government, has been called to declare before the Supreme Court of the region in connection with a number of corruption cases which occurred during his period as president.

·        In Andalucia, the previous socialist president Manuel Chaves, now a Minister in the national government, is refusing to explain financial benefits enjoyed by a company led by his daughter.

·        The Valencia Region is almost without a functioning government, after revelations in the Guertel case, with a network of companies set up very close to PP and with ramification in several other regions.  Senator and National Treasurer of PP, Luis Barcenas,  has been required to withdraw from his position in the party.  Ricardo Costa, the General Secretary of the party in the Valencia Region, has been forced out of his position abd expelled from the party following pressure by the National Leader of PP, Mariano Rajoy, who is also very dissatisfied with the handling of the case by Francisco Camps, President of the Region and Camps is still in the fire.

·        It has been revealed a Guertel company paid for vacations in Gran Canarias for PP leader Mariano Rajoy, his wife and son.

·        Police searched an office of the Diputacion Provincial in Lugo, Galicia and arrested the Second Vice President, socialist Lara Mendez.

·        The Vice President of the Regional Government in Ceuta has suddenly retired for “personal reasons.”  The leader of one of the main parties has demanded an official investigation.

·        According to a report from the Courts of Anti-corruption, over the past 10 years, taking into account only 28 cases, political corruption amounted to 4,158 million euros.

Spanish banks in danger zone

We have previously reported warnings from internationals experts that Spanish banks are in trouble due to the large number of properties they have repossessed, which they have avoided showing on their balance sheets to avoid taxes, and which they hoped they could sell.  However, this has proved more difficult than the banks had foreseen.  Credit Suisse estimates Spanish banks have 30,000 million euros debts in unpaid mortgage loans, which they have not shown in their books.  Just recently Moody’s upped their estimate to 57,000 million which Spanish banks need to set aside as reserves to cover risky loans amounting to 108,000 million.

Bank of Spain confirms

The Bank of Spain directly confirmed the situation when they decided this week to demand banks and saving banks to set aside 20% of the value of all property they have repossessed and which remain unsold after one year.  Previously the obligatory provision was 10% of the assessed value, and the state bank overlooked that many of them had not been shown on the balance sheets of the banks. This will tie up an important part of the banks’ capital and probably diminish the value of their shares on the stock exchange.

Because of this development, the banks are now refusing to take over any more properties as an option for non-payment by the owners.

2100: ‘Annus horribilis’ for the banks

In addition to this grave situation for the banks, one of their main “money machines” is in danger, i.e. the possibility to borrow money from the European Central Bank at 1% and invest it in Spanish state bonds at 4%.  The danger is that there will be an increase in the ECB lending rate due to inflationary pressure exerted by countries now starting to come out of the financial crisis.

Worlds biggest oil producer sacks all employees

SOS Cuetara, the worlds leading producers of olive oil, with debts of 1 billion euros has promised their creditors to sack all the 600 staff in Spain.  They call the measure, which will be for 6 to 12 months, “temporary.”  The company has units in other countries which can take up the slack in Spain.

Constructors emigrate

Several of Spain’s largest construction companies are successfully competing in the International markets.  During 2009 they secured contracts valued at 21,000 million euros; 14% more than last year.  The biggest single contract, amounting to 2,250 million euros for work to enlarge the Panama channel, was signed by Sacyr Vallehermoso.   Acciona are building motorways in Poland; Comsa will modernise railway lines in the same country and FCC is building 4 stadiums for the Eurocopa 2012.

But Spain is happy

According to a worldwide investigation into longevity and happiness of citizens in 148 countries, Spain came 16^th, with it’s citizens living happily for 58.8 years.  Costa Ricans, living 66.7 years were in first place, Iceland came second, followed by Denmark.

Hotel occupation down

Spanish hotels saw a 10% fall in occupancy from July to September this year, compared with their best year 1999.   More than 80% of hotel companies have been compelled to reduce room prices, and 69% have experienced falling income.