THE SPANISH BANKS ARE CLEARLY IN DEEP WATER

So, it appears that there may be a ‘run’ on Bankia, Spain’s fourth largest bank – which has just been part nationalized by the Spanish state.  This ‘run’ is being denied, predictably, by the government and the bank itself.  Indeed, it may well be that people are not withdrawing their money as fast as they can from Bankia.  However, the ‘rumour’ is dangerous and likely to end up being true, as people react to what they believe to be the case (a self-justifying prophesy).

Of course, the only real surprise for any of us is why anyone has ever believed that the Spanish banks were in anything other than a terrible and dangerous mess.  Never was this more so the case than with the Spanish Cajas (savings banks), which were run like mini-fiefdoms by local politicians – who saw them as handy tools to provide funding for favoured (and often lunatic) projects.

In fact, I am staggered that the Spanish banks have been able to so ‘successfully’ conceal the massive scale of their exposure to toxic property debts in Spain and I am mystified that the international community (and ratings agencies) have taken so long to appreciate this fact.  Perhaps the reality is that no-one dared to prise open this particular Pandora’s Box and just hoped that it would go away…

Certainly, it is ironic that the Indignado Movement (otherwise known as 15M) celebrated its anniversary on the 15^th May, just as Bankia was being effectively nationalized at massive cost.  This is something that will have enraged most Indignados, as they saw vast sums diverted to Bankia that could have been better spent on vital social services.

The trouble is that the Indignados, although vocal, have not really had any influence upon events in Spain.  Indeed, they have been largely ignored by Spanish politicians of all parties and the Indignados have (so far) achieved little more than being an outlet for justifiable disgruntlement on the part of everyone in Spain with regard to the way the country has (and is) being run.

Part of the problem is that the Indignados are inchoate.  There has been no real leadership and no clear agenda, with not even an attempt to form a viable political party in Spain that could contest the national elections last November.  So, the Indignado Movement has neither power, clarity nor responsibility.

Demonstrations in Spain, what the Indignados are saying

Of course, one of the more seductive things about the Indignado Movement is that it is so poorly defined.  This means that almost everyone can be an Indignardo and, probably, almost everyone is (including me!).  After all, Indignado means ‘outraged’ – and who is not outraged by the present crisis?

Indeed, how can anyone accept what the banks have done (and been allowed to do by inept politicians) and then accept the utter lack of accountability of the directors of the banks and the political leaders (state, regional and local) who have governed Spain so badly?

Furthermore, how can anyone get their ‘heads around’ the fact that the banks are given free money – from the very people who they refuse to lend to?  Meanwhile, the ‘man on the street’ is offered no protection or liquidity for his dying or debt laden business or to increase his compulsorily reduced income.

The immorality of all of this is something that has driven the Indignado Movement – and rightly so.

In truth, every country needs a moral base and it is impossible, in the case of Spain, to maintain that this has not been eroded.  Most people can see why banks cannot be allowed to fail but few people can come to terms with their rescue being fair or morally correct, with the latter qualities being of vital importance to the health of any community.  If the Indignados keep highlighting the importance of the morality of public life and its most important institutions and that abuse of power and corruption is unacceptable – then they have a role of real value.

Nick Snelling – Culture Spain

FURTHER RELEVANT INFORMATION ABOUT THE BANKING CRISIS IN SPAIN

Spanish bank scandal

Spanish banks and a terrific video!

Demonstrations in Spain and what the Indignados are saying

Spanish property market – the truth is finally coming out

Unemployment in Spain surges

Recession in Spain (again) – by numbers

If you liked this, Subscribe to my RSS feed

]]> http://www.culturespain.com/2012/05/18/the-spanish-banking-crisis-and-the-indignados/feed/ 2 http://www.culturespain.com/2012/05/15/spains-banking-sector-on-the-brink/ http://www.culturespain.com/2012/05/15/spains-banking-sector-on-the-brink/#comments Tue, 15 May 2012 17:03:25 +0000 Peter Lavelle http://www.culturespain.com/?p=7267 [...]]]>

CAN SPAIN GET TO GRIPS WITH ITS BLOATED BANKING SECTOR?

The pound has hit 1.25 against the euro this past week, its highest rate since Oct 2008, as Spain struggles to get to grips with its banking sector and Greece contemplates a euro exit. So what next for the continent in crisis, and the exchange rate?

Here is my latest update of the British pound to euro exchange rate, covering the 8th to 15th May 2012. This is intended as a brief guide to what’s affected the exchange rate this past week as well as what might happen next, to help you decide if now’s the best time for you to change currencies.

This Past Week

It looks as though the Eurozone debt crisis is escalating! The UK pound hit its highest point against the euro since 2008 this week (at 1.2540) as speculation Greece might exit the euro inside weeks gripped the market, while Spain failed to put its banking sector to rights.

The good news is that Europe has avoided falling into official recession, but while the political outlook looks so uncertain that is unlikely to aid the euro.

