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Spanish news round-up week ending 3rd July
Election completed and negotiations underway for new government, what does Brexit vote mean to Spain and holidays begin
The Spanish general election
Amid all the reaction to the Brexit vote it should not be forgotten that there was the small matter of a general election in Spain on Sunday, and although at first glance it might seem as though little has changed as a result, closer analysis reveals that in fact the situation of Mariano Rajoy and his PP party has improved significantly.
The PP will now have 137 seats in the new parliament, 14 more than last time, and acting President Mariano Rajoy has already stated that he will be seeking the support of other parties in order to ensure a second term in office. There are clear obstacles in his path, but his chances of being able to return to government within the next couple of months appear far greater than they did at Christmas.
One of the combinations being mooted is a “grand coalition” between the traditional arch-rivals of the PP and the PSOE, possibly including new group Ciudadanos as well, but it is still far too early to be certain that this will materialize.
In this context, Sr Rajoy was back in Madrid on Thursday morning to start his negotiations in an attempt to form a working government, beginning his round of contacts by meeting Fernando Clavijo, the leader and only MP of the Coalición Canaria party. The Coalición Canaria may have only one vote in parliament, but their support could prove vital if the PSOE opposes Sr Rajoy’s investiture as they could form the last piece of an alternative puzzle which would also involve a multi-party agreement between the PP, Ciudadanos and the PNV Basque regional party.
Meanwhile, the main losers in the election are generally agreed to have been the new populist Podemos party and those whose opinion polls prior to the voting proved once again to be very misleading. It was widely reported in the fortnight leading up to 26th June that “Unidos Podemos”, the electoral coalition formed by Podemos and the IU left-wing party, would replace the PSOE as the second most popular choice among the Spanish electorate, but instead their parliamentary representation remained almost exactly the same as in December on 71.
Pablo Iglesias, the Podemos leader, has called for calm as the reasons for this disappointment are analysed, but there are various theories being put forward by the media and political analysts to explain the momentum of the populist movement having been punctured in this way. Among the most common suggestions are internal tensions within the party, the alliance with the IU left-wing party, voter disenchantment with the lack of progress after the last election, the “Venezuela factor”, the attitude of party leader Pablo Iglesias, the actions of high-profile Podemos Mayors since the local elections in May 2015 and even the Brexit vote: click for further details.
Spain counts the potential cost of Brexit
Last week the UK electorate decided that Britain should leave the EU and in spite of nearly 3 million disillusioned voters immediately calling for a second referendum EU leaders are convinced that the decision is irreversible.
In this context analysts have been attempting to quantify the effects of the decision on Spain, and most are in agreement that while investment in the British Isles from abroad will decrease the effects in the rest of Europe will be felt in trade, tourism and migration patterns. In Spain the economy will be affected “significantly” according to most studies, while at the same time Spanish nationals living and working in the UK may find their rights to social services affected and there is also what some see as a dangerous precedent for separatist movements like those in Catalunya and the Basque Country.
Trade: Last year exports from Spain to the UK amounted to 18,231 million euros, while imports in the other direction came to only 12,584 million, and when tourism is taken into account the overall benefit from relations with the UK for Spain in financial terms was over 11,000 million euros. Should similar trading agreements not be renegotiated a large part of this benefit would be placed in jeopardy, and if imports dry up there could be serious problems for the Spanish automobile, aviation, food and pharmaceutical sectors.
Tourism: As for tourism, the biggest danger for Spain is the probable devaluation of the pound against the euro. Last year visitors from the UK spent over 14 billion euros in this country, far more than those of any other nationality, and the danger is that with the value of the pound expected to fall they will find themselves with less spending power and either opt to spend their holidays at home or will be able to spend less money while in Spain (and indeed in other Eurozone countries).
Add to this the fact that almost 300,000 UK nationals are registered as resident in Spain, and that another half million or so spend a significant amount of time in this country every year, and the effect of a decrease in the value of pensions which are paid in sterling could add to an already significant effect.
Catalunya: The possibility of Scotland seeking another independence referendum in an attempt to gain medium-term re-entry into the EU could re-ignite calls for a similar vote to be held in the Spanish region of Catalunya (see below).
