In my last post on this topic, I said the following:

My second observation is merely anecdotal, but the Acuña & 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.

Well, “Lo & Behold”, Spanish property portal idealista.com have done a bit of digging, and here is what they found. Going through the official Ministery of Housing data they were able to locate 22 “black spots” (towns or cities with over 25,000 inhabitants) where the price of housing has already reputedly fallen by more than 30% from the December 2007 peak. This compares with the official average price fall of only 8% for the whole of Spain. And incredibly (see the chart below) no less than nine of these “black spots” are in the Autonomous Community of Madrid – that’s roughly 40% of the most severely affected areas nationally are in only one community.

The areas affected are Alcalá de Henares (-37%), Alcobendes (- 47.6%), Alcorcón (-34%), Aranjuez (-35%), Colmenar Viejo (-33%), Leganés (-33%), Móstoles (-33%), Pinto (-37%) and Rozas de Madrid (-35.1%). By way of comparison, in Catalonia there are only two such areas, Castelldefels (-33%) and Sant Cugat del Vallés (-32%). Many of the worst affected areas in the Mardid area are in centres of high inward migration, but there are also some quite surprising names, like Alcobendas, one of the richest towns in the whole area, and home the famous neighourhood La Moraleja where so many of Spain’s publicity seeking but camera shy elite seem to find shelter.

Of course, it isn’t clear what level of reliability is to be placed on official government statistics, but on the other hand this data does put some flesh on the otherwise anecdotal evidence I have been hearing, or on those reports of trains which stop at stations where no one seems to get either on or off. We are talking about new building with large infrastructural projects to support it here, and of course, as I keep saying, if the immigrants simply walk, who is ever going to live in some of these places?

Yes, up to 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 Acuña & 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. Continue reading →

Hungary’s economic correction still fails to convince. Indeed I am not the only one who remains unconvined by the viability of what is currently taking place it seems, since according to the opposition supporting local daily newspaper Magyar Hírlap, none other than the Hungarian Prime Minister himself may be having doubts, as he is reportedly thinking of leaving the helm of the struggling ship placed under his charge before the next general election, which is scheduled to take place sometime early next year.

If this version of events is ultimately confirmed it will only add to the IMFs growing problems out East, since events in Latvia are not going at all according to their liking – see FT Alphaville’s Izabella Kaminska’s “Another Latvian wobble” of last Friday – and indeed Latvia’s government rapidly cobbled together another 275 million lati ($575.6 million) in spending cuts for 2010 yesterday after EU Economic and Monetary Affairs Commissioner Joaquin Almunia called on Latvia on Friday to “renew a national consensus”, and Prime Minister Valdis Dombrovskis paid a flying vist to Brussels, following a parliamentary vote against sending a real-estate tax bill through to the committee stage, implicitly rejecting part of an agreement with the IMF and EU. How many times this year does that now make it that the national consensus has had to be urgently renewed under directives from either Washington or Brussels, could someone please remind me?

Further, Hungary’s main opposition party – Fidesz – which looks well-positioned to win next year’s general elections, are threatening to rewrite the current ever-so-carefully written 2010 budget when they comes to powe next year, according to the latest statements from party president Viktor Orban.

“This (the IMF inspired text, EH) is the most dangerous budget of the past 20 years … never before has a budget put hundreds of. thousands, or even millions of Hungarian families at such grave risk,” Orban told private broadcaster Hir TV in an interview late on Friday. “This budget will not remain in place, we will draw up another one instead,” said Orban, a former prime minister, adding that if in power, his government would create one million new jobs in 10 years.

Well, things certainly do not look good either for Gordon Bajnai or for the EU Commission/IMF team who are behind the budget. Perhaps that is why the IMF’s representative in Hungary, Iryna Ivaschenko, told national news agency MTI yesterday that while the government was committed to its 2010 fiscal targets, there were economic and implementation risks on the nature of which she declined to elaborate. Continue reading →

Vengence, they say in Spain, is a dish which is best served cold. Looking at the pace with which things are now moving here, maybe the waiters are getting themselves ready.

According to Bloomberg the Spanish Dept Agency now has a new head – Gonzalo Garcia – who previously lead the Spanish Treasury’s financial analysis department. Garcia is 35 years old, and already has ten years experience working for the Spanish Treasury in the head that is sitting on those ever so young shoulders, while the person he will replace – Enrique Ezquerra – himself only 37, now becomes economic adviser with Spain’s Permanent Representation to the European Union based in Brussels. Something, it seems to me, is afoot, and it isn’t that hard to work out what. With Spain’s banks having something like 75 billion euros in short term loans which need to be renewed with the ECB in Frankfurt next June (see this post for a full explanation of the background to all this), and the Spanish government having a similar (or before we get to the end of the year possibly somewhat greater) quantity of debt outsanding in one year bonds which will need to be renewed next year along with all the extra debt they will also need to finance next year, and with a domestic banking system which is already struggling to refinance existing household and domestic loans, it isn’t hard to see that the position of Head of the Spanish Debt Department and direct coordination with Brussels are two of the key items on next years Spanish government agenda.

And the only issue left in my mind is whether the head which will need to be served up on the proverbial plate as the ritual offering to ensure the free flow of communication (and money) will not be
none other than that of the existing President of the Spanish government, José Luis Rodriguez Zapatero.

Certainly all the early warning signs are there, and no one can watch Spanish television news, or listen to the radio here without becoming immediately aware that something has now changed, and that he who was once all powerful is now, himself, in his turn steadily being subjected to that big squeeze of which he was, in an earlier epoch, such an admirable exponent himself. Basically I have no doubt that, whether the coup de grace comes later or sooner, Zapatero is now on his way out, and the only real outstanding question I have is whether he will in the end go before xmas (the start of Spain’s EU Presidency) or after June (when it finishes). The decision is I suppose in the hands of the Spanish people, and it is just a question of how much more unemployment they are willing to stomach before those inevitable “casserolades” start to break out.

Interestingly, for those us who follow this kind of thing, one of the obvious candidates, if not to replace him, then at least to take a key role in the new government of economic technocrats which is undoubtedly being prepared even as I write – ex Public Administration Minister Jordi Sevilla – recently left his seat in the Spanish Parliament – in an ominous and deeply significant leaving of the sinking ship with two other ex-ministers Pedro Solbes and ex-Defence Minister José Bono – to go and work for Price Waterhouse Coopers. And irony of all ironies, he had earlier been replaced in the Public Administration Ministry by the unfortunate Elena Salgado, who may well be about to see her short term in the Economics Ministry abruptly brought to an end. But Sevilla’s latest move becomes even more charged with symbolic significance when you consider that the role model for what may now be about to befall Zapatero, Ferenc Gyurcsany, was replaced by the current Hungarian Prime Minister Gordon Bajnai, who immediately called the now Finance Minister Péter Oszkó away from his labours at Deloitte. And Gyurcsany in what could be an early anticipation of what Zapatero may now need to do, resigned while muttering “I am leaving as I am being told I am the biggest obstacle to the structural economic reforms my country is said to so badly need”. Who exactly it was that was telling him this it may be judicious not to ask, but one thing is obvious, you can’t have people always coming from the same consultancy group, now can you? It just wouldn’t look right.