Tuesday, October 30, 2007

Fistful of Dollars

Taken from TypicallySpanish.com, bit of business news from Spain, including a reduction in the Euribor rate at last, and mention of the appalling minimum wage in Spain.

Spanish company Ferrovial has announced a 142% hike in profits for the year to September compared to last year. The number comes in at more than 800 million €, thanks to the integration of the British Airports Authority and plusvalías on deals resulting from the sales of the company’s interests in the airports of Sydney and Budapest.The numbers are good for the company although there was no increase in profits from the construction sector.Nearly two parts of the Ferrovial business is now generated outside Spain.

The Euribor rate, the interest rate used by banks to set mortgages has finally fallen after two years of consecutive monthly rises.The rate is expected to end the month of October around 4.64%, certainly lower than the September figure of 4.725%.Despite the news families who see their mortgage rate readjusted on an annual basis in October will still have to tighten their belts.

There is a debate in economic circles as to the effects of the Prime Minister’s promise of a large increase in the minimum wage in Spain. Even the economists cannot, it seems, agree on the effect on the economy.The current wage is 570, 60 Euros, and the Government has proposed an 8% increase in that annually over the next 8 years, taking it to 816.5 € in 2012.The Partido Popular have attacked the promise, claiming that an increase would affect inflation and unemployment.However the debate is largely theoretical, given that less than 1% of workers in Spain are on the legal minimum.

The Parquesol real estate company has announced a 48% fall in profits for the year to September, coming in at 24.8 million € following a fall in sales. The company spent 43 million € buying land in Madrid, Cádiz and Málaga. Income from rentals was up 15% at 15.4 million €.El País reports today that Spanish companies have 6 billion € legally lodged in accounts in financial havens over the past ten years. The Caymen Islands and Panama are the two areas preferred by the Spanish to avoid taxes, followed by the Virgen Islands and Bermuda. The data comes from the Foreign Investment Society, which is dependent on the Ministry for Industry. Nearly 80% of the money found in such places are investments which are from financial services, or holdings. The latest OECD report, two weeks ago, drew attention to the levels of international fiscal fraud.The Madrid market has today consolidated its position above the 15,700 points level, following similar gains seen in European markets. The main players such as Repsol, BBVA and Santander are all up more than 1% on the day.It comes as oil prices have continued to rise and are now close to 90 dollars a barrel.

Monday, October 29, 2007

The Abyss

Am reposting this story from the Daily Telegraph in the UK. Seems like it's pretty much bad news as most of Europe teeters on the brink of financial collapse. Still, apparently it's good news for the German's, which seems to imply that the rest of Europe can blame Germany, again!

Not many financial stories have the ability to make me laugh out loud, but this line did : "That German voters were never asked whether they wished to fold their prize into a peseta-lira porridge makes the issue even more neuralgic." Marvellous.

All animals are equal in the one-size-fits-all monetary system of the euro, but some are more equal than others. Germany is supremely equal. It is now up on hind legs.
Or in the words of Italy's financial daily Il Sole, Berlin has "declared war" on southern Europe by refusing to back desperate pleas for a weaker euro – by which is meant a tilt towards looser monetary policy. Indeed, it is strangling such efforts.

