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In his speech at the Herzliya Conference held in Israel last week, the President of the World Bank, Robert B. Zoellick, warned that “the measures adopted in Europe for now only buy time. We are facing one of the key moments in the future of European construction”.

Zoellick addressed the economic crisis gripping the World and Europe in particular, without sparing criticism, saying “the leaders of the developing countries are viewing Europe’s inability to find a solution with embarrassment which is turning into scorn,” in a talk being followed by experts, economists and politicians from various countries.

The World Bank President said that debt and the banking sector are major challenges for Europe and pointed to the political class as being the main problem, which in his opinion, is failing to carry out reforms when we are already in the fourth year of crisis. “In principle, the World Bank and the International Monetary Fund anticipate a downturn in economic growth this year. One of the main dangers is the eurozone,” he said, at the same time calling for European leaders not to fall into “protectionism and populism”.

After praising the technology and innovation in Israel, Zoellick also outlined the positive aspects in Europe: “The actions the European Central Bank are taking are significant .(…) It is important that there is a government in Italy and I hope that Spain also is taking difficult decisions. I hope they are good measures. If the Italian Prime Minister, Mario Monti, does not succeed with his reforms, it will be a serious problem for Europe?.

El Mundo reported that Zoellick also praised Chancellor Angela Merkel but demanded that “Germany step forward and indicate measures that they will carry out if other countries take actions on the right track.”

According to the World Bank President, in Germany there is a political sensitivity and effort that has lasted more than 60 years to avoid being seen as the leading European country, but “now it is the only one who can play this role.” “This is one of the ironies of history. The Germans, who have always demonstrated their role as a committed partner in Europe, must now take the lead if Europe wants to be saved,” he added.

Asked about the differences between his country and the EU, he said, “In the United States there are still serious problems but they are less immediate in comparison to those being suffered in Europe.”

To what extent should the State intervene in the economy? “The countries play a large role in the economy but we must remember that they are not as fast and innovative as the private sector. They have difficulty adapting to the changes,” Zoellick responded.

International tourists who visited Spain in 2011 spent 52,796 million euros, representing a 7.9% increase, according to figures from the Tourism Expenditure Survey (Egatur) prepared by the Ministry of Industry, Energy and Tourism published on Monday.

The average expenditure per tourist stood at 934 euros in 2011, 0.2% higher than the same period in 2010, while average daily spending rose by 4.6% to 102 euros.

UK and Germany lead the total tourist spending with 10,377 million euros (up 2.1%), and 8,669 million euros (also up 2.1%), respectively. Tourists from Scandinavia and France were those who most increased their spending, with increases of 10.1% and 12.8% respectively.

By region, Catalonia, with 21.4% of the total tourist expenditure and a growth of 7.4%, stood in the first position among the target destinations for 2011.

In December, foreign tourist expenditure increased by 5.2% to 2,811 million euros. Last month the average daily expenditure increased by 17.8% to 104 euros, while the average expenditure per tourist fell 0.4% to 1,033 euros.

El Mundo reported that the markets which contributed most to the growth of spending in December were Japan, United Kingdom, the Nordic countries and Switzerland.

The Canary Islands gathered a major part of the total revenues received with 32.7% of the total, or 918 million euros, and 14.5% more than in December 2010, followed by Catalonia, with 17.6% of the total expenditure, at 494 million euros, representing 1.7% less than the same month last year.

In 2011, families dedicated 29.1% of their gross income, counting deductions, on housing, which is almost two percentage points more than a year earlier, when this figure stood at 27.3%, according to data from the Bank of Spain.

This increase is striking since, according to the Ministry of Development, during the past year the average price of private housing fell by 6.8%, which, in principle, should have reduced the amount for this expenditure in household budgets.

The Bank of Spain statistics indicate that, for its part, the deduction for home purchases, which last year was limited to incomes of up to 24,000 euros per year, served to reduce the wage effort of families to below the 33% recommended by the State Plan for Housing and Rehabilitation 2009-2012.

So, without the benefit of this tax relief, households spent up to 36.1% of their gross income to the end of 2011, up to seven percentage points more. In this case, the increase over the fourth quarter of 2010 was 2.3 percentage points despite the price cuts.

Europa Press reported that the Government has approved in general the reinstatement of the deduction for the purchase of a main residence, although the G-14 group of major real estate agents, as well as the Association of Spanish Promoters and Constructors (APCE), have claimed that this also extends to second homes.

The European Commission President, Jose Manuel Durao Barroso, sent the Spanish Government a letter yesterday announcing his intention to send EU employment experts to Spain in February in order to help fight youth unemployment.

The initiative will also take in the other seven Member States whose youth unemployment rates exceed 30%: Greece, Portugal, Ireland, Italy, Slovakia, Latvia and Lithuania.

The youth unemployment rate in Spain reached 48.7% in December, the highest in the EU, according to data released by Eurostat on Tuesday. The EU executive’s spokeswoman, Pia Ahrenkilde, said of these figures “We must act now, and in the short term, to do more to combat the urgency of youth unemployment. It is unacceptable to have these very alarming rates of youth unemployment in some Member States”.

