Spain

Spain reveals holes in Europe’s crisis plan

5 Apr 2012

Rising Spanish yields have thrust the euro zone back into crisis mode. The ECB’s liquidity boost is fading, and the obsession with austerity looks self-defeating. Though Madrid could use some support for its banks, a full bailout will be difficult. Self-help is the only answer.

Spain can’t avoid austerity conundrum

29 Mar 2012

A general strike won’t turn back the clock on labour market reform and the coming budget cuts look inevitable. Too much austerity could be self-defeating and even unrealistic, but Prime Minister Rajoy cannot afford to waver after his earlier deficit faux pax.

Spanish bank take-under reveals real estate mess

27 Mar 2012

Caixabank is buying smaller rival Banca Civica and its dud property loans at a discount to market value. Caixa reaps savings from cutting costs, including its own network, and avoids being pushed into a deal with larger Bankia. Without state support, though, it’s still a risk.

Rajoy’s poll loss no ground for wavering on reform

26 Mar 2012

The ruling PP party failed to get a majority in Andalucia, eroding the Spanish PM’s mandate. It’s a setback more than a disaster. With yields back under pressure, the real battles begin now. To meet the deficit goal, the government must wield the axe in the upcoming budget.

Repsol shares betray leveraged Latam risks

23 Mar 2012

Shares in the Spanish oil major have lost more than 10 pct since troubles began in Argentina with its listed subsidiary, YPF. This looks overdone compared to YPF’s own market fall. But Repsol’s exposure to Argentina is bigger than it looks.

Hugo Dixon: Rajoy’s ploys risk stoking cynicism

19 Mar 2012

The new Spanish PM’s first batch of reforms was bold. The same may be the case of the second batch, to be announced after this week’s Andalusia elections. The main quibble is that Rajoy hasn’t been upfront. That could make the people more cynical about politicians, storing up trouble.

Shame if Spain loses second ECB seat

16 Mar 2012

Wrangling over big euro jobs may leave Madrid with only one ECB seat and Luxembourg, whose population is 1 pct of Spain’s, with two. That would be a mistake. Having Spain fully on board is an asset. And marginalising it would make it harder to deal with if it became a liability.

Haggling on 2012 Spanish deficit misses the point

13 Mar 2012

The EU has agreed to relax the country’s deficit target for 2012 as long as Spain maintains its goal of shrinking it to 3 pct of GDP next year. The compromise allows both sides to save face for now. The problem is that as recession hits, next year’s target remains challenging.

Enel woes reflect euro zone’s new normal

9 Mar 2012

Big cuts to the debt-laden Italian utility’s earnings and payout guidance suggest years of tough going in Spain and Italy. The shares are 40 pct off their 2011 highs, but windfall taxes, slack demand and the sector’s lowest dividend yield mean investors’ pain may not be over yet.

Spain bails out its regions, IMF-style

9 Mar 2012

The state will guarantee a 35 billion euro syndicated loan to local and regional government to pay back suppliers. The move will be a godsend to small businesses. But – like the bailouts of Greece – the risk is it will take the pressure off the regions to shape up.

Spain replaces Italy as bad boy in euro class

6 Mar 2012

Since August, Italy has been the big troubled euro economy, with higher yields than Spain. But Rome’s borrowing costs are now a touch tighter than Madrid’s. Economics and politics are responsible for the flip. The gap could widen further – at least until Italy’s next elections.

Spain must fix absurd electricity market

2 Mar 2012

Power producers have for years been forced to sell electricity at below cost. It’s hard to see how consumers can now be migrated to economic pricing without further damaging the economy. There’s no easy way of normalising the situation. The government faces some hard decisions.

Euro zone crisis over – for now

1 Mar 2012

Italian and Spanish 10-year bond yields have fallen below 5 percent. Cheap money and new governments’ ability to reform have won over markets. But the ECB will be reluctant to help more, Greece and Portugal are still problems – and the whole periphery is mired in recession.

Spain’s regions still threaten fiscal turnaround

28 Feb 2012

The central government largely met its deficit targets last year, but the country’s regions accounted for two-thirds of an overall miss, with total deficit at 8.5 pct of GDP against a 6 pct target. The market seems sanguine. This could change if Madrid can’t discipline the provinces.

Spain’s labour reform falls short

13 Feb 2012

The government has changed Spain’s stultifying labour laws. Companies will have more flexibility on wages and severance costs, which might destroy jobs in the short term. But a big split will remain between the labour markets’ protected insiders and the army of the unemployed.

Spain’s bank overhaul is not as big as it looks

8 Feb 2012

Lenders must set aside another 25 bln euros against bad property loans. But demands for higher capital requirements and new generic provisions can be partially met from existing reserves. Despite the government’s claims, Spain’s real estate mess has still not been cleaned up.

EU should cut Madrid some deficit slack

7 Feb 2012

Spain will struggle to shrink its budget deficit to 4.4 pct of GDP this year, but it shouldn’t try too hard. Forcing the pace could create a deeper recession. The government still needs a deficit target to control the unruly regions. But the EU should let it set a realistic one.

Two cheers for Spanish banking reform

3 Feb 2012

The country’s lenders must set aside another 50 billion euros against real estate losses this year. That’s a good start, but bad loans are still rising. Though Spain’s bigger banks can cope, the state will still be on the hook for part of the cleanup.

Santander has unfinished business in Spain

31 Jan 2012

Extra provisions for bad loans knocked the Spanish bank’s earnings by 35 pct in 2011. The new government will require an even bigger buffer this year, while European regulators are forcing it to maintain high capital ratios. The balancing act may come at shareholders’ expense.

Catalan airline succumbs to predictable collapse

30 Jan 2012

Spain’s fourth largest carrier couldn’t compete in today’s ruthless aviation market without help from Catalonia’s regional government. Spanair could hardly expect to survive on handouts long term. Other second-tier European airlines will have to rely on self help or mergers.