Spanish property market: Over the last couple of years the relative strength of the pound against the euro has made it more attractive for UK nationals to buy property in Spain, and British buyers have accounted for over a fifth of sales to non-Spaniards and around 1 in 30 of all residential property sales.
A decrease in this market would probably not have much of an effect on the Spanish property market as a whole, but in certain localized areas such as parts of the Costa del Sol and the Costa Blanca the UK market carries far more weight, and should the pound lose value over a prolonged period this would create uncertainty over the effect it might have on both sales and prices.
As ever it is important not to exaggerate the consequences of the Brexit on sectors of the Spanish economy. The situation as it stands is one of uncertainty, not of disaster, as no-one can be sure what terms will be agreed upon for the UK’s departure from Europe.
The only thing that is certain is that the Brexit will have an impact on many sectors of Spanish society and the national economy, but it is too early to evaluate how serious that impact might turn out to be.
Uncertainty in the UK will continue for at least two years (meaning uncertainty here for us!), and on Sunday candidates for the job of UK Prime Minister painted a wildly disparate picture of their plans for taking the UK out of the EU: Theresa May wants to hold back before invoking Article 50 to ensure the UK is clear about its negotiating stance and is talking about the exit process "taking years", while Andrea Leadsom wants the UK to trigger Article 50 as quickly as possible and get on with it.
The EU, meanwhile just wants the UK to officially inform them it intends to leave and start negotiations.
But the business world waits for no politician to stop talking and start acting, and already major institutions and businesses are planning their own Brexit: Spain announced on Friday that it is right in there amongst the scramble to try and attract new jobs for Spain and will be bidding for the European Banking Authority to relocate to Spain when it leaves London.
Spain has set up a working group to drive Spain's bid for the EBA and for the London-based European Medicines Agency, acting Spanish Vice-president Soraya Saenz de Santamaria said on Friday.
Santamaria also said Spain would seek to lure international banks based in London which are looking to move their operations to remain inside the European Union.
There is a great deal of talk on social media about the options of the UK, much of it wishful thinking. So what exactly is the "Norway model" and is it an option for the UK?
And is the "Reverse Greenland" option a way for Scotland to stay in the EU and in the UK????
This week Gibraltar Chief Minister Fabian Picardo went to London where he met with British and Scottish politicians to analyse the options open to his own government now that the UK has voted to leave the EU.
Many British nationals voting in the EU referendum last week who chose to leave the EU voted about local issues, few considering the far-reaching implications of their decision on British nationals living within the EU and those within the British Territory of Gibraltar, all of whom could potentially suffer major side-effects of a UK Brexit.
Spain has been engaged in efforts to recover the territory from British control since it was ceded to the UK “in perpetuity” by the Treaty of Utrecht in 1713, and prior to the UK Brexit vote, the Spanish Interior Minister stated that should the UK choose to leave the umbrella of the EU, that Spain would demand temporary joint sovereignty, as indeed was the case."It's a complete change of outlook that opens up new possibilities on Gibraltar not seen for a very long time. I hope the formula of co-sovereignty - to be clear, the Spanish flag on the Rock - is much closer than before," Garcia-Margallo said after the result was announced.
In the meantime, the underlying tension in the Rock was highlighted over the weekend by the arrival of a nuclear submarine belonging to the Royal Navy. In the context of Brexit the decision which was announced on Friday to send HMS Ambush to Gibraltar is being seen as significant, and while the popular press in the UK are united in describing it as a show of strength against “greedy” Spanish ambitions, their counterparts in Spain could fairly be described as “irritated”. The Navy, however, views stop-overs in Gibraltar as part of routine scheduling, visits to the British Territory a regular part of the annual cycle for UK nuclear subs, and can´t understand what all the fuss is about.
Economic and tourism news
There may be fears about the economic consequences of Brexit for Spain, but for the time being the recovery continues and this week the employment agency Adecco estimated that the number of temporary jobs which will be created as a direct result of the 2016 summer sales season will be 134,500, an increase of 3% on the figure for 2015 due largely to the need for more sales personnel, hostesses and telesales operators.