Spain’s Banking Headache

In Spain, the problem is that the banking sector is struggling to get to grips with the billions in bad loans it’s suffered since the housing crash in 2008.

This past week alone, Bankia (the 4th biggest bank in Spain according to assets, and itself the product of a merger of seven illiquid cajas) was nationalised, while 4 other cajas are also looking at joining forces.

This process should prevent Spain’s banks going bankrupt (which would obviously be disastrous for the public finances) but it fails to deal with the underlying problem of bad debt. The markets see this, which is why the euro has weakened in spite of Spain’s action.

In the medium term, this is likely to remain a problem too.

Is A Grexit (Greek Exit) Coming?

In Greece meanwhile, the sudden dominance of anti-euro parties on the political front means we’re facing the increasingly real possibility that Greece will exit the euro.

This accounts in large part for the decline in the euro, as the markets attempt to anticipate such an outcome by selling assets in euros and putting them in locations believed to be safer, such as the UK pound and US dollar.

The problem of course is that a euro exit is completely unprecedented, and has the potential to spark a domino effect across Europe in which all of Europe’s banks become unstuck, while other countries in the grip of austerity such as Ireland also avail themselves of the chance to leave.

So long as this remains possible, the euro looks set to remain weak.

The Next Week

In the short term, the fact that Europe has avoided official recession this week should provide some support of the euro.

However this of course will not help solve the problems in Spain and Greece. So long as Athens remains in political limbo, and the markets view Spain’s banking reforms with scepticism, the euro looks set to remain under strong pressure against the pound.

It would take a disaster in the UK to push the pound back down for long at this point.

Get in Touch

I will return with my next exchange rate update next week.

If you would like a no-obligation quote for transferring your money to Spain, don’t hesitate to fill in your details here and see all the services that we can offer at Pure FX  - where we are always delighted to provide an in-depth response to your queries, free of charge.

Peter Lavelle – Pure FX

BANKS IN SPAIN VARY CONSIDERABLY IN CHARGES AND SERVICE - SO MAKE SURE YOU CHOSE THE RIGHT ONE!

If you are thinking of banking in Spain then, in principle, you are spoilt for choice – or are you?

There are dozens of banks in Spain including a number of savings banks in Spain called Cajas or Caixas.  The latter are often regional and some have very few branches.

Spanish banks vary in terms of their exposure to the effects of the economic crisis in Spain.  Some are secure and others less so – although there is limited Spanish government protection in place should a Spanish bank collapse.

So  – what bank in Spain should you use?

Well, as with all retail banks, in every country in the world, there is unlikely to be a great deal of variation (in reality) between what one bank in Spain and another offers – in terms of account benefits. However, as a foreigner in Spain, three matters are of very considerable importance:

1.       Communication.

It is essential that you can do any and all your banking in Spain in your own language and that all paperwork (bank statements etc.) and Internet access is available in your language.  Equally, you need to have a permanent personal point of contact at your own branch who speaks your language fluently.

2.      Free receipt of money transferred from your bank in your own country to your Spanish bank.

Considerable receiving fees can be charged unless your Spanish bank expressly agrees to forego these fees!

3.      Extensive branches throughout Spain.

Unless you plan to always stay within one small area, you will need a bank in Spain that has branches spread across Spain.  This is helpful should you travel or move around the country.

Over the past years, some Spanish banks have specialised in providing a foreigner user-friendly service.  These banks usually have multi-lingual staff and are both used to dealing with foreigners and well equipped to provide an appropriate service.  This is very important and can greatly ease the stress involved in banking in Spain.

After all, few things are more unnerving than dealing with your money in a foreign country – in a different language!

I know of one high street retail bank, for example, that has focussed closely upon the foreign market in Spain which has a number of branches along the high density foreigner coastline of Spain.  This bank tends to be efficient and invariably have multi-lingual staff in their branches.  They also provide the option for you to do all your banking in your own language.

For more information about Spain, living in Spain and Spanish property have a look at:  ‘How to Buy a Spanish Property and Move to Spain – Safely!

However, if you want to know more about banking in Spain and details of who I would recommend – then please drop me a note and I will  send you further details…

Nick Snelling – Culture Spain

MAKING THE MOST OF YOUR PENSION IS ESSENTIAL - SO KNOWING ABOUT QROPS IS VITAL!

One of the oddities of pensions is how little Britons tend to know about them – including where the pension is held, its value and what to do to maximise its effectiveness. There is a saying in the pension industry that ignorance about a pension is much like ‘owning a house but not knowing where it is and how much it is worth’…

In fact, there can be considerable benefits to moving abroad if you have a pension and manage it wisely. After five years of living abroad, for example, all restrictions and regulations concerning your UK pension fund disappear. Indeed, it is possible to reposition your pension fund within QROPS (Qualifying Regional Overseas Pensions Schemes) so that you can take advantage of:

An immediate lump sum payment
Greater investment choices
The ability to pass on unused funds to whoever you want, free of UK tax
Tax efficiencies between the UK and Spain
Potential inheritance tax avoidance
An annuity (i.e. income for life) by the age of 75
Obviously, to arrange for these potentially significant benefits you need expert advice. This you must choose extremely carefully. Indeed, if you are considering a change to your pension, you must ensure that you take advice only from:

A UK-registered (and insured) pension specialist
A professional who is an up-to-date and qualified IFA (Independent Financial Advisor)
Someone who has access to a wide selection of QROPs
A specialist in pension funds between the UK and Spain
If you need to know more or wish to have direct details of a reputable, fully qualified, British QROPS expert then please do contact me.

Nick Snelling – Culture Spain

THE BORGIAS PALACE GANDIA

I have just been sent a wonderful YouTube film of a demonstration in Barcelona about the crisis in Spain.  It is wonderful (breath-taking really) and shows the best side of Spain and the culture of Spain.

The demonstration is set within an office of la Caixa, one of the biggest banks in Spain, and revolves around a by-line stating that ‘it is not a crisis – it is capitalism’.

Do watch the film (it is very short) – and then ask yourself where else in the world could this happen?  Wonderful…

Meanwhile, yesterday, in my own town of Gandia, a man assaulted three staff at the Santander bank in the high street of Gandia, saying that the bank had destroyed his life.  Sadly, this horrible tragedy was devoid of humour and good nature and has resulted in severe injuries.  In a dreadful way it shows the inevitable reality behind the present economic crisis in Spain and the individual pain that is being felt by many people.

Of course, few people in Spain have a good word to say about the banks in Spain.  They are held largely responsible for the present economic crisis and with good reason.  Scandalously badly run, they have been bailed out by the Bank of Spain (i.e. the people of Spain) at massive cost and yet are busy repossessing properties and then dumping them back onto a flooded market.  Meanwhile, it would be easier to open a clam with a toothbrush than obtain lending from them.

Finally, several banks in Spain have enraged the population through giving their directors (just before their bailout by the Bank of Spain) enormous pay outs and pensions.  To see more about this and to be driven into a paroxysm of rage, whether you are in Spain or not, see: banking scandal Spain.

Nick Snelling – Culture Spain

Spanish bank Scandal

How bankrupt is Spain? 

  Banking -the Spanish property crash and the Banks

Banks in Spain – how safe are they

 Banking in Spain - the four secrets to banking in Spain

MADRID LOOKING FABULOUS - A CITY OF CULTURE TO RIVAL THE BEST IN THE WORLD!

So, 2011 gradually ebbs away – a year that many people in Spain will be pleased to see disappear, hoping that 2012 will herald better times ahead.  Unfortunately, I fear that may not be the case and there are compelling arguments to suggest that 2012 may be more difficult and challenging for Spain than 2011.

So, how does one round up 2011?

Well, I think reactions to Spain in 2011 depend very much upon who you are, of course, as the feelings of a holidaymaker to Spain will be very different from someone living in Spain trying to sell their house or a Spaniard recently out of work.

Certainly, for the Spanish, as a whole, 2011 has been notable for a final recognition that the economic crisis in Spain is for real – and here for the foreseeable future.  This reckoning has taken some considerable time to enter the consciousness of the Spanish who, for a long time after 2007, seemed genuinely to believe that the economic crisis in Spain was just a ‘blip’ in Spain’s upward progress, rather than the Tsunami that it has turned out to be.

However, this year has dispelled any illusions, not least through raw and unavoidable facts such as the 23% unemployment rate in Spain and the fact that 49% of 18 – 24 year olds have no work – the tragedy of which touches everyone, in every strata of Spanish society.  Meanwhile, throughout the year the bank of Spain has been rescuing the appallingly badly run Cajas (savings banks) which have, notoriously, provided their failed directors with fabulous pensions and compensatory payments.

Banking scandal Spain          The Spanish economy – how bankrupt is Spain

The cause of Spain’s economic crisis has been the crash of the Spanish construction industry.  In 2007, including peripheral industries, the construction industry in Spain may have accounted for as much as 30% (or more) of Spain’s GDP and yet by this year (2011) cement use in Spain had fallen to its lowest level for 27 years – indicating that the construction industry in Spain has, more or less, ceased to exist.

If this was not bad enough there may be as many as 3 million properties for sale in Spain (no-one really knows!) of which some 1 million are new builds.  This massive excess in supply will take a generation to clear with some Spanish building projects so ill thought out and defective that they are (and always will be), to all intents and purposes, probably worthless…

The Spanish, of course, took their revenge on the incompetent socialist party of Spain (PSOE) in two elections in Spain in 2011 – the regional and local elections at the beginning of the year and the Spanish national elections in November.  Utterly discredited for their astonishingly incompetent management of the Spanish economy, the socialist party of Spain were resoundingly defeated in all the elections and replaced by the Spanish conservative party (the PP) led by Mariano Rajoy.

