Morgan Stanley issues alert on Spanish banks

By Ambrose Evans-Pritchard

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Morgan Stanley, the investment bank, has issued a major alert on the health of Spanish banks, warning that a replay of the ERM crisis in the early 1990s could wipe out the capital base of weak lenders exposed to the property crash.

"A momentous economic slowdown is now under way. We believe the deterioration in Spain is just in the beginning stages. The bulk of the pain will be suffered in 2009," said the report, by Eva Hernandez and Carlos Caceres. "The probability of a crisis scenario similar to the early 1990s is increasing. If the ERM (Exchange Rate Mechanism) scenario were to become reality the main concern would not be earnings, but capital," it said.

"We estimate that a non-performing loan ratio of 10pc to 15pc for developers' loans would fully erase earnings in 2009 and would represent between 20pc to 30pc of the current tangible capital base of Banco Popular, Sabadell and Banesto," they said.

The grim report comes amid a fresh flurry of horrendous data from Spain. The ICO consumer confidence index has plunged to a record low of 46.3. Lay-offs continued to surge in July as the building industry - 13pc of Spain's workforce - stepped up its job purge. Unemployment has risen by 457,000 over the last year, pushing the rate to 10.4pc. "These figures are very disturbing", said employment chief Maravillas Rojo.

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Finance minister Pedro Solbes told El Pais that the outlook had darkened dramatically over recent weeks as the global oil shock and rising interest rates combined with Spain's home-grown housing crisis. "The economic situation is worse than we all predicted. We thought it would happen slowly but instead it has hit fast," he said. Mr Solbes admitted that the property boom had degenerated into a "bubble" but said there was little the government could reasonably do about it. "What was the state supposed to do? Stop people building houses? That wouldn't be reasonable. Tell the banks who they can lend money too? We couldn't do that either. We warned that building 800,000 homes a year was not sustainable: and that granting mortgages for 40 years was folly, but there are certain things the government cannot prohibit," he said.

The root cause of the bubble was the extremely lax monetary policy imported by Spain after it joined Europe's monetary union. Interest rates were slashed on EMU entry, and then fell to 2pc until late 2005 - far below Spain's inflation rate. However, Mr Solbes has been reluctant to link the crisis to Spain's euro membership. As Europe's economics commissioner at the launch of the euro, his career is inextricably tied up with the whole EMU experiment.

For now, smaller Spanish banks are getting by on funding from the European Central Bank, in many cases issuing mortgage bonds with the express purpose of using them to secure loans from Frankfurt. ECB loans have tripled to €47bn over the last year, causing rumblings of concern among regulators. The ECB is not allowed to prop up banks with long-term funding under EU treaty law.

Morgan Stanley said there was 40pc chance of a "bear scenario" leading to a 0.5pc contraction of the Spanish economy next year, with a mounting risk of an even more extreme case that replicates the ERM crisis (or worse) and leads to a 1.4pc contraction in 2009.

The report said construction investment made up 18pc of GDP last year, much of it funded by foreign investors. The concern is that a "sudden reversal of capital inflows" could leave the economy unable to finance its current account deficit, now 10pc of GDP - the world's second biggest after the US in absolute terms. The corporate sector has debts equal to 130pc of GDP. This too requires foreign funding.

Morgan Stanley said it had become concerned about the banks after the €5.1bn (£4bn) collapse of Martinsa-Fadesa, the country's biggest builder. Loans to developers make up 26.1pc of total lending for Sabadell, 21.9pc for Banesto, and 19.4pc for Popular.

This leaves them highly vulnerable to an ERM-style bust that could push non-performing loans for developers to 14pc. "Such a scenario cannot be disregarded, in our view," it said, adding that the developers may face an even more drastic challenge than they did in the early 1990s.

The "extreme bear" case would lead to further dramatic falls in bank shares: Banco Popular (-61pc), Sabadell (-56pc), Bankinter (-51pc), Banesto (-42pc), and BBVA (-35pc). The report based its estimates on a stress test that replicates what happened in Britain in the early 1990s, as well as Spain's own travails during that period. It said BBVA enjoys a solid client base and is likely to be a "winner" once the storm passes.

The condition of Spain's lenders is a source of intense controversy, and the Spanish officials bridle at claims by foreign critics that there is any problem. The banks certainly dodged the US sub-prime debacle, thanks to restrictions by Bank of Spain on the use of off-books investment vehicles. Home equity withdrawals and "piggy back loans" are rare. Mortgages were mostly limited to 80pc of house prices, at least in theory. The great unknown is whether those price estimates bear much resemblance to reality. Ramon Lobo, a former bank auditor, said valuations were routinely inflated by as much as 25pc, allowing the sub-prime-style abuses through the back door. The Bank of Spain denounced the use of inflated appraisals in 2006.

If the practice was as widespread as feared, the default rate on €320bn of Spanish mortgage paper sold to investors worldwide could prove higher than expected.

Spanish house sales fell 34pc in May from a year earlier, and mortgages were down 40pc. The consultancy Facilismio said yesterday that prices had fallen 6.7pc in July from a year earlier, but anecdotal reports suggest a much steeper drop. With gallows humour, Spanish journalists have begun using the term "Costa del Crash". The UK estate agent Savills said Britons are having to accept price cuts of 20pc to 30pc if they need to sell their villas in a hurry.

The vultures are starting to circle around the hapless Mr Solbes. Critics are calling for his head, accusing him of covering up the true scale of the downturn before the re-election of the Socialists in March. This seems unfair. Mr Solbes continued to dismiss warnings of a crisis as "enormously exaggerated" long afterwards. He appears to be genuinely astounded by what has occurred.

 Have your say    

Someone said: ¨Yes ZP is brilliant as he has
defended and promoted Spanish interests and
helped raise the image of Spain . His promotion
of gay marriages,feminine rights and defence of
liberty of religion are outstanding¨

NO, zp is not brilliant as he left Spain out of the
mayor league of the world and is playing now
with non-democracy countries of central and
south america and africa, leave ¨on¨ the TV
news.

Yes, he leave the gays to be married, good, with
a law previosly prepared by Aznar, only change
that the Zp´s law use the word ¨matrimonio¨
(molesting a lot of people because that word
have an important religious meaning) but with
the same rights.

Your comment about he defend of feminine
rights have not answer, do you think that Aznar
dress the women with gurkas?.

The first right of feminine is to have a job and to
make money to have her prosperity, as the rest
of humans, but now losing their jobs they lose
also that right.

And about the liberty of religion????, Aznar
forbid muslims???? Maybe he make you go by
force to the church??? From 30 years ago you
dont need to see a ¨cura¨ in spain if you dont
want.

In spain a lot of people vote the ¨left¨ until they
feel their pockets empty, finaly they have a thing
in common with the republicans in usa.

Do you feel your pocket???? can you feel it??? is
gone!!, next time wake up tooooo early and go to
vote the ¨left¨ again.
Posted by paco torero on August 7, 2008 12:15 AM
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MUGGERRIDGE: That is my point. War will cause alot of desrtuction and keep the factories going, employment up and people at work. War is extremely profitable and great for an economy. The only down side is that somebody (those who volunteer) dies, but these are people who knowingly volunteered to die. Who are you to tell them what to do. Aren't you pro-choice? War is coming because we have to have one to keep the banks afloat and the rich families from going broke.
Posted by EVANS on August 6, 2008 6:31 PM
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"Posted by juanjo on August 5, 2008 7:17 PM".

And so, querido Juanjo, all this trash you write will undoubtedly buy lots of loaves of bread for Spanish families which are now in great difficulties?

