Saturday,
February 09,
The
ANNOTICO Report
Their
Great Leap forward has turned into a Giant Leap into the Great Abyss.
There
will be 500,000 unsold new homes by the end of March - roughly the number built
in an average year. 500,000 more were to be built this year, making the
unsold stock worrying. About half the country's estate agents are already out
of business,
Financial Times
By Leslie Crawford
February 7 2008
Eurostat, the European Union's data
compiler, in December published a dry table that revealed a remarkable fact:
Spaniards had become richer per head than Italians.
Anyone who
knew
But never did
Spaniards think they would one day overtake in terms of per capita income one
of the founding members of the EU. Josi Luis Rodrmguez Zapatero, the Spanish
prime minister who faces a general election next month, boasts that
overtaking
Mr Zapatero's
grandstanding, however, has been obscured by doubts. The end of a 10-year
housing boom, coupled with financial turmoil abroad, is leading Spaniards to
question the foundations of their leap forward. The Spanish sorpasso took place
just as the country's growth was peaking. Might it prove as fleeting as
Moreover, its
economy is now big enough to affect
During the peak
of the construction frenzy two years ago, economists described the Spanish
economy as a "monoculture" of bricks and mortar and worried that
there was nothing to take its place if the building boom came to an end.
Construction employed 13 per cent of the workforce. The banking system channelled 60 per cent of all credit to housing-related
activities.
Spain was
building more homes than France,
The credit
squeeze hit
IPE, a business
school that specialises in urban planning and
property, estimates that there will be 500,000 unsold new homes by the end
of March - roughly the number built in an average year. Given government
forecasts that 500,000 more were to be built this year, the unsold stock is
worrying. About half the country's estate agents are already out of
business, according to their trade association.
One
consequence of the building slowdown is that unemployment has shot above the 2m
mark.
January's 6 per cent increase in the number of unemployed was the highest
monthly rise in 10 years. Immigrants and temporary workers are feeling the
brunt of the cuts. The end of the property boom is also worrying for Spanish
commercial and savings banks, which have 290bn ($425bn, #217bn) in outstanding
loans to property developers and are trying to cut their exposure to the
sector.
Not everyone
shares the gloom, however. Mr Zapatero
is unabashedly confident about his country's economic prospects, on which his
re-election prospects also depend.
"I am an
optimist," he tells business. . He expects the economy to grow by
"at least" 3 per cent in 2008. Mr Zapatero's Socialist party is promising to create 2m jobs
over the next four years and to raise minimum pensions and wages. If the
economy fails to grow at the predicted rate, Mr Zapatero thinks old-fashioned fiscal stimulation should do
the trick. The government has a "comfortable" budget surplus of 2 per
cent of GDP, he says, to get things moving.
Another reason
for optimism is that
"We had
four horrible years. I was the director for construction then and I was
convinced I would be fired. Those years taught us a lesson: that we couldn't
depend on just one country, one business and one client, the government."
Today, 90 per
cent of Ferrovial's assets are in the
Santander and
BBVA,
Diversification
means that even if
In this jittery
environment, resilience is a big advantage. What frightens some is the hubris
that appears to have taken hold of Mr Zapatero and some of the business establishment. Only
the government predicts
"To draw up economic policy on the basis
that we are going to grow by 3 per cent this year is unrealistic, even
irresponsible. Not to recognise a
problem is the first step to not solving it," says Lorenzo Bernaldo de Quirsz, of Freemarket, an economic consultancy in
Complacency is
also frightening because
"
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