The EU experts are ?to visit each of the countries concerned in February, for one or two days, to identify where the EU contribution could be useful to help develop a youth employment plan”, said the spokeswoman. These missions were endorsed by EU leaders at their summit on Monday.

Europa Press reported that the EU officials will form ‘action teams’ along with the Spanish authorities, employers and unions. These teams must then consider how best to use the 10,700 million euros in European aid which has been assigned to Spain up to 2013, and which has not yet been spent.

“One of the objectives of these ?action teams? should be to agree on how to accelerate and, where necessary, redirect these uncommitted funds”, said Ahrenkilde. They must also “review the priorities of existing programs in order to have more impact on measures for young people and job creation in SMEs”, she added, stressing that “there are no new funds” for fighting youth unemployment.

Another of these teams? tasks will be to determine how to promote the use of the EU exchange programs for Erasmus and Leonardo students and trainees.

The ‘action teams’ will have a period of eleven weeks, until mid-April, to develop an action plan to combat this problem. On Monday the Prime Minister, Mariano Rajoy, made it clear he was prepared to send his own experts to Brussels in order to accelerate the implementation of these measures.

The Spanish Stock Exchange believes that Vueling, the low cost airline owned by Iberia, will be one of the companies to benefit most from the closure of Spanair, after seeing them lead the markets with their stocks rising by over 20%.

Spanair had a market share in Barcelona, where they had their headquarters, of around 13%. All eyes are now pointing to Vueling, also based in Barcelona, to be the big beneficiary following the demise of its former rival, who announced the halt of their business at the weekend.

Cinco Dias reported that other potential winners in business, due to the cessation of Spanair could be Aer Lingus, which rose 7% on the Irish Stock Exchange, and Ryanair, which saw an increase of more than 1%.

Vueling, which is 49% owned by IAG, is the most likely candidate to gain a large number of the routes formerly operated by Spanair. Some of these have limited profitability, but others are of great value, such as the routes to the Scandinavian countries, industry sources explained.

“The most logical approach is that the remaining routes stay with the low-cost airlines, since they are the best able to promote them,” said one Spanish broker?s analyst. It is possible that the new Iberia Express may be interested in some of the routes, but these will be isolated cases, since the new IAG company will be focused on long haul routes.

Vueling announced yesterday that it will increase its seating capacity during the summer season by up to 25% over the capacity of the previous year, and by up to 50% in Barcelona airport. “With this new situation, Vueling will incorporate 33 extra flight frequencies on already scheduled flights, and five new routes; from Barcelona, Berlin and Hamburg, and from Bilbao, Tenerife, Las Palmas and Lanzarote in the Canary Islands,” the company said in a statement sent to the CNMV.

The Internal Market Commission of the European Parliament gave the go ahead on Thursday, to a draft directive that prohibits the granting of mortgages to consumers who do not have the capacity to repay the credit.

The directive “on credit agreements for residential property” requires lenders to refuse loans which do not have payment guarantees, and requires EU Member States to ensure that this is complied with through using consumers? solvency databases.

“Whenever the evaluation of the consumer’s creditworthiness returns negative results regarding their ability to repay the loan during the term of the contract, the lender must refuse credit,” says the draft directive.

Under this initiative, Member States shall ensure that consumers provide to lenders, and other credit intermediaries, complete and accurate information about their financial situation in the context of the credit application process.

To support this information “documentary evidence may be requested from sources that can be verified independently.”

In addition, Member States must ensure that the lenders, principally financial institutions, are able to access a database on consumer creditworthiness, in order to verify that the consumer can comply with the credit obligations during the term of the mortgage contract.

These databases are to be managed by credit reporting agencies or private credit reference agencies and public credit registries, reported euroefe.com.

Solvency criteria must also be unified in the EU-27 so that all consumers in the EU have the same obligations and rights to a mortgage – the same criteria for measuring the creditworthiness of the applicant, equal rights in the period of reflection in order to compare offers, and the same prerogative to an early repayment under certain conditions.

This policy will also be put to a vote in the Economics Commission of the European Parliament,and will need the full approval of the plenary meeting before being adopted definitely.

For 70% of EU citizens, mortgages are the most important and prolonged financial commitment in their life.

In 2009, the total value of mortgage loans amounted to 6,126 million euros, i.e. 52% of the GDP of the EU.

While most mortgages were granted by financial institutions, in at least five member countries the small lenders accounted for 12% of the market share.

According to the Institution?s updated ‘Fiscal Monitor’ report, the International Monetary Fund (IMF) has drastically worsened its deficit forecast for Spain in 2012 and 2013 to 6.8% and 6.3% respectively, figures which double the 3% deficit target the Spanish economy must achieve in the next year. The organisation, chaired by Christine Lagarde, revised its forecasts sharply upwards for the September issue of its report, namely by 1.7% for 2012 and 1.9% for 2013, representing the worst forecast for the Spanish economy for these two years of all the years analysed by the Fund.