Its the Economy, stupid!!
Posted by Antonio Pérez (Madrid) on August 6, 2008 9:48 AM
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your telling us about problems now!
the spanish press, nov 03
"The Silent Cranes of Marbella" saying a hundred housing sites would be shut by xmas, till the corruption,broken planning laws had been sorted out,the Russian mafia responded by saying they would shoot those responsible if they lost money, hence the Brits started piling in as the Germans sold up, what a bloody mess now
Posted by Tommy on August 6, 2008 8:34 AM
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EVANS....when you nuke IRAN please expect a full retaliation against all interests of the West. A volley of missiles at the main oil terminal in Saudi Arabia is less than 30 miles away. A volley of missiles at Tel Aviv should expand the war. War delivers suprises like in Iraq today in a state of civil war. Kurds invading Turkey. Southern Iraq controlled by Iranian backed militias. Just because Britain "won" WW2 and lost an empire brings nothing except more problems......USSR and the rise of communism.
Posted by muggeridge on August 6, 2008 8:21 AM
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And now, the link

link

Posted by Dieter MA, MBA, PhD ^7, etc. on August 6, 2008 7:58 AM
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THE SPANISH PROPERTY BOOM OF THE LAST 30 YEARS HAS BEEN EXCLUSIVELY FUNDED BY BRITISH , GERMAN AND DUTCH CAPITAL.

MUCH OF THE EXODUS OF BRITISH CAPITAL HAS BEEN MONEY LAUNDERING VIA OFF-SHORE ACCOUNTS , OR PLAIN GOOD OLD FASHIONED SUITCASES OF CASH , TO REMORTGAGING /SEELING UK RSIDENCES TO ACQUIRE HOLIDAY HOMES.

YES THERE IS A MASSIVE DOMESTIC SPANISH MARKET , BUT NOTHING WHICH THE PROVINCIAL SPANISH BANKS COULDN'T HANDLE.

ERGO , IF THE MOVEMENT OF CAPITAL BECOMES DIFFICULT- LICIT OR ILLICIT- OR THE BRITS AND GERMANS STOP INVESTING , THE DEVELOPERS WILL FEEL PAIN

.
Posted by MAN ON WATERLOO BRIDGE on August 6, 2008 7:42 AM
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To my revolutionary brother Juanjo,

Glad to hear that "All the European democracies are great friends and will not allow Spain to suffer after the unstinting and generous help they gave in building our infrastructure thus helping our companies to grow and become world players.".

But why isn't Spain a great friend of the European democracies? Why will the Spanish Treasury not take Italian Gov Eurobonds as collateral for overnight repo operations? Link attached.

link

PS Are you out there Ottar?


Posted by Dieter MA, MBA, PhD ^7, etc. on August 6, 2008 7:38 AM
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"The pain in Spain stays mainly on the plain',by god i think shes got it!again, "the pain in spain stays mainly........(curst by the English disease)
Posted by nevvy on August 6, 2008 5:47 AM
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When in 1880 to 1895 the US Steel industry had too much production and capacity, JP Morgan formed US Steel so as to stop any further expansion. After over-paying Carnegie 450 Million, he and his group got the US government to build war ships. Why? To sink them in the next war. You've got to destroy excess production. The point of my post is that Spain should bulldoze, dynamite and basically destroy all these empty buildings so that the economy can start over. This is another reason why we have periodic wars....to destroy excess production which is the curse of modern industrial methods. Read: REPORT FROM IRON MOUNTAIN which explains what happens when you don't have wars anymore like we used to. Time to attack Iran.
Posted by EVANS on August 6, 2008 4:30 AM
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Heeeeeeeeere's ...A M B R O S E !!!!

[wild cheering, floor-thumping, expectant faces, barely-contained euphoria, people fainting, pigs flying, hush descends]

Ambrose: "grim report….fresh flurry of horrendous data… plunged to a record low…….lay-offs…surge……job purge……..degenerated…..outlook darkened dramatically………worse than we all predicted…..crisis…….highly vulnerable…...further dramatic falls in bank shares……….vultures starting to circle……..covering up the true scale of the downturn.."

[manic applause, piercing wolf whistles, drawers whizzing through the air, endless ovations, mexican waves, cries of 'BRAVO', near-riots, The dead arise & appear to many]

And now...for something completely different.......DING !

Posted by Blaggarde on August 6, 2008 1:14 AM
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Lets just put a cap on this argument. We need to FORGET about that waster undemocratic state called the EU and concentrate on the UNITED KINGDOM. That means getting rid of all the waster politicians from the main political parties (yes they are all wasters) - so get on with taking your vote from them and either spoiling it or giving it ot one of the smaller parties that still remains BRITISH and true to DEMOCRACY AND LIBERTY - THat leaves you with one choice - You Do the Research.....
Posted by R McAuley on August 5, 2008 11:34 PM
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J Livesay - 100% correct - the EU is a direct threat to the democracy and economy of the UK. So vote neither Conservative, Labour, Liberal or BNP ---- think about it - there is a party which starts with U
Posted by R McAuley on August 5, 2008 11:30 PM
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juanjo - dream on (hope you haven't committed to too much overpriced unsaleable property?)
Posted by R McAuley on August 5, 2008 11:27 PM
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Keep the noise down guys - some of us are trying to get some sleep..
Posted by kurt on August 5, 2008 10:59 PM
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To Anonymous .
it is quite simple .Spain has massive hotel interests in Cuba . Repsol and other great Spanish companies are active in both Venezuela and Bolivia helping these countries to develop their resources and potential . The President is promoting Spanish interests as as the Vice President on her visit to Mexico to help Mexico develop their energy with the help of Spanish companies and expertise . All the European democracies are great friends and will not allow Spain to suffer after the unstinting and generous help they gave in building our infrastructure thus helping our companies to grow and become world players .
Posted by juanjo on August 5, 2008 9:57 PM
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hiperqualified EU inmigrant on August 5, 2008 3:29 PM says that if the UK had joined the Euro and he had had one hundred thousand Pounds, he wold have profited.

It's worth noting that this actually has nothing to do with UK Euro membership. If he had thought the Euro was going up, he could have converted his Pounds to Euros at any time. Since he didn't, I guess this is his 20-20 hindsight.

And there is a flip side to this. Five years ago a certain number of people in the UK were gloating about the Euro denominated mortgages they had obtain, with Euro-area low interest rates. Those folks now owe 25% more than the debt they originally had.

But those are issues concerning individuals. If the UK really had joined the Euro, then every item and service we export would now cost 25% more, which would certainly not help exports.

In particular, the Euro would have tended to price us out of our most valuable market - valuable because we export high-tech, not lamb chops - the US. Some people forget that the US market is valuable not merely for its size, but because selling High-tech items to the US challenges UK companies far more than exporting low-tech stuff and food to Europe ever would.

In addition to that, we would now most likely be suffering the hangover from a Euro-driven boom-and-bust, like Ireland or Spain.

This is the reason the Euro-debate never ends. People focus on the one issue that catches their eye, and don't think about other issues that tend to balance it out.
Posted by jon livesey on August 5, 2008 9:50 PM
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Gold and silver is the only real/honest money out there and be produced out of thin air... Everything is just an inflated subscription to the greater fool theory.
Posted by Nick on August 5, 2008 9:36 PM
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For Clive and Richard:

I am perfectly aware of the fact that BAA is a Spanish-owned company. I referred to it as British-run. When I say British run I mean that the majority of the management and directors are British. The point of my post was to say that Heathrow, which is Spanish-owned (Ferrovial) and essentially British-run (BAA), has had problems, but that other airports run by the same people are doing fine.

Perhaps I did not express that clearly enough.

Regards,

Alberto
Posted by alberto on August 5, 2008 9:26 PM
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Oh dear Alberto. Where do you get your information? Abbey just happens to have achieved the award for worst customer service and BAA British? Sorry, wrong again.
Posted by Clive on August 5, 2008 7:43 PM
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To Juanjo:- Then how is it that the only countries that will have anything to do with us are Cuba under Castro, Venezuela under Chavez, Bolivia under Morales? All communist dictatorships. No democracy wants to know us any more. ZP declared himself Rojo (Red) and most of his ministers and Fiscalía are too.
Posted by Anonymous, Spain on August 5, 2008 7:35 PM
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To:- Anonymousecosilivehere
I've got a basic line and 3mb/s with Telefónica (shortly to be raised to 6mb/s so they tell me) and it costs me €61 per month plus calls. You're being shafted because you live in the country.
Posted by Richard, Alicante, Spain on August 5, 2008 7:30 PM
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For Lizbeth.

Yes ZP is brilliant as he has defended and promoted Spanish interests and helped raise the image of Spain . His promotion of gay marriages,feminine rights and defence of liberty of religion are outstanding . The Alliance of Civilisations is a great step forward to understanding as is his support of a Club Med to deal better with our neighbours . Yes we are much better off than under an Anglo friendly President like Aznar who took us into Iraq .I do not work for the Government and yes I am self employed . Zp is in a different league from Blair and Brown as he defends and promotes his country's interests and uses the structures to do so .
Posted by juanjo on August 5, 2008 7:17 PM
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Alberto

Just to let you know - BAA (which runs seven UK airports including both Heathrow and Stansted) was taken over by Ferrovial in June 2006, and thus is not British as you state.

link

Perhaps doing a little research yourself before criticising others for their supposed ignorance might be in order next time?
Posted by Richard on August 5, 2008 7:05 PM
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A downturn of 34% in house building? Well, that may be the case but it is not all down to the economic downturn as detailed in the article. The sad story of building on the Costas and the lack of buyers has much to do with the dire publicity about corrupt regional government officials, local town councils and builders/developers. Every expat living here knows this and also knows that measures in the EU Parliament came too late to stop the damage. Just look at LRAU on the internet.
It is common for builders both big and small to use the deposit cash and stage payments to finance the next stage of the development or the next house down the road. Eventually it all comes off the rails. In many areas the number of tower cranes is huge and they never move from one day to the next or even month by month. They are there because plant hire companies do not have anywhere to store them if dismantled. It is a simple fact of life that much of the damage to the building industry is self inflicted by greed and blatant corruption.
As for that wonderful company Telefonica: Well, anyone saying that does obviously not live here. Basic line and campo broadband (half MB) for 73 Euros a month. Plus calls!
Anyway, I live here and it's great. You just have to bury your head in the sand a bit every now and again.
Posted by Anonymousecosilivehere on August 5, 2008 7:03 PM
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The EU having paid for most of the Spanish infrastructure; is it not now guilty of working with Spain's finance in a sort of 'give them enough rope' way.
Posted by Antony Rigby on August 5, 2008 6:32 PM
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I'm puzzled by one theme that comes through loud and clear here.

When AEP comments on economic problems in the UK and US, people can't get enough of it.

But let him comment in any way about the Euro-area, and people react with anger, as if he's attacking religion.

What that tells me is that most of the support for the Euro here is pretty emotional, not rational.
Posted by jon livesey on August 5, 2008 6:31 PM
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For Juanjo
Hello Juanjo
Are you joking?
ZP is brilliant? and we now live much better than with Aznar?? Do you work for the goverment or are you self employed?

Posted by lizbeth on August 5, 2008 6:26 PM
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What a f***ing messs, and of course it does get worse.

So, now the Spanish are in it, with us and, of course, its a property scenario that we have only yet seen the tip of

Well. a few bank bankrupcies will not hurt anyone except the timid central banks, who will shortly have their bo**ocks crushed when they find they do not have the bottom to save some big banks in trouble.

Well, serves the buggers right for being so pompous.


Posted by David on August 5, 2008 6:14 PM
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And God said to Adam - go forth and buy a house and spend your life worrying about paying for it and make the money lenders rich. Who needs a private house anyway?
Posted by One bike man on August 5, 2008 7:29 AM

AMEN - Here in Miami I rent for less than the taxes and insurance on a comparable place. Been riding the bubble like this since 2003. Reality dicates prices will have fall at least another 50% down here in Miami before the market is in line with cost to rent.
Posted by Renter for Life? on August 5, 2008 5:58 PM
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For Alberto

I stand by what I stated about Heathrow but I should have said that Barajas Airport is an example of how an airport should be managed.

I also stand by what I say about Abbey National - its service is atrocious.

Not all Spanish companies are badly managed just those mentioned by Sam in his first post. I am a customer of Scottish Power and I have no complaints about its service.

¡No sean tan delicados!
Posted by David Glazier on August 5, 2008 5:33 PM
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I felt the article a little alarmist. Spanish banks, especially Popular, are notoriously well-run and profitable.The big ones have made a successful strategic move into Latin America (displacing many American banks). I would be surprised anything like what the article described occured. I can understand why many Spaniards detest the current government, but they are not doing such a bad job economy-wise, given the circumstances. I believe countries on the periphery of Europe, like my own (Ireland) and Spain, Finland, etc. are far more growth-oriented than the core Europeans with their high taxation, high spending, overregulation and too powerful unions.
Posted by alexander anderson cfa on August 5, 2008 5:31 PM
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To Anonymous . Please be fair ,Zapatero has done brilliantly .He took our troops out of Iraq .He negotiated a no combat area of Afghanistan for the troops to do humanitarian work .He sent troops to Lebanon to bolster Spanish influence in the zone and to avoid further drafts to Afghanistan . his tactics at blocking the German EON takeover of Endesa were brilliant . His encouragement of Caja Madrid to up its share of Iberia therby blocking a BA takeover were equally excellent. His persuasion of EDF to back out of a bid for Iberdrola and the consequent take up of shares by the Spanish construction giant ACS were equally clever . The visit of his Vice President to mexico to help liberalise the Mexican petroleum industry and the cooperation of Spanish business is far from incompetent . That is just for starters .So please dont be sore if you're being outsmarted all the time.
Posted by juanjo on August 5, 2008 5:29 PM
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For David Glazier:

Try to be a little bit more objective and better informed. Ferrovial does indeed own Heathrow, which has indeed been in the news recently due to a difficult opening of the T5, but other British airports run by the BAA (which is, in any case, a British-run company) work very well. I've been to Stansted twice in the last few months and it has been very efficient. Or are they only Spanish-run when things go badly.

Santander's takeover of Abbey has been a splendid success and a very positive development for Abbey, as anyone who keeps tabs on the financial news knows. Their share of the British mortgage market has increased significantly since the takeover.

O2 is expensive and crap...? Well, I suppose you're trying to slander all Spanish controlled companies, so there was bound to be something wrong with O2. They did get the IPhone contract for Britain, ahead of Vodafone et al.

Please, objectivity.

Alberto
Posted by albert on August 5, 2008 5:03 PM
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Morgan Stanley issuing alerts is the same as an illiterate trying to teach someone else to read and write.

