Monday, May 10, 2010

Spain out of recession, maybe.....

After seven quarters in recession, it seems that Spain may have finally crept back into growth, by a small margin - 0.1%.
Given that unemployment is so high in Spain it must be good news that the part of the economy that is working, is improving.
Along with this we can see that a deal has been agreed to hold a rescue fund for the eurozone, in the wake of the Greece crisis, that, it is hoped, will provide some security to other territories that are in danger of being punished by the financial markets and plunged into crisis.
But even though this seems to be having the required positive effect on the stock and currency markets around the world, the money still has to come from somewhere. The other eurozone countries have effectively stated that they will be supporting each other in case it looks like a single country cannot meet it's debt obligations.
The worse thing about this, potentially, is that the most at-risk countries - the famous PIIGS, of Portugal, Ireland, Italy, Greece and Spain, will just carry on with their old ways, in the knowledge that they will be bailed out.
Anybody that knows Spain, will know that there needs to be substantial reform in a number of areas, including employment, tax law (where evasion and black money is still rife) and property.
Consider the various complicated tax laws and costs surrounding the property and mortgage markets, and how they could be simplified to kick-start the Spanish property and Spanish mortgage markets. The combined costs of buying a property in Spain with a mortgage, can often add up to about 14% of the purchase price of a property, which is plainly ridiculous. How much would the construction and property industry benefit from getting rid of most of the stupid taxes ?
Spain is full of empty and unsold property at the moment, which the indiginous population - the younger, next generation of property buyers, simply cannot afford at the moment. If you remove some of the taxes, then the youngsters will be able to leave the family home and buy their own place.
Also, losing the taxes would certainly have an impact of attracting more foreign buyers, including Brits, back to the Spanish market.
A small growth does not mean they are out of the woods, there is still much that could be done.

No comments: