Spain winning battle to restore economic growth

March 2, 2011 – 12:56 pm

Zapatero is winning Spain's economic battle.

Spanish Prime Minister Jose Luis Rodriguez Zapatero is beating his Portuguese counterpart Jose Socrates as they battle to convince investors they can stem the debt crisis and restore economic growth.

The extra yield investors demand to own Portuguese 10-year bonds rather than Spanish securities has climbed this year, approaching levels reached just prior to Ireland’s November bailout. It cost a record 215 basis points more this week to insure against Portugal defaulting than its Iberian neighbour. Zapatero adopted austerity earlier than Socrates. In a U- turn, he embraced public-wage cuts six months before Socrates did, raised the retirement age, made it cheaper to fire workers and forced lenders to hold more capital. Portugal, whose central government deficit widened for the first 10 months of last year, denies it needs aid as borrowing costs near a euro-era record.

“It seems that the adjustments the Spanish government has made and the tighter rules they are applying to the banks are having a convincing effect on investors,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “Spain is getting the benefit of the doubt and is increasingly being perceived as a turnaround story, while Portugal is seen as a target for the rescue fund.”

The yield spread between Spanish 10-year bonds and their German counterparts has narrowed 26 basis points since Dec. 31 to 223 basis points today, while Portugal pays 73 basis points more relative to bunds than at the end of 2010. Bond trading signals that while Portugal is struggling to convince investors it won’t need to turn to the 440 billion-euro ($606 billion) European Financial Stability Facility rescue fund, Spain is seen at less risk of collapse.

Spanish bonds are “certainly getting better” as a potential investment, Andrew Bosomworth, a money manager at Pacific Investment Management Co., said in an interview on Bloomberg Television’s “On the Move” with Francine Lacqua on Feb. 21. “Real economic progress and healing is starting to take place,” he said. Pimco manages the world’s largest bond fund.

Zapatero announced additional measures today aimed at tackling the 20 percent unemployment rate, telling Parliament the government will step up vocational training in schools. The prime minister, who has pledged to change rules on wage- bargaining by the end of next month, also said the nation has to improve its competitiveness. 

Source: Kyero

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Good news for Spanish real estate as sales increase.

February 14, 2011 – 9:35 am

Good news for Tenerife and Spain's property market

Spanish real estate has had its first official good news since the collapse of the market, with home sales increasing last year for the first time since 2007. The latest figures from the country’s National Statistics Institute (INE) show property sales in Spain rose 6.8% in 2010, which, whilst still significantly down on boom-time levels, marks a huge turnaround from the vast decline of the previous two years. 

Property sales totalled 441,386 in Spain last year, compared to 775,300 at the height of the boom in 2007. When the financial crisis, combined with a glut in supply caused by overdevelopment of many tourist areas, caused the property bubble in the country to burst, sales began to decrease rapidly. The INE reported a 28.8% decline in 2008, followed by an equally dramatic 25.1% contraction in 2009.

While some speculators say prices have yet to hit their lowest, the modest yet significant 6.8% sales growth for 2010 may indicate that the worst of the crisis is over. With the government having embarked on a full-scale public relations campaign to lure disillusioned British buyers back to the market, and Prime Minister Jose Luis Zapatero’s efforts to overhaul the banking and labour market sectors, 2011 is likely to see a further slow increase as the country’s economic crisis begins to recede.

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Prime Minister of Spain defends country’s solvency.

April 14, 2010 – 1:15 pm
Spain's Prime Minister defends solvency

Spain's Prime Minister defends solvency

Spain Prime Minister José Luis Rodríguez Zapatero has passionately defended his country’s solvency. With Greece struggling to contain a debt crisis, some investors have fretted that the problems could spread to Spain.

“Spain has a big plus. It is, as a country, very solvent,” he told the Frankfurter Allgemeine Zeitung, adding: “We have a plan for the reduction of the deficit within three years.” Asked if the Spanish economy would flounder, together with the euro, Zapatero replied: “No. The euro will retain its vitality. We are still in the biggest crisis since the Great Depression and in a phase during which confidence in us and the euro is being tested. But we will pass this examination.”

Turning to the possibility of Greece, or other euro zone states such as Spain, being rescued, Zapatero added: “If one has to intervene, then I think that has to be done together, within the institutions of the EU. We should have confidence in the Greek government and in the requests the (European) Union has made of it,” he said.

Some argue that as a socialist, Mr. Zapatero is in a better position to tackle reform than are the conservatives. He could say that “the current system is socially divisive” and “mainly penalizes the young, women and immigrants,” said Charles Powell, a history professor at CEU San Pablo University in Madrid.

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