The income tax filing season for the 2010 tax year, which began on April 4 and ends June 30, will be the last in which the vast majority of Spanish homeowners will be able to write off on their tax returns 15 percent of the interest and capital they pay on their mortgages up to a cap of €9,000. As of this year, only homeowners earning less than €17,000 per year will be able to benefit from the full extent of the tax break, while those earning up to €24,000 will find that the amount they can deduct has been progressively capped at much lower levels than before. Higher income earners will be able to deduct nothing. More than a third of tax payers will no longer benefit from the tax … [Read more...] about Spanish home prices fall faster on tax changes
Business
Inditex: fast fashion for crisis-proof profits
With unemployment around the world high, cash tight and job prospects dim, you would think that buying a new wardrobe would be the last thing on consumers’ minds. But Inditex, the Spanish owner of clothing brands such as Zara, Massimo Dutti and Bershka, still managed to get consumers to open their wallets last year. And open they did. The company, based in Galicia, Spain, reported a net profit of €1.73 billion for its full fiscal year ending January 31, a year-on-year increase of 32 percent. Sales rose 13 percent to €12.52 billion in the 12-month period. The seemingly unstoppable growth of the almost 50-year-old company comes two years after Inditex overtook US chain Gap to become the … [Read more...] about Inditex: fast fashion for crisis-proof profits
Spain held hostage by its banks
When the global financial crisis erupted in 2008, the Bank of Spain was one of few regulators lauded for having had the forethought to enact measures aimed at protecting the banking industry. It had prevented Spanish banks and savings banks from handing out the junk loans that brought down several American lenders, and, uniquely, it created a €40-billion “anti-crisis” fund at a time when many shorter-sighted bankers, economists and analysts thought the credit boom, on the back of low interest rates and rising property prices, would continue indefinitely. Four years later, Spain’s economy is now being held hostage by its banking industry as fears about the ability of banks and, in … [Read more...] about Spain held hostage by its banks
A new slowdown in Spain
The government wants motorists to reduce their speed to cut Spain’s fuel bill amid rising oil prices. But will forcing drivers to go 10 kph slower save anyone any money and, more to the point, cushion the impact of the North African uprisings on the Spanish economy, as the government evidently hopes? Though physics dictates that drivers would indeed see some savings, economics, unlike physics, is not an exact science and chances are that the lower speed limit on Spain’s highways, effective from today, will do little to protect the economy from rising energy costs. Instead, the rush to impose a new law reducing the highway speed limit from 120 kph to 110 kph smacks of desperation. Not … [Read more...] about A new slowdown in Spain
Portugal’s debt: a tale of pride and prejudice
Borrowing costs on Portugal’s debt have hit a level that proved unsustainable for both Greece and Ireland, but Lisbon is refusing to countenance talk of an EU bailout. Can this small, recession-prone nation hold out much longer? Long lumped along with Ireland, Greece and Spain as one of the so-called PIGS, Portugal has so far managed to face down fears about its ability to service its debt better than many policymakers, economists and investors could have expected. Even as the yield on 10-year Portuguese bonds soared to 7.63 percent in mid-February –the highest level since the country became a founder member of the single currency at the end of the 1990s– and the European Central … [Read more...] about Portugal’s debt: a tale of pride and prejudice
Bye-bye to Spain’s savings banks
Once there were 45, now there are 17. And within a few months there could be even fewer. Spain’s savings banks, or cajas, a common feature of the country's financial landscape for almost two centuries, are becoming an endangered species. The smallest and weakest have fallen first, gobbled up in a series of inter-bank mergers and acquisitions triggered by their exposure to the worst of the fall-out from the international financial crisis and the popping of the Spanish property bubble. New rules introduced by the Spanish government will ensure the consolidation continues apace. The government will require all lenders to raise core-capital levels to 8 percent by September. … [Read more...] about Bye-bye to Spain’s savings banks
Spain’s sovereign debt crisis: Round 2
It may look like a replay of last May and June, soaring bond yields and all, but there are some important differences between the current bout of financial market distemper and that of the spring. At face value, it is somewhat worse. The interest rate demanded of the Spanish 10-year bond is about 20 points higher than it was at its most back then, and the risk premium embodied in the difference between the yield on the German bund and the former is 40 basis points greater – in fact at a euro-era maximum. But looking a bit beyond the immediate it is interesting to note that all this activity has not cut into euro exchange rates remotely as much as it did in the spring, that the price of … [Read more...] about Spain’s sovereign debt crisis: Round 2
A Basque pact to save Spain’s economy
In the spring of 2009, the Basque Socialists (PSE), led by Patxi López, closed a groundbreaking governing pact in the northern region with the Popular Party (PP). It was the first time in the democratic period that the Basque Country was to be governed by non-nationalists and the deal was also remarkable in that it united Socialists with the PP, two parties that on a national level seemed locked in a tribal relationship of mutual antagonism. At the time, many forecast a short life for the new Basque government. This was partly because of the political differences between the two parties in Madrid, but also because of the bitter reaction to the pact on the part of the PNV Basque … [Read more...] about A Basque pact to save Spain’s economy
The strikers who have nothing to protest
There have been a number of signs over the last few months that the general strike called by Spain's two main trade union confederations, UGT and Comisiones Obreras (CCOO), against government economic policy and labour reform is not going to attract as big a crowd as anticipated. The first was that they switched the date of the strike from June to September 29th. The second was when, in late spring, the functionary-specific unions that had invited the leaders of UGT and CCOO, Cándido Méndez and Ignacio Fernández Toxo respectively, to a protest against government pay cuts later declared that neither would be welcome at future demonstrations. UGT and CCOO, it was felt, had attempted to hijack … [Read more...] about The strikers who have nothing to protest
Basque deal with Houston derailed by improper practice
When representatives of US railway companies visited Spain last year to examine the country’s AVE high-speed train system with a view to taking back with them some hints for their own networks, it was a boon to Spanish rail infrastructure. Spanish firms also saw a chance to showcase their cutting-edge technology in the rail and wind turbine industries in the United States when President Obama announced last year that billions of dollars would be available through the job-stimulus Recovery and Reinvestment Act. But when US transportation officials revealed in early September that one of the Spanish firms to benefit from the US government plan had committed serious violations in cahoots … [Read more...] about Basque deal with Houston derailed by improper practice