Posted by Tato Dulanci, Spain on August 5, 2008 5:00 PM
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To Hiperqualified EU immigrant,
And the Italians desparately need their Lira back, so that they can devalue it by 30% and become competitive again.
Posted by Pete on August 5, 2008 4:01 PM
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Think this article has the big figure wrong - ecb lending Main + LTRO = 470 BLN Euro - (www.ecb.int) a very scarey number considering some of the collateral they accept, but not to worry, the BOE is following quickly in their footsteps!
Posted by jim on August 5, 2008 3:43 PM
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Pedro Solbes, appears just as useless at his job as do M.Ps. in this country, all of them whinging and whining at there inability, to understand, that if you load somebody up with seven or eight times there ability to service there borrowing, that it will all go wrong.
Posted by Royston Amphlett Bournemouth on August 5, 2008 5:37 AM
Hello Royston. The fact is that the whole Spanish government, starting from Zapatero is incompetent and useless. They only got elected in 2004 because of the "supposed" Islamic terrorist attack which they quickly blamed on Aznar's support for bush in Iraq and in 2008 because of a whole spate of lies about the opposition.
By the way, you really should learn the difference between "there" and "their".
Posted by Anonymous, Spain on August 5, 2008 3:33 PM
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To the brits whom believe that been or not on the euro currency boils down to "we love our pound"...shocking answer (Spain loved the peseta, French the franc, etc...) Now when all EU states made the big decision to join the euro, the Brits would of got 1.8 euros per pound more or less, now if you get 1.25 consider yourself Lucky!!!. Then if I had £100K then I would have in my bank now 168k euros (plus interest) as it stands now I would have 125k euros so I've lost 57k euros for now, but when the Brit Gov finally decides that -We love our Pound!- is not good enough reason, then we will get the 1 for 1 so we will loose 68K euros per £100k...we will be poorer by 41%...But I supposed it was fine to see all Eurozone struggling to make the changes (crisis/high prices in Germany, Spain etc) and seating in our hands....well now there it goes! check out when all the EU qualify inmigrant workers of this country start going back home, because it just pays the same, who will want to be here, with the highest prices for transport, energy, food, accomodation, taxes, poor health care...etc? And worst of all: no sun!!!
Posted by hiperqualified EU inmigrant on August 5, 2008 3:29 PM
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To: Pissed off tax payer.

All you say is correct, provided that we are functioning in a real world scenario. However we are a part of Euroland, and reality and the European project are two different things. The good news is that reality will eventually prevail, the problem is that it took 72 for it the prevail in the Soviet Union. It's not a pretty picture.
Posted by Dieter MA, MBA, PhD ^7, etc. on August 5, 2008 3:26 PM
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To Dieter of the many letters after his name

Dream on , you sound like a control freak, to have a one world order is what you seem to want,what we need is each contry to dictate their own policies accordingly to their own economies, and the Europan project , which one? the one that we started off with or the monster that we are developing? they keep changing the goal posts and we don't know anymore which way we are going when I say We I mean the ordinary peasants who only contribute paying taxes , new taxes and more invented taxes EU only made life miserable for the poorer countries, but somebody somewhere is making money and gaining more power alright and have a guess as who they are

Posted by Pissed off tax payer on August 5, 2008 2:58 PM
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To Dieter of the many letters after his name

Dream on , you sound like a control freak, to have a one world order is what you seem to want,what we need is each contry to dictate their own policies accordingly to their own economies, and the Europan project , which one? the one that we started off with or the monster that we are developing? they keep changing the goal posts and we don't know anymore which way we are going when I say We I mean the ordinary peasants who only contribute paying taxes , new taxes and more invented taxes EU only made life miserable for the poorer countries, but somebody somewhere is making money and gaining more power alright and have a guess as who they are

Posted by Pissed off tax payer on August 5, 2008 2:55 PM
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To Sam,

Thank you for the following:

"The Spanish government's fiscal policy on foreign acquisitions is fair as it helps national firms expand and spread Spanish influence and prestige worldwide. If the EU are not in favour ,then its up to them to do something .Meanwhile "hay que aprovecharte". The Spanish government is only looking after its own , thats all."

There is an inherant truth in what you say. And if the British Gov would only start doing what the Gov of Spain, and France and Germany just to name a few, we British would have no cause to complain.
Posted by Dieter MA, MBA, PhD ^7, etc. on August 5, 2008 2:48 PM
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Mugger-ridge Do I sense you would rather appease Muslim radicals instead of taking the fight to them.

Do you want Iran to have a Nuke?

British foreign policy is flawed, because we are not hard enough, we need to ensure criminals and those who carry knives on the street are sent to Afghanistan within a day of being stopped on the streets of London.

In addition, any Muslim family of Taliban fighters or Muslim Brits who go to jihad against us are sent packing.

With people like you around no wonder Great Britain is in economic demise.

Posted by Purps on August 5, 2008 2:41 PM
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To Julian . Thank you for being fair . The Spanish government's pfiscal policy on foreign acquisitions is fair as it helps national firms expand and spread Spanish influence and prestige worldwide. If the EU are not in favour ,then its up to them to do something .Meanwhile "hay que aprovecharte". The Spanish government is only looking after its own , thats all.
Posted by sam on August 5, 2008 2:33 PM
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This is for David. Heathrow is a well run airport .If it were not then the authorities would step in . I was in Gatwick recently,also owned by Ferrovial,and was impressed by its new seating arrangements at security and its well trained and courteous support staff . I am sure that the British authoriteis would act against Santander and Telefonica if they were as bad as you say .Iberdrola is doing a great job since it rescued Scottish Power with the support of the Scottish Prime Minister . Please be objective .Spanish businesses are helping great britain maintain services and creating jobs . As for Gibraltar it is an anachronism and not suited to European unity .
Posted by sam on August 5, 2008 2:27 PM
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PURPS: "oil at USD85 per barrel..even if we hit IRAN"...so Britain will join ISRAE/USA by nuking IRAN...no wonder there are foreign terrorists roaming around this country. Note: We lost IRAQ (civil war)and probably AFGHANISTAN with 40 million Pushtuns on the border...why not start another pre-emptive war to help our floundering economy.
Posted by muggeridge on August 5, 2008 2:09 PM
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Sam: Santander is undoubtably a very well run bank and Telefonica is a good teelcom operator so Spain has some very good companies (as does Britain). But Ferrovail is a disaster and other Spansih banks and property companies haven´t done too well. In all countries there are good and bad. Spain´s purchasing of UK companies is justified by a generous and perhaps unfair deptreciation law on aquisitions that the EU may regulate against
Posted by Julian Smith on August 5, 2008 2:08 PM
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To Mandy,

I am trying to help solve the problems of our habitat also. I proposed to create a global monetary system that would allow a central bank, such as the ECB to enforce a prudent and coherant form of monetary discipline on the worlds inhabitants. This could be a starting point for solving other pressing problems, such as the one you are bringing to our attention. But as you can see from the below posts, there are idividuals who live in the past and will not see the light. Please refer to the exchanges between myself and one Ottar. Until we find a way to get through to these types of mentalities, we will jepordise all these supra-national types of projects.
Posted by Dieter MA, MBA, PhD ^7, etc. on August 5, 2008 1:59 PM
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This is for Sam - Heathrow Airport, owned by Ferrovial, is a disaster area and the majority of people who travel through it do so at their peril. Paris and Amsterdam are taking customers away from Heathrow. As far as Santander is concerned, the customers of Abbey National suffer the worst service of any other British bank and O2 is the most expensive and the least efficient of the mobile phone companies. And, as far as Gibraltar is concerned, the "Peñon" was ceded to Britain "in perpetuity" un the terms of the Treaty of Utrecht.
Posted by David Glazier on August 5, 2008 1:56 PM
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Dear fellow readers, ever since the economic crisis our Mainstream Media Mentors have been neglecting to warn and lecture us about the horrible global warming which is killing millions every year. Shouldn't we remind our Media Masters to re-prioritise and continue to focus on the terrible plague of man-made global warming?
Posted by Mandy Torrell on August 5, 2008 1:26 PM
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Dear Mr Barnett,

Please , the Spanish are not greedy and corrupt as you say ,they are just Latins ,that's all .It is a different culture where if you dont take advantage of the situation then you're a tonto or sin cojones . Santander is a brilliant bank superbly led by Sr. Botin ,a financial genius and Ferrovial is showing you brits how to run airports as is telefonica with its great success of O2 and bailing out the disaster of the Dome . Spain is a true friend to GB as it still tolerates the colony at Gibraltar .
Posted by sam on August 5, 2008 1:07 PM
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To Ottar:

Think of all the good we could do in Africa.

