If PIIGS are being slaughtered, what's happening to the hogs?

[c1ue]

http://www.emerginvest.com/GlobalEco..._In_Spain.html

To put this in perspective, there are roughly 14M households in Spain...

http://www.ine.es/en/prodyser/pubweb...gs36-42_en.pdf

Three Million Unsold Properties In Spain?

by Global Economy Matters - Spain Economy Matters
Posted on Sep 21, 2009

Yes, three million. That was the conclusion reached in the 2009 annual report on the Spanish property market prepared by Madrid-based real estate analysts R. R. de Acuņa & Asociados. The report is described by Sunday Times Spanish Property Doctor columnist Mark Stucklin as one of the most influential annual reports on the sector, so the conclusions are hardly to be sneezed at, indeed the assumptions made in the calculations appear on the surface to be entirely plausible. In fact, having read the summary of the report in this article here, Variant Perception's Jonthan Tepper wrote to me to ask whether I thought we were being "dire enough". Yep. Sufficient unto the day is the direness thereof.

According to the estimates of R. R. de Acuņa & Asociados - as outlined in the Expansion article - there are currently 1.67 millon flats and houses on the market and looking for a buyer in Spain. To this number need to be added the 327,350 properties under construction but still unfinished, together with the 1.098 millon for which planning permision has been granted and which now have two years - by law - to be completed. No half measures here. Whatsmore, the 1.098 million with planning permission have already been allocated a credit line of 52.947 billion euros by the Spanish banking sector. So adding everything up between them Spanish estate agents, banks, savings banks and private investors are now holding a grand total of something like 3.1 million properties, all of them looking for that ever so elusive buyer.

Another interesting conclusion is that 75% of existing builders will simply go out of business in the next five years. Mark Stucklin - on his Spanish property buff blog - gives us what he calls a a "bulleted summary" of the main points in the report. Personally I would only add two further points of my own.

Firstly the estimate of 25% unemployment by the end of next year contained in the report may well be on the low side, especially if the Spanish government is running out of funding for the stimulus programmes. Spanish INEM employment department officials have already leaked estimates that if the Plan E type projects are not renewed, then we could see something like 700,000 additional unemployed in October and November of this year alone. If these warnings turn out to be realistic then my feeling is that we will hit 25% unemployment around Easter, and then start heading up towards 30%. We should break through the 30% level around the turn of 2010/11 or by the spring of 2011, depending on a lot of factors which are still hard to see at this point. And where will we stop? No idea at all, since this simply depends on when the Spanish citizenry decide they have had enough and a package of emergency measures are put in place. It is hard, given the way the eurosystem works, to see how a "short sharp shock" may be administered, but something of the kind will be needed, or the patient will simply arrive moribund on the operating table.

My second observation is merely anecdotal, but the Acuņa & Asociados report places a lot of emphasis on the coastal situation, which has, to some extent, already been "factored in" by most participants, however quite by chance I have talked with a number of people in recent days who have stressed with me just how serious the situation is in the satellite towns around Madrid, built as they have been for Ecuadorians who never arrived, or Romanians who have already left. I think this element is yet awaiting a proper accounting, and the cost is unlikely to be small.

[globaleconomicollaps]

Re: If PIIGS are being slaughtered, what's happening to the hogs?

http://www.telegraph.co.uk/finance/e...epression.html


Spain tips into depression
Spain is sliding into a full-blown economic depression with unemployment approaching levels not seen since the Second Republic of the 1930s and little chance of recovery until well into the next decade, according to a clutch of reports over recent days.


By Ambrose Evans-Pritchard
Published: 10:28PM BST 24 Sep 2009


Two Miura fighting bulls are silhouetted against the sky at the Miura ranch near Lora del Rio, southern Spain
Bull run is over: Spain is sliding into a full-blown economic depression akin to that seen in the 1930s

The Madrid research group RR de Acuņa & Asociados said the collapse of Spain's building industry will cause the economy to contract for the next three years, with a peak to trough loss of over 11pc of GDP. The grim forecast is starkly at odds with claims by premier Jose Luis Zapatero, who still says Spain's recession will be milder than elsewhere in Europe.