However, the new conservative Spanish government is unlikely to have any political ‘honeymoon’.  Indeed, it is hard to know how Mariano Rajoy can regenerate the Spanish economy in the short term as he is faced with: an economy with a probable 30% GDP hole (the Spanish construction industry), high unemployment, low income from taxes, falling house prices (down 35-50% on 2007 values), high debts and banks that are wobbling.  Further cuts of government services are inevitable, of course, but these are unlikely to actually revitalise the economy and may lead to social unrest.

Certainly, one of the most notable aspects to 2011 has been the lack of violent social unrest despite a population that has shown signs of being restive.  Indeed, instead of riots, Spain saw the emergence of the remarkable Indignado Movement (15M).  Indignado translates as ‘outraged’ and this was, understandably how many Spaniards (of all ages) felt as they filled the squares in many towns and cities in Spain during the year – albeit in a uniquely peaceful manner.

Interestingly, the Indignado Movement in Spain was most verbose about the ‘system’ in Spain failing – not democracy but the way that democracy is run here.  By this, they meant that there was little real political choice as governments in Spain, are effectively always drawn from a two party system (the socialist PSOE party and the conservative PP party).  Furthermore, the Indignado Movement was furious with the corruption endemic in politics in Spain, leading to frequent abuses of power.

Corruption in Spain, still a problem          Spanish conservatives win general election

Of course, the Indignado Movement has spread with ‘sister’ movements across America (Occupy Wall Street) and in London.  Unfortunately, whilst some of the statements of the Indignado Movement often made a good deal of sense and had considerable support, the Indignados had no realistic solutions to Spain’s problems.  Indeed, the Indignado Movement is inchoate as an organisation and has had no perceivable impact upon ‘real life’ politics in Spain (they did not contest the Spanish national elections).

To add to the economic woe of Spain, the town halls in Spain are also in meltdown.  This has been a badly kept secret for some time but this year the Pandora’s Box of local authority debt in Spain has been opened up – to release some scary facts.  Indeed, some town halls in Spain are so broke that they have been unable to pay their staff for months with suppliers of services and goods waiting, sometimes, for over a year to be paid.  In some cases, local authority construction and infrastructure works have been left half completed with little hope of completion for years to come.  Meanwhile, the debt to income ratios of some town halls in Spain is quite simply breath-taking with any significant reduction to these debts likely to take a generation.

So, by anyone’s standards these are hard times for the Spanish and, in truth, the ‘hard times’ are far from over with the threat of collapsing banks and a Eurozone meltdown a Damocles’ sword waiting to make matters worse.

A saving grace for Spain has been the tourist industry in Spain which saw an excellent year (an 8.4% increase in tourist spending).  Unfortunately, this was not due to Spain offering something greater/better/more exceptional than usual but through the wise desire of holidaymakers to choose safe Spain as opposed to Greece or the deeply troubled countries of North Africa.  Nonetheless, this boom was welcome but should not be taken for granted as the North African countries fight to get tourists to return.

Meanwhile for foreigners in Spain life here has been defined mainly by whether they have to earn an income (incredibly hard) and or sell their property (almost impossible).  Either of these two problems has been devastating and those who have sold their properties in Spain have had to do so at heavily discounted prices – often leaving them with a greatly reduced equity for their next purchase.  If the intention had been to return to Northern Europe then this will have had significant, and obvious, consequences.

However, for those with a secure pension and no desire to sell their properties in Spain then the year will have been like any other.  The climate has not changed and is wonderful, it is cheap to eat and drink out and the quality of life here is very fine.

Perhaps more perplexing has been the problem for people thinking of moving to Spain (the subject of a book of mine published earlier this year).  The question has been whether it is the right time to buy (the bottom of the market?) and, more importantly, whether the Eurozone would crash and Spain return to the Peseta?

Well, the evidence seems to suggest that there has been a marked rise in foreign buyers coming to Spain to buy property, particularly from Northern Europe (excluding the British).  Certainly, there are countless bargain properties in Spain and a clever buyer can probably insulate himself from any further drop in the housing market by picking carefully and driving a hard bargain.

However, I suspect that the Spanish property market will fall again in 2012, possibly by between 5 – 10% – and that is not taking into account any Eurozone crash or return to the Peseta.  So, it is a time for caution, if you are a potential buyer.

Spanish property Market       Bargain properties in Spain

That said, Spain still has a terrific amount to offer both tourists and those seeking to live in Spain permanently.  The country has fantastic beaches, great mountains, endless outdoor activities, modern shopping, beautiful towns and cities and a well-developed infrastructure to deal with foreign tourists and provide them with a superb holiday.  The culture of Spain is as interesting as ever, the museums excellent and travel through Spain fun and stimulating.  It is a great country with an accessible language and a nuclear society that is still functioning well, amidst a kindly and tolerant people – who deserve better than their lousy political leaders and the awful year that they have just experienced…

Nick Snelling – Culture Spain

FURTHER RELEVANT ARTICLES CONCERNING SPAIN IN 2011

Book on: How to Buy Spanish Property and Move to Spain – Safely!