PS Happy now Richard?
Posted by Dieter MA, MBA, PhD, PhD, PhD,PhD,PhD,PhD, etc. on August 5, 2008 12:54 PM
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Monetary Union will never work without both economic and political union which will never happen.
Posted by cww on August 5, 2008 12:53 PM
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Cry me a river, Dieter,

sorting out the economies of all the world to adhere to ECB rules is simply so unrealistic that the argument has no place in a debate about Spain, Britain and Europe.

Posted by ottar bighand johansen on August 5, 2008 12:40 PM
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To; Richard Avon

It's a German thing.
Posted by Dieter MA, MBA, PhD, PhD, PhD,PhD,PhD,PhD, ect. on August 5, 2008 12:27 PM
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To: ottar bighand johansen

"That I contest that the largest trading bloc in the world should join forces in a common currency does not equate with the opinion that the world's entire population should be brought in:

Why shouldn't the entire world population enjoy this privilege?
Posted by Dieter MA, MBA, PhD, PhD, PhD,PhD,PhD,PhD, ect. on August 5, 2008 12:14 PM
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I am amused that, with all those letters after his name Dieter can't spell etc!!!!
Posted by Richard Avon on August 5, 2008 12:06 PM
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Give me a break, Dieter,

joining the Euro is a privilege, not a right. The UK has that privilege, but has chosen not to utilize it, to the detriment of its population.

That I contest that the largest trading bloc in the world should join forces in a common currency does not equate with the opinion that the world's entire population should be brought in.
Posted by ottar bighand johansen on August 5, 2008 11:51 AM
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I now think we should have joined the euro! It has appreciated in value whereas sterling has declined. Mr Darling has debunked Brown's notion of prudence.
Posted by A monk of great renown on August 5, 2008 11:30 AM
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It is time to sell the Euro hard; I see 1.25 by year-end and eurogbp at 0.73 making sterling 1.7100. Throughout 2009 the dollar will strengthen further to 0.9500 to the Euro and cable to 1.4850

There are chances in life one must take and this is one of them. The other is to take the banks out at their own game, they need to shrink their balance sheets and sell assets, and this will lead to great profits and to lower inflation.

The ECB and BOE models are fatally flawed, the US has pushed its dollar down to reduce the deficits, this has worked, now we need China and India to get real and adjust their currencies by 30% in a revaluation that will limit their own internal inflation rates and bring normality to the global system.

You heard it here first.

By the way Oil will be $85 per bbl at year end even if we hit Iran.

Posted by Purps. on August 5, 2008 11:22 AM
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They dont come more greedy and corrupt than the Spanish and now it is all coming home to roost,HA HA HA HA HA HA HO HO HO HO HO HO HO HA HA HA HA I love it.
Posted by Mr Barnett on August 5, 2008 11:18 AM
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Hey mat, I am absolutely horrified at the plight of your $8 million dollar landlord. I would flee the country too if Scotland Yard was after me. I mean, what's the point of an armed stand-off if you know your guilty?

Surely, an honest man can make a living.
Posted by Hordac the Refuser on August 5, 2008 10:56 AM
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To ottar bighand johansen:

Why don't we create a new currency that encompasses the whole world. We can call it the Globo, and we make you the godfather. But why stop there, lets create a Universo, and all of the Universes problems will be solved. It's just that simple.
Posted by Dieter MA, MBA, PhD, PhD, PhD,PhD,PhD,PhD, ect. on August 5, 2008 10:53 AM
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You guys should be looking at home, british banks have been borrowing from the BOE and ECB.
If you think Spain is bad, wait till the economy pops here, and the foreign landlords start to return back too their homelands. I know one who had a 8 million property portfolio and couldnt keep up with the payments, left the uk for france.
Posted by mat on August 5, 2008 10:42 AM
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Posted by Bertie Poole on August 5, 2008 9:15 AM

It would be reasonable to surmise Santander bough A&L; for the same reason JPMorgan bought Beat Stearns.
Allowing it to fail, as it would have, would have shined a light in to dark places Santander would rather no one looked.
Lets face it, it was the quickest bank purchase in quite some time.

Posted by Richard on August 5, 2008 9:40 AM
The Euro has yet to face a real test, it is not the first currency union in Europe, it is not the first to last 10 years, they have all fallen apart whenever things got a little dicey. If the Euro survives the next 10 years, then we can start viewing it as lasting.


"Yesterday the Ministry of Labour announced that no more unemployment statistics will be published."

Its that bad they cant even fudge them anymore? Wow
Posted by DominicJ on August 5, 2008 10:41 AM
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Just you wait, David!

I predict the fall of commodities and oil prices will actually be good for the economy, because people who aren't tools of the Martians will have money to spend after food and fuel bills.

Also, increased radiation from space is activating long dormant nucleotides within our genes. 12/21/12!
Posted by Hordac the Refuser on August 5, 2008 10:41 AM
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in the whole recent buy-to-let saga, I always wondered where these thousands of hungy renters were supposed to come from... arriving like mushrooms after a rainy night?
Posted by raoul on August 5, 2008 10:40 AM
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I suppose Ambrose that the Northern Rock débâcle is Mr Solbes' fault as well? Santander must be really screwed if it's going about buying British building societies. The reality is that, rather than the euro collapsing, it is more likely that Britain will join the euro.
As someone who travels throughout the continent on business regularly, I actually get annoyed when I have to go to non-eurozone countries. Whatever about banana directives, the euro is the best thing to come out of the EU (asides from the freedom of movement and labour).
Posted by Hooray Euro on August 5, 2008 10:40 AM
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I bought a house in Spain 6 years ago for £12,000. 5 Bed 3 storey, ready to move in. Fantastic. Perfect little bolt hole for when the immigrants put so much pressure on local services, they collapse.

Now it's worth £110,000 because they are building an international airport 5 miles up the road.

However, on paper I only paid about £7,500 for the house, the rest went in cash, tax free to the owner. This is standard practise and totally condoned by both the solicitor and town hall officials.
Posted by Part_time_ex_pat on August 5, 2008 10:27 AM
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I don't hear Zanulabour banging on about black Wednesday anymore because as we now see that was GOLDEN WEDNESDAY and I suggest, Gordon, it should be a national holiday day in celebration of the best british day since the end of the 2WW up-until he refused a vote of the EU treaty of course
Posted by mystickmeg on August 5, 2008 10:25 AM
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Hey DominicJ,

there is no deflationary depression in Spain, that is a scenario, not a fact.