RR de Acuņa said the overhang of unsold properties on the market, or still being built, has reached 1,623,000 . This dwarfs annual demand of 218,000, and will take six or seven years to clear. The group said Spain's unemployment will peak at around 25pc, comparable to the worst chapter of the Great Depression.

Spanish workers typically receive 50pc to 60pc of their former pay for eighteen months after losing their job. Then the guillotine falls. Spain's parliament has rushed through a law guaranteeing €420 a month for long-term unemployed, but this will not prevent a social crisis if the slump drags on.

Separately, UBS said unemployment will reach 4.8m and may go as high as 5.4m if the job purge in the service sector gathers pace. There is the growing risk of a "Lost Decade" akin to Japan's malaise after the Nikkei bubble.

Roberto Ruiz, the bank's Spain strategist, said salaries must fall by 10pc in real terms to regain lost competitiveness, replicating the sort of wage squeeze seen in Germany after reunification.

There is no sign yet that either Spanish trade unions or the Zapatero government are ready for such draconian measures. Talks between the unions and Spain's industry federation (CEOE) broke down in acrimony in July.

Mr Ruiz said the construction sector will shrink from 18pc of GDP at the peak of the boom to around 5pc, making it unlikely that there will be any significant recovery before 2012. Even then growth will be "slow, weak, and fragile".

The Spanish government can do little to cushion the downturn. "The room for manouvre in fiscal policy has been exhausted," said Mr Ruiz.

The rocketing cost of jobless benefits has added 3pc of GDP to the budget deficit. Mr Zapatero has ordered all ministries to cut 8pc of discretionary spending to help plug the gap left by collapsing tax revenues. The axe is likely to fall on research and big projects such as high-speed railways.

The root cause of Spain's trouble is that it joined monetary union before its economy was ready. EMU halved Spanish interest rates almost overnight. Real rates were minus 2pc for much of this decade. Combined private and corporate debt reached 230pc of GDP, funded by French and German savings.

The credit boom masked a steady decline in productivity over the last decade. Spain's unit labour costs have risen by about 30pc compared to Germany.

The Bank of Spain made heroic efforts to counter the effects of the bubble by forcing banks to put aside extra reserves, known as dynamic provisioning, but the sheer scale of the problem has washed over the defences.

Spain no longer has the escape valve of devaluation to claw back market share. It cannot resort to emergency monetary stimulus – as Switzerland, Britain, the US, and Japan are doing to prevent the onset of debt deflation. Prices are already falling at a rate of 1.2pc.

Jamie Dannhauser from Lombard Street Research said Spain is bearing the full brunt of the European Central Bank's restrictive monetary policy, which has caused private sector credit in the eurozone to shrink over the last six months.

The latest ECB data shows that 60pc of Spanish firms have seen access to credit fall so far this year. Most say they have been denied their full request for loans or credit lines.

Mr Dannhauser said Spain faces the same sort of boom-bust headache as Britain. The big difference is that Spain cannot let the exchange rate take the strain. "It is going to be very hard for them to sort this out in a currency union."

For the time being, an odd calm prevails across the Iberian peninsular. There are no street riots, even though youth unemployment has reached 38pc. It is hard to imagine anything like the bloody uprising by Asturian miners in 1934, the last time so many people were without jobs.

Local communities have started to issue scrip currency known as "moneda social", based on reflation experiments tried by Austrian cantons in 1932 and more recently by Argentina. Yet few blame the crisis on the effects of the euro. There is a near total backing for EMU, in contrast to France and Germany where a small but vocal minority has never accepted the wisdom of Europe's one-size-fits-all system.

Membership of the EU and the euro is inextracably linked in Spain's collective mind to the country's re-emergence as a modern, dynamic European power after the stultifying isolation of the Franco dictatorship. It would take a major trauma to test that bond.