The Spanish economy – how bankrupt is Spain

Corruption in Spain, still a problem

Demonstrations in Spain what the Indignados are saying

Spanish property Market

Bargain properties in Spain

Banking scandal Spain

The Spanish economy and debt in Spain – the town halls are in trouble

Spanish conservatives win general election

IS THE UK REALLY PLANNING TO RESCUE BRITONS IN SPAIN AND PORTUGAL?

Well, I think if I was in Spain in charge of marketing Spanish property to the British (if there is such a person!) then I would probably finally have my head in my hands.  Either that or I would be looking frantically for a wobbly, three legged stool and a short rope.

Why?

Because the UK press has recently been advertising the fact that the Foreign Office is making plans to evacuate British civilians living in Spain and Portugal should the banks in Spain and Portugal collapse.  This may, it is said, leave many expats in deep financial trouble – despite both countries guaranteeing the bank account of an individual to a maximum of 100,000 Euros.

Needless to say, the Press in the UK have pounced on the Foreign Office plans with predictable glee and (in the case of the Mail) resorted to the tired cliché of Dunkirk – this time a ‘financial Dunkirk’ (Heaven help us!) for when expatriates are hit by ‘financial oblivion’.

Gosh.  This really does seem like hysteria in the making.

The Spanish economy – how bankrupt is Spain          Banking scandal Spain 

Of course, I suspect that very few expatriates living in Spain and Portugal have large sums of money in the Spanish banks here.  Virtually every Briton I know has kept their liquid assets back in the UK or off-shore, with monthly pension payments coming from the UK (obviously) and other money being transferred, when needed, from UK or off-shore accounts.  All of this keeps the money transfer companies happily in business and most Britons feeling reasonably secure, even though they may have their biggest asset in Spain.

The Spanish economy and debt in Spain – the town halls are in trouble

Equally, no-one living in Spain over the past three or four years can possibly have any illusions about the ‘security’ of Spanish banks.  The latter have been clearly in deep trouble for all of that time with the Cajas (Savings Banks) melting down one after the other – something consistently highlighted in the news (Spanish, expatriate publications and their home country national Press).

Indeed, quite frankly, any Briton still with a lot of money in a Spanish bank needs his ‘head examining’ with few British expatriates that stupid.  So, the numbers of people seeing financial oblivion from a cash point of view are probably very restricted.

Far more worrying for many expatriates living in Spain and Portugal is the prospect of their homes devaluing even more, if the financial crisis in Spain and Portugal worsens further – let alone if the Peseta returns or the Eurozone splits into two.

As it is, virtually anyone who bought a Spanish property between 2005 – 2007 will have seen their property drop significantly in value, perhaps by as much as 35% – 50%.  This is a massive reduction of equity with any further loss truly devastating.

Banking -the Spanish property crash and the Banks          Banks in Spain – how safe are they

Needless to say, the real curse of property prices dropping radically is that it makes it very difficult for an expatriate living in Spain or Portugal to return to the UK and re-enter the British property market.  This is particularly the case with retired people who have little prospect of regaining their wealth and who may have to very significantly down grade – if they are left with enough money to buy anything at all.  It is these people who will really need help or who have to realise that any prospect of moving back to the UK has disappeared for some time to come.

The question, of course, is whether the banks in Spain and Portugal will collapse – making the UK Foreign Office ‘Dunkirk’ plans necessary?

Well, that is anyone’s guess, frankly, and goes to the very core of whether the Eurozone will be sustained and stability regained.  That, I am afraid is a question that goes well beyond my ‘pay scale’ and is what is confounding our  EU ‘leaders’.

However, one thing is for sure – and that is that this is no time to have a lot of money in Spanish or Portuguese banks for expatriates living in Spain and Portugal and maybe that is the real lesson to be learnt from the UK Foreign Office plans…

Nick Snelling – Culture Spain

FURTHER RELEVANT ARTICLES ON BANKS IN SPAIN

The Spanish economy – how bankrupt is Spain

Banking scandal Spain 

Spanish economy – meltdown?

Budget cuts in Spain

Banking -the Spanish property crash and the Banks

Banks in Spain – how safe are they

Banking in Spain - the four secrets to banking in Spain

A financial Dunkirk – Britain draws up rescue plans

The Spanish economy and debt in Spain the town halls are in trouble

LIFE IN SPAIN, GANDIA PORT, VALENCIA

Spain is being rocked, at the moment, by the news that the directors of various Spanish banks have taken huge compensation packages – despite relentlessly driving their own banks to the point of destruction.  To everyone’s amazement, some of these packages have been awarded by the directors, to themselves, just days before the Bank of Spain was forced to bail out the banks concerned.