Because of "No-Nonsense" Trichet's impressive display of cojones, the Euro area will get a boost as commodity prices normalize, and this will cushion the Spanish downturn.

Because Trichet would have no nonsense, the parts of the Spanish economy that is doing well, was left undisturbed. Let a builder or two go broke, that's fine. But the solar industry, Telefonica and Santander seem to be doing fine.

Because the BOE both dishes out and happily has nonsense, interest rates were slashed. That did not help home owners, but it let the currency drop so banks and assets fell prey to foreign hands. The notion that Spain would somehow be better of with a battered peseta is starting to go from unlikely to inconceivable.

The currency is one less thing to think about in times of trouble. For once it protects prudent savers' wealth, for the better of long time incentives, but it also importantly allows Spanish politicians to tell it like it is. They're in dire straits and they can say so, because it would puncture their currency. This is a stark contrast to the UK where the only option of the Treasury is wishful thinking and fairy tales, because an honest assessment of conditions would endanger the fragile Pound. Just remember how that minister dropped a paper with a real assessment of the housing market, causing lots of agony.
Posted by ottar bighand johansen on August 5, 2008 10:25 AM
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"The vultures are starting to circle around the hapless Mr Solbes. Critics are calling for his head, accusing him of covering up the true scale of the downturn before the re-election of the Socialists in March. This seems unfair."

But why is it unfair? It is exactly what took place. Solbes has proved himself as completely useless and should do the honourable thing and resign immediately.

But you need to understand these Marxists who "rule" us. They do not give up easily. However, in the end the economic disaster that Spain is in will cause their downfall, and the fall will be deep and painful for them, as it should be.

Yesterday the Ministry of Labour announced that no more unemployment statistics will be published. It is an insult to the vast minority of Spaniards who understand economics. It shows that the Marxists are terrified of losing power over us - and so they should be.

Once again, thank you Mr Evans-Pritchard for providing me the opportunity of receiving transparent economic analysis on Spain which I cannot get here.
Posted by Antonio Pérez (Madrid) on August 5, 2008 10:23 AM
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Posted by William Boyd on August 5, 2008 4:39 AM

About Greenspan's comments. All you need is to feel the fear in his comments, but he is too late.

The global deflationary crash rolls relentlessly forward. The fall in commodities is now in progress anticipating the awesome demand destruction ahead as the BRICS investment boom runs into the thin air of Western consumer demand growth it was meant to service, but which is now contracting fast.

Meanwhile, as the fall in commodities turns real time western headline CPI inflation rates negative as I write, the western central banks will almost certainly persevere too long with interest rates based on looking backwards at year on year inflation.

Thus with western real interest rates in real time set at levels always far behind the real time deflationary curve, disaster engulfs the world.

All that disguises the onset of this disaster is the scale of the BRICS investment boom, which has been keeping the global blue chip investment goods earnings afloat quite nicely thank you,. When that ends, global share prices crash, following property and commodities into the destruction of banking capital and collateral, and making the credit crisis even more severe.

People are taking the fall in oil and other commodities as a positive sign, and it would be if the central banks reacted quickly enough, but they won’t, and so the fall in oil prices is merely part of the capitulation of the world economy.

Posted by David Goldsby on August 5, 2008 10:16 AM
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muggeridge, it's not the model, it's the criminals who took advantage of lack oversight and drawn-down enforcement.

Step by step they pulled back the regulations. What was once a financial system that was the envy of the world has now become the tool of an alien species.
Posted by Hordac the Refuser on August 5, 2008 10:15 AM
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Russell,

You twat! "Deserted" their own countries.....

I am critical of the Spanish economy, but it is a great place to live...

There is a point somewhere there that all the UK oldies living here cannot dump on the Spanish health system for ever and a day, and that all their contributions to the UK system should somehow move on down south. And I think once you have paid into a system the UK govt. cannot simply just write you off after a number of years.. Or screw you with their fees when you try and get your Spanish born kids British passports...
Posted by David Madrid on August 5, 2008 10:14 AM
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Who in their right mind listens to any American bank especially Morgan Stanley which not so long ago had to be rescued by the Chinese government!
Of course Ambrose has two primary aims in his financial ramblings:
1. He wants us to believe that financial excess primarily exists outside the Anglosaxon world. In fact it originated and is therefore worst in the Anglosaxon countries.
2. He loves to make us believe that the Euro is a disaster. In fact the Euro has proven to be infinitely more stable than the US Dollar and Sterling.
Get off your high hobby horse and write balanced and conherent articles. I am sure you can!
Posted by Mike A on August 5, 2008 10:12 AM
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Supporters of the Euro and the EU project who criticize AEP are grossly mistaken.

The fact is Spain has problems as do the Anglos all reported by AEP.Why do some comments confuse the reporting of facts as a personal attack? The idea that the European project is for the building of a caring state is taking the mick you got to be joking.
Posted by Mark on August 5, 2008 10:12 AM
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Do I Have any sympathy for British or other Europeans who deserted their own home countries who fed and clothed them for so long? Don't think so .And it's all down hill from now on.
Posted by Russell on August 5, 2008 9:57 AM
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Now we can see the real advantages of a single European currency for its membership. The vultures would have destroyed the Spanish peseta if it had been floating alone in the present storm. Lets hope our little Pound will survive as it comes under fire with our economy going into global recession. All it will take is a stronger US dollar and the FX dam will break. UK interest rates will be much higher soon in order to stop the rot. The question is how much money has been lost on American mortgage debt by our banks....any guesses?
Posted by muggeridge on August 5, 2008 9:48 AM
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All written in your article is too true .
When Zapatero was elected in 2004 for the first time I already told my wife that this (nice and naive ZP )guy will be blamed for the burstng of the property bubble . How could I know : well ,back in 2003 some estate agent told me that my house was worth about 3 times the price I had paid for 10 years earlier .
However the Spanish government can and should be blamed for it's naivity
about the situation ..and till today they try to keep up their stupid image of naivity .
To be fai the current situation ,nevertheless , has its roots in very low interest rates and reckless (suicidal) financial insitutions which began already under Aznar's government . Spain's problems were already there but only became apparent when the worldwide credit crisis unfolded . One last thought : shouldn't the financial "überexecutives" with their fantastic lies (aren't they deliberately invented to seduce dumb people ) be blamed for all the current mess ?
I feel that we should seriously rethink the free markets theories as it is clear that current capitalistic model has to be rescued from itself .
Posted by A German in Spain on August 5, 2008 9:47 AM
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Ambrose

Gert is correct that your non stop Euro bashing is getting a little tedious. The Euro is a fact now and won't just disappear because a few Spanish houses have dodgy mortgages.

But Dieter the Euro train may well be leaving the station Choo Choo. But do you know who is driving it?

That is why we will not come aboard. The nation states of Europe may be democracies but the EU is the most anti democratic organisation ever constructed.

I suspect that your piece is ironic. If so congratulations you could almost be a Brit.
Posted by Richard on August 5, 2008 9:40 AM
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Spain could raise wages to increase domestic savings.

But that would drive bond prices lower. The debt market is a zero-sum game: if workers are not in debt, their is no profit to be made on their debt.

No, some other mechanism must be found. However, none come to mind.

For instance, I had a long look at selling Englishmen in popsicle form. To whit, if global warming melts the north pole, then the great conveyor may stop. This would allow America to raise much needed alien capital as a distribution point from existing facilities in Area 51.

England would become a kind of "frozen foods" section in the new global supermarket. Of human brains. And female ovaries.