More data show that during June the annual inflation rate was -0.8%, continuing a trend back towards positive territory which began in May. Positive inflation has not been reported in Spain since last July, but with successive month-on-month increases now having been recorded between March and June the cost of the average “shopping basket” could soon be on the way up again after falling for most of the last two years.
Elsewhere, the Ciudadanos political party is continuing to denounce the practice of manipulating the market price of Spanish cured hams by controlling the number of hams which are produced, and thus avoiding over-supply, by freezing them prior to processing. A law which was passed two years ago does not list freezing among the stages of production, but neither, on the other hand, does it enforce the need for freezing to be reflected on the labeling of products, and this is upsetting Ciudadanos MP Toni Cantó.
One sector of the economy which is thriving is foreign tourism, and the latest figures show that during May there were just over 7.1 million visitors to this country from abroad, with the year-on-year increase of 7.4% being driven to a large extent by the rise in the number of UK nationals travelling to Spain. During May the statistics show that 9.1% more Britons came to Spain, and the total of 1.78 million accounted for just over a quarter of the overall figure. The other two leading markets, those of France and Germany, grew by only 3.2% and 3.3% respectively, and accounted for 1.08 million and 1.19 million visitors.
Data produced this week by Spain’s national markets and competition commission (CNMC) for the month of June conclude that the average domestic electricity bill rose to 59.74 euros, an increase of 9% in comparison to the month before, but at the same time bills in 2016 have so far been 16.4% lower than in the equivalent period last year.
This is due mainly to falling rates being applied by the electricity companies which supply homes in Spain, a phenomenon which in turn is caused by increased supply being made available from hydro-electricity plants and wind power: the heavy rain and strong winds this winter, particularly in the north of the country, have made these “alternative” sources of power cheaper.
Crime and punishment
In recent years the theft of copper cabling for resale has become an increasingly common crime in Spain, and one of the most potentially drastic instances was reported on Sunday by national newspaper El País, which informs that a junior naval officer managed to evade security staff and remove 6,000 kilograms of cabling from the Spanish Navy frigate Victoria. The incident occurred in 2012, and as a result the Victoria was forced to receive electricity from another Navy vessel and it was only by good fortune that no more serious consequences were suffered.
This Tuesday at least eight people were arrested on Tuesday charges of belonging to the “Russian mafia” in a series of Guardia Civil raids in the province of Tarragona, following a prolonged investigation by the courts of Reus into money-laundering, drug trafficking and relations with corrupt police officers in Moscow.
Away from Russia, over 64,000 fake branded products imported from China have been seized by the Policía Nacional on an industrial estate in the Comunidad Valenciana, where they were in storage after having been brought to this country by Chinese citizens.
Another fraud investigation resulted in a total of 64 people being detained in various parts of Spain by the Guardia Civil in connection with the issuing of fake boat captain licences, receiving payments of 4,000 euros from people anxious to be allowed to steer their own vessels in Spanish waters or to organize tourist boat trips along the Costas.
Fiestas and celebrations
Among the more traditional celebrations in Spain this week was the annual wine battle in the town of Haro in the wine-producing region of la Rioja on Wednesday, an event which was attended by approximately 7,500 people.
Their main aim was to redistribute the 75,000 litres of wine which had been supplied by the Town Hall all over the other participants during what appears to many to be a particularly wasteful fiesta. Despite this possible objection, though, the Batalla del Vino has been held every 29th June (Saint Peter’s Day) since 1949 in Haro, and it was declared a Fiesta of National Interest five years ago.
Carles Puigdemont, the president of the regional government in Catalunya, has seized upon the Brexit vote in the UK and the allegations levelled at Jorge Fernández Díaz, the Minister of the Interior in the acting government, to advocate accelerating the process of making the region independent from the rest of Spain at the earliest opportunity.
The allegations against Sr Fernández Díaz centre on audio recordings in which he appears to urge the former head of the anti-fraud squad in Catalunya, Daniel de Alfonso, to concoct charges against pro-independence political parties and their leaders. And repeating an often used phrase in Spanish politics, Sr Puigdemont said in the regional parliament “Basques, Catalans, flee, you who can!”.