A fine example is Novacaixagalicia whose directors shared out a whopping 23.6 million euros (between themselves) before they were replaced – just as the Spanish state was preparing to effectively nationalise Novacaixagalicia and provide emergency funds to the tune of 2.4 billion Euros.

Meanwhile, the directors of notorious CAM bank awarded themselves 12.8 million Euros as compensation for losing their jobs.  They were, of course, losing their jobs because their scandalously bad management of CAM meant that CAM needed a 2.8 billion Euro emergency injection of funds and a 3 billion Euro credit line – just to survive.

If huge ‘compensation’ packages were not bad enough then the sheer scale of misdemeanours and negligence that is now coming out about how some Spanish banks were run is astonishing.  Indeed, the current Spanish bank scandal is a story of despicable behaviour (both from politicians and Spanish banking industry management) – that belies belief.

The CAM bank, for example, provided immense loans at reduced interest (in some cases 0% interest!) to its directors.  Indeed, between 2004 and 2010 CAM lent an astounding 161 million Euros to its Directors, on extremely preferential terms.

Meanwhile, any attempt at ‘truthful’ accounting seems to have disappeared altogether.  In March of this year the CAM, for example declared Q1 profits for 2011 as 40 million Euros – however when the Bank of Spain checked the accounts they found that CAM was, in fact, in debt to 1.13 billion Euros…

By the way, be under no illusions about the directors of Cajas being modestly remunerated because they were running local savings banks. Far from it, as is illustrated by the salary of the last SEO of CAM bank, María Dolores Amorós.  She was paid 600.000 Euros pa. before she was sacked and has a pension of 370.000 Euros.  I am no anti-capitalist but I find those sums odious given that many people in Spain are called Milleuroistas – because they earn only a 1,000 Euros a month (if they have a job!).

Of course, in Spain there are two ‘types’ of banks, private banks (shareholder owned) and Cajas (sometimes known as Caixes).  The latter are savings banks in Spain and were (there are very few left now!) generally quite small with often a given bank having only a few branches situated within a local area/region of Spain.  An exception to this is la Caixa (now a shareholder owned bank) which, when still a Caja, had thousands of branches throughout Spain.

The trouble is that many Cajas, being local to an area, were highly politicised.  In fact, so politicised that some Cajas always had local politicians (in the proportion to which they held power locally) on their Board of directors.

So, in some Cajas, if the socialist PSOE party held power then there would be more socialist politicians on the Board of a given Caja than (say) conservative PP politicians or vice versa – depending upon the balance of local political power.

Of course, the Board of a Caja would always also have professional banking directors to provide some ‘objective’ banking industry input.  However, I say ‘objective’ because, of course, the ‘professional’ directors were appointed by the local politicians in power – thus providing the perfect opportunity for corruption and some serious back-scratching.

As you can imagine, the result of allowing a bank in Spain to have politicians on the Board was predictable, particularly in a country where corruption is endemic.  Indeed, some Cajas effectively became the private fiefdoms of local politicians and virtually personal funding tools – with which to dispense largesse on favoured projects.  Some of these were financial disasters from the start (such as Terra Mitica in Alicante) and many involved the funding of construction projects almost irrespective of their lunatic merits.

So, there is no surprise that the Cajas in Spain are in such deep trouble.  Indeed, an indication of their ruinous state is illustrated by the fact that there are only 15 savings banks in Spain – when there were 45 before the Spanish state restructuring of the banking system started.  This is no surprise, frankly, although it is still shocking to lean that there has been write-downs by the Spanish state of some 105 billion euros (so far) in the balance sheets of Spanish lenders.

Well, as you can imagine, the sense of rage in Spain is palpable!

Effectively, the directors of some of the savings banks in Spain, like the CAM bank and Novacaixagalicia, have awarded themselves huge compensation packages for the loss of their jobs (due to their incompetence!) – which is being paid for from bailout money supplied by the Spanish state.

Unbelievable and, to my mind, utterly unacceptable.

Of course, as always with this financial crisis (virtually anywhere in the world) you are left asking, yet again: what were the state financial regulators in Spain and the Bank of Spain itself doing – to ensure that banks in Spain were properly run, that audits were correctly undertaken and that this vital sector was healthy?

Nothing appears to be the only possible answer.

Meanwhile, what sanction for incompetence on the part of the regulators and executives in the Bank of Spain has there been (let alone the directors of the banks that were so mismanaged)?

Well, so far, I suspect – absolutely nothing…

In fact, the only sanction being suffered, of course, is by the general population of Spain.  They have been left to pay for the outrageous behaviour of the Spanish banks, whilst trying to scratch a living in a terribly damaged economy – an unimaginable experience for some director bathing in their vast, and totally unjustified pay outs.

 Nick Snelling – Culture Spain

RELEVANT ARTICLES ABOUT THE SPANISH ECONOMY

How bankrupt is Spain? 