Germany's post-1990s mini-slump delayed this showdown but delay has merely made matters worse. Loose money for German needs caused Latin booms to get out of hand. Now those booms are over and Germany is resurgent.
The clash is a foreseeable result of strapping together Europe's two ancient cultures – each with different wage systems, trade patterns, economic cycles and sensitivities to interest rates – in a premature currency union without a central treasury. And doing so in an entirely political bid to force the pace of EU federalism, against the warnings of the European Commission's economists.
Germany has clawed back 40pc in labour-cost competitiveness against Italy, 30pc viz Spain and 20pc viz France since the currencies were fixed (Eurostat data). This was done by hard work or – depending on your view – by squeezing wages in a beggar-thy-neighbour strategy to snatch market share from the rest of euroland. The truth lies between the two.
Italy has held up better than feared. Or at least, the Ostrogoth "Republic of Padania" above the Po is holding up. Fiat has silenced critics. But there are limits as the euro stalks $1.44 against the dollar and screams to mad highs against the Asian mercantilists. "What really worries us is new orders," said Francesco Peghin, head of Padova's business league.
"The euro has risen 60pc against the dollar since 2001. Until now companies have held share by squeezing margins but it's no longer possible at this level.
"A strong currency is one thing. It is quite another when the exchange rate completely decouples from the real economy," he said.
France is slowly bleeding. House prices are falling. In the Jura – Europe's toy-making capital – Smoby-Majorette has just gone bust, undercut by Chinese imports. Nearby, car-parts group Manzoni-Bouchot has suffered the same fate.
The big names are shielded by currency hedges but these become ever more costly to roll over. "The euro has become a terrible handicap," said Peugeot-Citroën's Christian Streiff.
As President Nicolas Sarkozy knows, it takes a year or two for currency effects to feed through and the victims draw political sympathy. Hence his daily broadsides against the European Central Bank: liquidity spigot for "speculators" but foe of working people.
Germany is in another world. Its August trade surplus was $19.8bn and, a paragon of fiscal virtue once again, it is becoming bossy. Finance minister Peer Steinbrück unwisely makes cisalpine enemies as if it were sport.
Whatever the theory of EMU, everybody knows that the German people gave up the Deutsche Mark and the revered Bundesbank under an implicit contract that their country would never face inflation.
That German voters were never asked whether they wished to fold their prize into a peseta-lira porridge makes the issue even more neuralgic. Yet inflation is what Germany now faces. It reached 2.7pc in September, hitting milk, butter, bread and fuel.
Bundesbank chief Axel Weber is breathing fire. "By the end of the year, inflation in Germany could increase to 3pc. As a central bank we are really concerned," he said.
"Monetary policy can't lose sight of its primary mandate – even if that means no longer supporting a robust economy."
The teutonic bloc of Austria, the Netherlands and Finland is behind him, alarmed by M3 money supply growth racing ahead at 11.3pc.
But while the North is inflating, the South is wilting and Ireland faces crucifixion. The celtic boom is over. The Irish economy contracted by 1.4pc in the second quarter. House prices have fallen for six months in a row. A satellite of the dollar zone, it is painfully leveraged to the US property slump.
For now, Spain's inflation is the same as Germany at 2.7pc, but that is an illusory convergence. Property prices fell 4.1pc in Seville in the third quarter, 0.9pc in Madrid and 0.5pc in Barcelona on official data. The Iberian bubble is bursting, whatever sunshine vendors in Britain continue to claim.
Over 98pc of Spanish mortgages are priced off Euribor, up 60 basis points since the credit crunch. "All is beginning to go catastrophically wrong for the Spanish economy," said Bernard Connolly, global strategist for Banque AIG.

For a remortgage in Spain - to interest only perhaps - go to http://www.europamortgages.com/

Spain is left floundering with a current account deficit of $125bn (9pc of GDP). Greece is worse (10.5pc).
But this is not a national morality tale. The Spanish and the Greek peoples are victims – even if they don't yet know it. Never forget that Frankfurt kept rates at 2pc until December 2005, turning a blind eye to frothy M3 when it suited Germany. By doing so, it consigned the South to even bigger boom-busts.
Once the EMU's enthusiasts are thrown out of power in Spain and Italy this winter, Mr Sarkozy will have enough allies to force a change in ECB policy – as he is entitled to do by invoking Maastricht article 104. The bank's sacred independence is a Wagnerian myth.
As for Germany's Mr Weber: does he really mean to destroy the post-war European order nurtured by Adenauer, Schmidt and Kohl with high-minded idealism for half a century?

Wednesday, October 24, 2007

The Sting

Okay, not exactly the crime of the century, but I have had a mortgage client come to me with three properties on the same development in Spain due for completion imminently. They have been given quotes by their lawyer for arranging the three mortgages, and the bank commissions are clearly load to provide either more commission for the lawyer. or maybe to create a pot of commission to split between the lawyer and another mortgage broker.
In any event, given that the lawyer is doing quite nicely from the conveyancing, it seems a bit rich to be overcharging the client for three Spanish mortgages. It's just not cricket.
Over at www.europamortgages.com we try and be upfront and honest about these things - I'll even disclose the lender's identity rather than pretend it's a big secret.
Cheers for now. Watch those fees.

Tuesday, October 23, 2007

We have just gone global

Have started this blog to get all my latest mortgage news and products out on the web to clients both old and new. I've just expanded the website www.europamortgages.com to include mortgage offers in Spain, France, Italy, Portugal, Dubai, Cyprus, Florida and the Caribbean.

Over the years we have helped hundreds of clients with their mortgages in Spain, our principal market, and we've seen that the international property market has just exploded, and suddenly places like Cape Verde are on the tip of everyone's tongue. Come on, be honest, who had heard of Cape Verde a couple of years ago ???

So our model of providing great service to our Spanish mortgage customers is being applied to all these other territories - with more planned all the time. So if you're an old customer looking for that next investment, or a new potential customer, go and check out www.europamortgages.com

I'm going to use this blog to keep everyone abreast of market changes and new products, that are happening far quicker than I can keep changing the main site. I may also diarise my life as a mortgage broker to a degree, if the trials and tribulations of a mortgage broker throws up anything worthy of the blog!!!

check back for more soon