But none of these dreams will come true unless taxes are raised and wages are lowered - and dare I say it? Somebody very badly needs to vote.
Posted by Hordac the Refuser on August 5, 2008 9:38 AM
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After the Spanish banks suffer further big share price falls, I wonder what the shareholders of Alliance & Leicester will think about the deal with Santander - a double whammy coming up?
Posted by Cheshire Stu on August 5, 2008 9:22 AM
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Posted by ottar bighand johansen on August 5, 2008 9:00 AM

As has been said many times before, there will not be a run on the spanish currency, because there isnt one.
There will however be a run on Spanish bonds and any other asset within the Spanish borders.

How exactly do you think Spain is going to deal with a deflatonary depression and huge debts in Euro's.
Theres a long list of countryies that borrowed dollars and were ruined when they could no longer repay those debts.
Can you explain why spain wont join them?
Posted by DominicJ on August 5, 2008 9:19 AM
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I am astonished how terminal angloamerican capitalism critizices everybody but itself; Yes , spanish banks are in trouble, but at least their losses can be accounted for, and at long term recovered. Whilts angloamerican problem is different, its all the derivatives which are worth nothing.If they wirte all the losses off, they are bankrupt¡¡¡
Kind Regards
Joseph Barcelona
Posted by joseph on August 5, 2008 9:18 AM
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I find it strange that Santander is doing so well. They are performing like a boom period is only beginning. Why is it that they seem to be the only bank in the world that is doing well and is buying up other banks?
Posted by Bertie Poole on August 5, 2008 9:15 AM
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Now if Real Madrid were to go bust I'd be a happy bunny (as corrupt an institution as you'll ever find!)
Posted by Big Nick - RAC, AA, BMX and Cycling proficiency medal winner on August 5, 2008 9:13 AM
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Who bails out the Spanish Banks?

Does anyone know? I don't.

The Germans?

The ERM mechanism has been replaced by the Euro. (This is not really news)

It used to be fun when there were lots of currencies in Europe and you could find a cheap holiday somewhere.

Bring back the five economic tests, they made sense. (I think)


Posted by Galloping Inflation on August 5, 2008 9:10 AM
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Who in their right mind listens to any American bank especially Morgan Stanley which not so long ago had to be rescued by the Chinese government!
Of course Ambrose has two primary aims in his financial ramblings:
1. He wants us to believe that financial excess primarily exists outside the Anglosaxon world. In fact it originated and is therefore worst in the Anglosaxon countries.
2. He loves to make us believe that the Euro is a disaster. In fact the Euro has proven to be infinitely more stable than the US Dollar and Sterling.
Get off your high hobby horse and write balanced and conherent articles. I am sure you can!
Posted by Mike A on August 5, 2008 9:05 AM
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Cheers, Ambrose,

remember that unlike in the 1990s, there will be no run on the Spanish currency, because it will be supported by other Euroland areas not in trouble.

UK might see a replay of the ERM humiliation, but not Spain.
Posted by ottar bighand johansen on August 5, 2008 9:00 AM
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Derwentwater,

it was John D. Rockefeller and the shoe-shine boy (sorry, please don't be offended, I'm a pedant, but (i) do like people to be correctly informed, and (ii) hate perpetuation of errors (so can't wait for NuLab to go)).

Posted by Dr Ralph, Oxford, U.K. on August 5, 2008 8:52 AM
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So a socialist politician lied about the economy, about the state of public finances, about the soundness of the crack up boom economic policies, about the excessive expenditure, etc... And of course this socialist politician did it to hold on to power, to maintain the nepotism, and encourage the populace to indulge their concentration in circus like nonsense....yes...it all sounds frighteningly familiar....Solbes' boss Zapatero is fully involved in a campaign to turn Spain into the Liberal Basketcase (and general sick man of Europe)...and he blames the economic mess on outside factors...throwing insults to Jean Claud Trichet, Pope Benedict, the Arabs, etc...
Posted by Deco on August 5, 2008 8:52 AM
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As an Estate Agents in Spain we saw this coming towards the end of 2006. Anyone active in the market could not have missed the signs, at a local market level mortgages were being offered to youg couples at unreal repayment levels, land prices were being snapped up at 40% above real value forcing final house prices up above possible repayment possibilities. Never mind the holiday home market, many young Spanish couples are now struggling hard to meet repayments on their mortgages, parents are now helping out but with unemployment on the rise this help is also under threat. Who do the Spanards blame? The Euro, the ECB and the current socialist Government, who's lies on the situation before the last general election are now exposed. With worst to come we can expect a backlash against the current Government and indeed the EU politicians in general, whose distance from it's citizens beggars belief.
Posted by Lionel on August 5, 2008 8:46 AM
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Ambrose,you just dont get it . Spain is the kand of creative accounting . Every property sale has a part of "black money " .it is normal for employees to be topped up each money in cash . Rental agrements work the same way . House valuations are inflated .Mortgages are granted on an understanding that not all the income of the applicant is declared . When a 1000€ a month is a good wage then how can banks give mortgages of 200000€? Loans and tax breaks are used so that Spanish companies can buy abroad thereby getting assets and cash flow . It is another culture and Mr Solbes is really surprised as he knows nothing about the real world anyway like his President who has gone straight from University into politics and didnt even know the proce of a coffee when asked . Ambrose Espain ees different
Posted by sam on August 5, 2008 8:43 AM
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Pedro Solbes said in an interviw in El Pais prior to last year´s election, that he would retire and not go into any form of business career - as that was something to be left for "professionals". He is the only politician I have ever heard of who does not think that they could run a big Company successfuly because he does not have the skill set. Other politicians may be deluded, but at least they "get it" that running a countries economy does indeed have many of the same challenges as running a large Company.

p.s. well done Ambrose, you don´t try and paint a face on a pig!
Posted by David Madrid on August 5, 2008 8:33 AM
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Will the UK be any different? Northern Rock has just posted a $1.2bn loss in H1 today. A full scale financial crisis and market crash is just around the corner. Buy gold and silver for protection, see:
link
Posted by Peter on August 5, 2008 8:26 AM
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To the Spanish government: Just copy the Major-Lilly government, and especially those masters of lies and deception, the Blair-Brown-Campbell government and RECLASSIFY all those politically embarassing half million newly unemployed builders as sick and incapacitated.

They have the odd back, neck and knee aches (spondylosis) and are a bit down (depression, anxiety and agrophobia) with all this bother.

The corrupt doctors, now well used coining-it on the public teat, will provide the majic diagnoses --they know who pays them! Problem solved!
Posted by Ollamh Fodhla, Northumberland on August 5, 2008 8:14 AM
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An owned home is a dream many people have. In Spain many homes pass down through families - but the tax regime is fairly punitive in property inheritance. In cities a great many people surely rent their homes - unable to get into ownership.

Spec-built property in many regions has been for the same foreign buyers whose deeper pockets have hitherto inflated house prices beyond the reach of locals.

Cultures seem to have different attitudes to rent Vs buy - presumably based on the comparative cost, ease of access to mortgages etc. At the moment there is a mortgage famine in Spain, banks will make you borrow more than you ask for and place the surplus cushion of funds (equivalent to several years payments) in a term deposit of years which cannot be broken. They also lend a relatively low amount of valuation - 70% would not be an untypical ceiling.

Makes 125% at Northern Rock look a bit ridiculous? 100%+ mortgages abounded in the UK until recently. And we are worried about Spain?
Posted by simon coulter on August 5, 2008 8:09 AM
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Mr Evans-Pritchard,

You are just a mouthpiece for the Anglo-American financial interests, whether you know it or not.