  Banking -the Spanish property crash and the Banks

Banks in Spain – how safe are they

 Banking in Spain - the four secrets to banking in Spain

WHERE WERE THE REGULATORS WHEN THE BANKS IN SPAIN WERE RUNNING OUT OF CONTROL?

The past week in Spain has seen the dissolution of the Spanish parliament, the second largest seizure of heroin by Spain ever (150 kilos), the nationalisation of three further Spanish banks and continuing tremours on El Hierro, one of the Canary Islands. On the economic side of things, matters show little signs of improving with GDP quarterly growth in Spain down to 0.1% in Q3 of this year.  Meanwhile, the average age of a car in Spain is evidently around 10 years old – almost the oldest in the EU.

Of course, the most important event has been the dissolution of the Spanish  parliament which means that campaigning by the Spanish political parties is now starting in earnest for the General Election in Spain scheduled for the 20^th November 2011.  The general consensus is that the ruling socialist party will be soundly defeated and that success by the conservative PP party led by Mariano Rajoy is assured.

Certainly, current Prime Minister Zapatero is deeply unpopular and is seen to have grossly mismanaged the Spanish economy over the past seven years.  Whilst still prime minister at the moment, he will not be fighting the General Election in Spain on the 20^th November (no doubt to the intense relief of his party).  His long serving deputy Alfredo Rubalcabe has taken his place as head of the socialist PSOE party – having been ‘shoe horned’ into position as the unopposed new leader.

However, it has to be said that there is no great enthusiasm for the conservative PP party and Mariano Rajoy.  The PP has been the subject of several corruption scandals and Mariano Rajoy is perceived as lacking any charisma.  Although he is seen as a decent and intelligent man (he is very highly qualified and was Spain’s youngest ever property Registrar), he is not someone likely to inspire the country.

Dangerously, there is a feeling amongst some Spaniards who I have spoken to that most of Spain’s problems will disappear with the election of a new government in Spain.  A new government and prime minister, so the argument goes, will boost Spain’s confidence – which is all that is needed to allow the country to recover from its current parlous state

A boost in ‘confidence ’ for Spain and Spaniards is certainly required but the solution to Spain’s underlying problems (desperately high unemployment, a collapsed construction industry, massive debt in Spain, an elephantine civil service etc.) will require a good deal more than an illusory sense of renewed ‘confidence’.  This will almost certainly disappear after a short honeymoon’, I fear, as the Spanish realise that structural faults and weaknesses are rarely fixed by sentiment alone.

Meanwhile, the bank of Spain has effectively nationalised and recapitalised the ‘last’ banks in Spain needing help.  There can be no surprises that these were all Caixes (savings banks) and they are the Novacaixagalicia (NCG), CaixaCatalunya and Unnim – which were bailed out to the tune of 4.75 billion from Spain’s Orderly Bank Restructuring Fund (FROB).

Still on the subject of Spanish banks, the news in Spain has been full of stories about the CAM bank (Caja Mediterráneo) a savings bank which operates primarily along the Costa Blanca.  The CAM bank has been notorious for years, not least because of its use as a political ‘tool’ of local Spanish politicians who used it to invest in ‘favoured’ projects.  In any event, the CAM bank has been appallingly badly run with the Spanish property crash leaving it terribly exposed to massive (toxic) debts on property.

Indeed, it appears that the Bank of Spain discovered a massive debt (of some 5,000 million Euros and has had to invest 2,800 million Euros to prevent the CAM bank from collapsing – whilst providing  a line of credit extending to some 3,000 million Euros.

However, the real scandal has been the behaviour of the CAM bank executives who, unbelievably, have awarded themselves massive pensions and compensation for loss of their jobs – despite their dreadful (often self-serving) incompetence.  Five of the executives evidently awarded themselves a total of 12.8 million Euros as compensation, whilst the Director General (María Dolores Amorós ) has given herself a pension of some 370,000 Euros pa.

This was, incidentally, after some executives had taken vast loans from the CAM bank at preferential rates of interest that were as low as 0%.

Astonishing, a scandal and utterly shameless!

Finally, to finish off appropriately, with a political story, I am grateful to Mark Stucklin of Property Insight Spain for pointing out that Prime Minister Zapatero has also lost money on a Spanish property that he owned.  It seems that with the same acute economic prescience that he has consistently employed during his premiership of Spain he bought a holiday home in Vera in 2007 (the very height of the Spanish property boom!).  He paid some 440,000 Euros for this property and has just sold it (probably at near the bottom of the Spanish property crash!) for 280,000 Euros – a loss of some 38% (which pretty much equates to the overall drop in Spanish property prices since 2007)!

