Property Pulse Issue 318 – 29th March, 2011
March 29th, 2011
After fears last year that Spain could follow Greece and Ireland in requiring a bailout from the EU, 2011 has been a year of relative optimism for the Spanish economy.
The government’s swift measures to cut the budget deficit and tackle Spain’s weak savings bank system have done much to warrant this optimism.
Today, international confidence is pivotal in securing the type of investment needed to support a modern economy, and this week there was more good news from abroad.
Russia announced they had removed Spain from its investment blacklist, specifically citing Spanish progress in reducing the budget deficit, pension reform, and the banking system: Russia had put a block on Spanish investment in November.
Further international endorsement came from Norway, a nation controlling the second-largest sovereign wealth fund after the United Arab Emirates.
Norway stated they plan to invest directly in Spain’s network of savings banks. Similar investments have already been promised by Qatar and Abu Dhabi earlier in the year.
However, there is one international concern that economists see as an increasing threat to the current stability in Spain.
Last week, the resignation of Portugal’s Prime Minister, José Sócrates, sparked fears that Portugal will now almost certainly require bailing out.
José Sócrates resigned after parliament rejected an austerity budget which included spending cuts and tax rises. All five opposition parties voted against the measures.
Mr Sócrates had already said he would no longer be able to run the country if the budget was not adopted.
Making up the bulk of the Iberian peninsular, Spanish and Portuguese history have always been closely intertwined.
Historically, the two countries are long-standing enemies, but their relationship has progressed more healthily over the last 30 years.
Over the centuries, the two countries have fought directly and, more often than not, found themselves on opposite sides during larger wars.
However, after the death of Francisco Franco in Spain and the Carnation Revolution in Portugal, both countries had embraced modern democracy by 1976 – leading to them both joining the European Economic Community in 1986.
In recent political matters, the two countries have even elected similar governments, with conservative and socialist parties in power at the same time in both countries.
It has been a concern for some time that a domino-like effect could take place in the Eurozone, as one economy causes the fall of another.
Portugal’s fate has previously been seen as an particularly serious threat to Spain, with Spanish banks thought to be heavily exposed to Portuguese debt.
However, Spain’s economy and the recent evolution of the two countries are very different. The austerity measures taken by Spain have brought fiscal stability and, importantly, international recognition.
Conversely, Portugal’s Prime Minister is now taking the blame for being too slow to implement the necessary spending cuts and austerity measures which could have put Portugal’s finances in better shape than is currently the case.
So, while Portugal now face an uncertain future, the effect on Spain should be no more than on any other EU country.
In fact, the differing fortunes of these two neighbouring countries highlights the progress Spain has made in turning its fortunes around.
Here’s the best of this week’s Spanish property news.
Saludos from everyone on the Kyero team!
Norway’s $544-billion sovereign wealth fund is planning to invest in Spanish companies, including smaller banks, a Norwegian central bank spokesman said on Saturday.
A Portuguese bail-out has been considered a racing certainty by many investors since the end of last year. Now the government has fallen, it seems inevitable.
Each day, we record the popularity of every Spanish property advertised on Kyero. Here’s this week’s top Spanish properties – as voted by you.
Moody’s, the credit rating agency, has downgraded the senior debt and deposit ratings of 30 Spanish banks following its downgrade of the Spanish credit rating two weeks ago.
The number of foreign visitors to Spain’s Canary Islands soared in February, official data showed Tuesday, as sunseekers shunned rival resorts in Egypt and Tunisia because of anti-government uprisings there.
Russia has taken Spain off its investment blacklist as Madrid cut its budget deficit, introduced labour market and pension reforms and announced plans to recapitalise its banks.