You are an absolute intellectual dwarf on monetary and financial issues.

Keep on bashing the Euro like you always do, until in the long term, the UK will ultimately hide itself safely under the umbrella of the European Monetary System.

Kind regards,
Posted by Gert Bollen on August 5, 2008 7:59 AM
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Ambrose,

You make me sooooooooooooooooo mad. You hate the European project. You always hated the European project. You will always hate the European project. Can’t you see that you are ruining the only chance that this planet has of creating a caring, feeling, earth friendly economic world order? And look at the effort exerted to date. Our European Communications/Propaganda Ministry is doing a heroic job of keeping the emphasis on the failed, broken down Anglo/American model. Just tune into any broadcast of CNBC Europe. All our embedded reporters talk about is the broken economic model that you are implicitly promoting. They hardly ever mention Europe. You think that his is coincidental? We Europeans are also working closely with other governments that have a long tradition in representative democracies. Just to give you two examples. The Russians are pulling their load by supplying our Continental comrades with energy. The Russians are even buying Italian Eurobonds, debt that even the Spaniards won’t buy. The Chinese are also pulling their load by buying vast amount of the Euro currency. The Euro doesn’t even have a government that can guarantee its value. Surely you see the investment being made and the effort that is being exerted to this cause. And you want to ruin all this? Come on Ambrose. Jump on board the Euro land Express for the big win. It is still not too late. But do it quickly, since the train is leaving the station. Chooo, Chooo.

Dieter MA, MBA, PhD, PhD,PhD,PhD,PhD, ect

Posted by Dieter MA, MBA, PhD, PhD, PhD,PhD,PhD,PhD, ect. on August 5, 2008 7:55 AM
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And God said to Adam - go forth and buy a house and spend your life worrying about paying for it and make the money lenders rich. Who needs a private house anyway?
Posted by One bike man on August 5, 2008 7:29 AM
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Perhaps this bleak news will put an end to the overseas property porn shows on UK television. There is always a silver lining.
Posted by James on August 5, 2008 6:28 AM
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Amongst your list of Spanish Banks no mention of Santander. Aren't they supposed to be bucking the trend ??? -- as I was reading when they bought out Abbey & A & L.
Posted by Clive on August 5, 2008 6:08 AM
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UK rely on Italy for footie success but Spain being great at many sports and so UK should have gone Spain to emulate success which we need badly.
UK going African cricket but Spain do not play.
Real crap in UK as Professionalism runs riot and poor amateurs get nothing after being mugged by bad coaches and Public Relations teams .
Stuff of your sort of economics!
Posted by Dr MIBarton MA MBA PhD on August 5, 2008 5:52 AM
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Ambrose quotes Finance minister Pedro Solbes comments to 'El Pais':

"The economic situation is worse than we all predicted. We thought it would happen slowly but instead it has hit fast," "What was the state supposed to do? Stop people building houses? That wouldn't be reasonable. Tell the banks who they can lend money too? We couldn't do that either. We warned that building 800,000 homes a year was not sustainable: and that granting mortgages for 40 years was folly, but there are certain things the government cannot prohibit."

Well, the reality is that someone, somewhere, has 'told' the Spanish to suspend reality and act recklessly, have they not? And who might 'they' be? Non-Government Organizations? The Media? The World Bank? George W. Bush? Dubai Investments? A bunch of criminals wishing to launder their ill-gotten gains through Spanish property developments?

Look, if the Spanish government truly feels powerless to stop their Spanish lemmings from running over the edge, then what are they in government for? Why are they being voted? Why should anyone listen to any western government minister today? Isn't it already obvious that real power lies behind the scenes? Sounds like a conspiracy theory, but when the facts are studied on their merits, the theory suddenly looks very much like conspiracy fact. If you want a real conspiracy theory then all you have to do is believe the official version of events invented to describe 9-11. Now that's what I call a REAL conspiracy theory!
Posted by Errol Flynn on August 5, 2008 5:44 AM
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Particularly unpleasant reading.
Pedro Solbes, appears just as useless at his job as do M.Ps. in this country, all of them whinging and whining at there inability, to understand, that if you load somebody up with seven or eight times there ability to service there borrowing, that it will all go wrong.
Posted by Royston Amphlett Bournemouth on August 5, 2008 5:37 AM
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Further to my last (and honest no more today): Ambrose when you come to do your piece (as you surely will with alacrity) about Alan Greenspsan's FT comment today could you explain it a little bit first? There's a dear.

AG's comment ends thus:

"The danger is that some governments, bedevilled by emerging inflationary forces, will endeavour to reassert their grip on economic affairs. If that becomes widespread, globalisation could reverse – at awesome cost."

which is right up your street OK but just that I can't quite make out too well the directions that get us there.

Apparently all this disaster is our fault for not letting the banks get on quietly with inventing the global economy without being interfered with every time we run into a little glitch like not having any more money worth speaking of any more or that sort of thing? Something like that anyway best I can make of it.

Correct me if I'm wrong.
Posted by William Boyd on August 5, 2008 4:39 AM
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subprime deja vu? so it really does take almost a year before europe feels the hit from the USA.

just a thought;
"For now, smaller Spanish banks are getting by on funding from the European Central Bank, in many cases issuing mortgage bonds with the express purpose of using them to secure loans from Frankfurt."

in what way does that not replicate what the FED has done in the last year? If the problem is the same, replicate the same non-solution solution?
Posted by J Y on August 5, 2008 4:18 AM
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Morgan Stanley are of course ideally placed to write a report on shakey banks with dwindling capital reserves, misreading of the markets, appalling investment decisions and the huge losses that would naturally be the result.

Posted by rick on August 5, 2008 3:21 AM
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Ho-hum 1 Morgan Stanley 2 Ambrose ...

Interesting though that the Spanish banking travails in this case apparently isn't the result of sub-prime woes.

Ambrose lays the blame on Spain's lax monetary policy. Yet in recent pieces he has been trumpeting alarm about our obsession with inflation targets, both globally and at home.
Posted by William Boyd on August 5, 2008 2:54 AM
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About two years ago, an Irish bartender in Dingle told me his wife gave up her job and was managing their three investment condos in Spain. I smiled, finished by beer, and later called my agent in Spain to sell my place on the Spanish coast. Something akin to Joe Kennedy getting a great stock tip from his shoe shine boy back in 1929.
Posted by Derwentwater on August 5, 2008 2:29 AM
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Not so much of "what would Jesus do" but what would Franco do? Of course it was not Mr Solbes & his many advisers at large who will admit to incompetence (or failure in their fiduciary duties), after all they were the dummy officers on duty who watched the mayhem. Anyway they and the home owners basically lose theirs. Is it "I am all right Jack in Spanish (you may substitute other languages / dialects here)". A good start would be for the home owners to initiate a class action suit against the incompetent officials such as Franco may have considered.
Posted by douglas forteath on August 5, 2008 1:48 AM
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Any good news to report in the foreseeable future, Ambrose?

I thought not.....

Posted by J Jenkins on August 5, 2008 1:26 AM
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The bulk of the mortgages are of the flexible or better adjustable rate type. If the inflation succeeds in pushing up interest rates again, problsm would arise quicker than expected. Spain has already received a Gold Medal for Fractional Reserve Banking and misallocation of funds. Additionally, after the conversion to the Euro, the price hike for Spain has been maximized hereby killing the Tourism goose with the golden eggs.
Posted by francis schutte on August 4, 2008 11:57 PM
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