Obviously, I have no desire to see anyone lose money but it is hard not to think that Zapatero’s loss was not brought on (at least partially) by his own lunatic economic policies and utter inability to control the economy of Spain.  Mind you, do not be too heartbroken for him and his financial loss – evidently he is building a 1 million Euro property in Leon for his retirement from active politics…

THE COSTA BLANCA IN AUGUST, DREAM BEACHES

The ‘big’ news in Spain for many foreigners is probably the fact that yesterday Catalonia celebrated its last bullfight – after 624 years of bullfighting in Catalonia.  The ban actually takes place on the 1st January 2012 but the season for bullfighting in Spain traditionally ends in September.

As I have written before, the decision by the Catalans to end bullfighting in Catalonia is looked upon with some scepticism by many Spaniards from other parts of Spain.  They maintain that the ban on bullfighting in Catalonia is driven by a desire by Catalans to be different from the rest of Spain and is therefore a politically motivated action rather than one impelled by a quest for greater animal rights.

Whatever the truth, I cannot help thinking that the Catalonian ban on bullfighting is a good thing particularly as bullfighting in Spain, to my mind, encourages (or, at the very least, colludes) in making animal cruelty acceptable.

Meanwhile, the Spanish property crash continues apace with demonstrations occurring in some 41 cities and towns by people protesting about the repossession of homes by the banks.  This is being led by the Organisation for Mortgage Victims (Plataforma de Afectados por las Hipotecas) in conjunction with the Indignados (the 15M movement).

Evidently, since 2007 more than 200 families a day have lost their homes to repossessions in Spain with a vast number of repossession orders in the system waiting to be executed.  The problem is that, unlike the US, in Spain you cannot just hand the keys of your home to your lender in the belief that this will negate any existing debt.  Far from it – the full debt has to be repaid and the banks will pursue the debt!

Worse still, as Martin Dell of Kyero makes clear in his newsletter, there is evidence to suggest that some Spanish banks are involved in price and valuation fixing to the acute detriment of the owners of properties that are the subject of repossessions in Spain.  If this is true then the banks are behaving in a breathtakingly bad way as if, of course, they could ever do otherwise!

The protesters against eviction in the face of repossession are saying that everyone has a right to a home – whilst stating that it is immoral for the banks to be evicting people when the Spanish banks own so many homes in Spain (many of which are empty).  Needless to say, the banks in Spain have become the biggest ‘estate agents’ and landowners in the country, albeit holding assets that are pretty toxic given the 30- 40% slide in Spanish property values since the halcyon days of 2007 (when lunatic  over-pricing, over-valuing and over-mortgaging was the norm).

Meanwhile, still on the subject of Spanish banks, I was amused by a recent article stating that some banks in Spain were outraged that EU commissioner, Michel Barnier, had stated that the 16 European banks that had only just passed the EBA stress test required greater funding.  Seven of the 16, of course, were Spanish banks (no surprises there!).  Of course, the Spanish banks concerned are all saying that they need no further funding and are in good condition.  Time will tell, of course, but the Spanish banks ‘doth protest too much’ – methinks!

On a happier note, Spain has benefited considerably from the political disturbances in North Africa and Greece with many summer holiday tourists turning away from those destinations and going to Spain instead.  The result has been a massive increase in tourism in Spain which is up 9.4% from last year, with August registering the highest monthly number since records began in 1995.

Needless to say, if ever Spain needed an economic boost then it is now and the Spanish tourist figures for this year are something to be welcomed.  However, for the most part tourism in Spain is very seasonal and any boost to the economy and (critically) to the Spanish job market will soon decay as temporary jobs cease and the tourists return to their normal lives.

Furthermore, unfortunately Spain cannot claim that holidaymakers are coming to Spain for Spain’s sake.  This means that this year’s peak may be a freak, if the political situation in North Africa calms down and Greece stabalises.  Something of a big ‘if’ but it means that Spain cannot sit on its ‘laurals’!

Unfortunately for the Spanish government and any travellers there are rail strikes in Spain this week both today and on Thursday the 29^th September.  The rails strikes in Spain by the train drivers will occur during peak rush hours and are in protest at proposals to privatise the rail service.  Efforts will be made to mitigate the worst effects of the rail strikes in Spain – but watch out if you have plans to travel by rail in Spain on Thursday…

Finally, the Canary Island of El Hierro is preparing itself for a volcano!  El Hierro is the smallest (only 278km2) Canary Island with a population of some 10,000 people .  It is also the furthest south and west of all of the Canary Islands and famous as a nature reserve – whilst, in the distant past, El Hierro was renowned as the end of the known world!  However, recently there has been considerable seismic activity with concern that this may be the prelude to an eruption…

Nick Snelling - Culture Spain

 FURTHER RELEVANT INFORMATION

Bullfighting

Bullfighting in Spain – the Tordesillas bull hunt 

Bullfighting In Spain

Bullfighting in Spain – the beginning of the end

Spanish banks

Banking -the Spanish property crash and the Banks

Banks in Spain – how safe are they

 Banking in Spain - the four secrets to banking in Spain

Tourism

Tourism in Spain – the facts

Tourism in Spain

The Indignados

The 15m Movement -what the Indignados  are saying