Sr Puigdemont and other separatist leaders in Catalunya are also encouraged this week by Jean-Claude Juncker’s decision to meet Nicola Sturgeon, the head of the Scottish regional government, in order to discuss the possibility of Scotland somehow remaining within the EU.
The first of the Obamas arrive in Madrid
Michelle Obama, the First Lady of the USA, arrived in Madrid on Wednesday afternoon just ten days before her husband is due to visit Spain, and on Thursday gave a speech to promote her “Let Girls Learn” initiative, in which she calls for an end to sexist approaches to education.
On Thursday morning Mrs Obama addressed over 600 children and adolescents on the subject of the inequality which still exists all over the world between men and women in education, and also took the opportunity to offer her condolences to the victims of the terrorist bombing in Istanbul before pronouncing herself “honoured” to see Queen Letizia of Spain among her audience.
The start of the summer holidays
Friday 1st July marks the start of one of the numerous “Operación Salida” (Operation Exit) traffic police operations which will punctuate the summer, with hundreds of thousands of Spaniards leaving the major cities to begin occupying the holiday homes they have rented for all or part of the summer or to take up temporary residence in hotel accommodation.
In their attempt to reduce the number of accidents the DGT traffic authorities are planning to use more radar speed guns this year, with motorcycle Guardia Civil patrols being equipped with 60 portable devices for use at hotspots all over the country. Motorists will be warned of their presence by an orange sign on both major and secondary roads, although they may not be aware of the Pegasus helicopters which could be flying overhead to detect any offences committed.
Unfortunately, the arrival of July also heralds the time of year when the risk of wild fires is greatest, as was highlighted on Thursday and Friday by a fire which affected at least 1,000 hectares in the south-east of Albacete.
One man who hasn’t fully enjoyed his early summer break in the Canaries is British physicist Stephen Hawking: a 41-year-old American woman who is resident in Norway has been arrested by the Policía Nacional in Tenerife, where she had sent threatening messages to him during the Starmus festival, which began on Monday and ends on Friday.
“I am very close to you. I’m going to kill you”, read the messages she sent to Professor Hawking, but instead she was tracked down to the 4-star Hotel Conquistador by the Playa de Las Américas.
During his presentation, entitled “A Brief History of Mine”, Professor Hawking forecast that Man will not survive another thousand years on Earth due to the fragility of the planet, and urged governments to invest more in the search for other habitable environments in the Universe
Spanish property news
The latest data published on Wednesday morning by Spain’s central statistics unit show that in April the lack of a national government and the resulting uncertainty continued to have little or no effect on the gradual increase of activity in the residential property market, and particularly in the field of mortgage lending to finance home purchases.
During the month there were a total of 23,607 new mortgages registered on residential properties, an increase of 24.6% in comparison to April 2015. This is the 22nd consecutive monthly increase in the national total, and as a result monthly figures of between 20,000 and 24,000 are now the norm (as opposed to around 15,000 two and a half years ago).
The attractiveness of low interest rates and the current low property prices are partly responsible, of course, but so too is the increased willingness of banks to compete for mortgage customers and extend credit in the expectation of rising market values in the medium- and long-term future.
More good news in terms of prices: the quarterly local markets report which was published on Thursday by leading Spanish property valuation firm Tinsa shows that little by little prices are stabilizing and bouncing back after the slump which began in 2007 and 2008, although as yet there are still considerable differences in the trends from region to region and from province to province.
The overall national price index is reported by Tinsa to have risen by 0.8% over the last twelve months, with the most significant increases having occurred in the regions of La Rioja (7.4%), Catalunya (6.8%), Madrid (5.4%) and the Canary Islands (3.6%). At the same time, prices also rose in the Basque Country, Castilla-La Mancha, the Balearics, Castilla y León, Extremadura and the Comunidad Valenciana, with the last three of these regions recording their first increases since the start of the slump.
No sign yet, then, of the “chill” which has reportedly affected property sales to UK nationals in Florida over the last week…
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