Similarly, the Institution has updated its estimate of the deficit the Spanish economy recorded in 2011, raising it from 6.2% to 8%, which is consistent with that forecast by the PP Government emerging from the general elections on 20th November. The IMF believes that Spain is moving further away from the targets set for 2012, when it must reach 4.4%, and for 2013, the year in which the European Stability and Growth Pact indicated they should close at 3%.

In the same vein, the IMF has revised upward by 2.6% its forecast of debt in respect of the gross domestic product (GDP) for 2011, up to 70.1%, compared with the September report. However, this deterioration will be even greater in the next two years, since they have adjusted their estimates by 7.9% for 2012, up to 78.1%, and 11.2% for 2013, up to 84%.

Despite this upward revision of its projected deficit, the IMF notes that Spain, like many other advanced economies, has already approved new measures to achieve their deficit targets. They emphasised that the first package of measures adopted by the new Spanish government, which is equivalent to 1.1% of the GDP, includes spending cuts and temporary tax increases on income, capital and higher value housing, but also entails a limited increase in social and fiscal spending, such as tax deductions for housing.

Consolidation and Growth

In its report, according to Diario Sur, the IMF says that continuing with the adjustments is necessary for debt sustainability in the medium term, but argues that these should ideally be carried out at a rate that ?adequately” supports the growth of production and employment.

“Given the big adjustment already underway this year, Governments should avoid responding to any unexpected fall in growth by further adjusting its policies, and should instead allow the automatic stabilisers to operate as long as funding is available and allows doubts over the sustainability,” they suggested.

Reconsider the Pace

The Fund emphasised that the deficits in many of the advanced economies fell significantly in 2011, placing the average cut in deficit among the IMF’s member countries at 1%, while stressing that many countries also plan to carry out “significant” adjustments this year. For this reason they believe that those economies with sufficient fiscal space, including some in the eurozone, should reconsider the pace of adjustments in the short term, while at the same time they called for the United States and Japan to clarify their strategies for reducing the deficit in the medium term.

The IMF also insisted on the necessity for adjustments to be supported by the availability of adequate funding outside of the markets, as must happen in the eurozone, where market confidence is slow in responding to the reforms. “A major adjustment during a fall may exacerbate rather than ease tensions in the markets through its negative impact on growth,” they added.

According to Social Security data, since 2008, the economic crisis has put 177,336 companies out of business in Spain, most of them small- and medium-sized enterprises, and especially in Murcia and Valencia, due to their dependence on the construction sector, while larger enterprises have demonstrated their ability to survive.

This data is referred to in an article included in the January issue of the Economic Report of the business school ESADE entitled “How many companies have been taken by the crisis?”

This is the difference between the number of companies registered in the Social Security in December 2007 and the number which appeared in October 2011, reported ABC News.

While companies with three to five employees decreased by 13.7%, and those with six to nine employees fell by 17.8%, companies with between 10 and 25 employees dropped by 21.3%, those with 26 to 49 workers by 23.5%, and those with between 50 to 249 employees by 14.9%.

The article, by Professor Anna Laborda, notes that large companies (with more than 500 employees) are those that have proven to be better prepared to withstand the crisis, according to the comparison of data from the Central Companies Directory (CCD).

Large companies have shown a greater capacity for survival: those with 5,000 or more workers have increased in number between 2007 and 2011, from 99 to 107.

Murcia and Valencia Most Affected

Analysis of the data reveals that the regions where the reduction in numbers of companies is greater, are Murcia and Valencia, mainly due to their reliance on the construction sector.

In addition, with declines of over 13% are the Canary Islands, Castilla-La Mancha and Andalusia, while Catalonia and the Balearic Islands were above the average, with reductions of 12.3% and 11.8% respectively.

The Community of Madrid recorded a loss of businesses of 8.9%, which could be explained, according to the author of the study, by the fact that Madrid has the highest concentration of large companies, which are those resisting the crisis better.

The remaining regions show losses below the national average, with a particularly good performance for the north: with the Basque Country, Navarra, Galicia and Asturias, all below 7%.

The number of mortgages on homes fell 35.8% in November over the same month of 2010, reaching 28,113, one of the lowest figures of the series which started in 2003, the National Statistics Institute announced yesterday. With this year-on-year decline, mortgaged homes accumulated 19 months of declines. The drop, however, is less pronounced in November than in October, which exceeded 43%.

In the first eleven months of 2011, mortgaged homes fell by 32.3% over the same period in 2010. Month-on-month, mortgaged dwellings rose by 26.7% against the 28% decrease experienced in October.

Diario Sur reported that the average value of a mortgage on a home reached 109,662 euros in the eleventh month of last year, which is 4.5% lower than in the same month of 2010, while capital borrowed dropped 38.7% year-on-year, brushing 3,083 million euros.

In November, 45,491 mortgages were registered on rural and urban buildings (the latter includes housing), representing a 32.2% decline compared to the same month of 2010 and an increase of 16.1% month-on-month.

The number of mortgages registered on rural buildings per 100,000 of the population was highest in La Rioja (174). Only two communities reported positive growth rates, Navarra and the Basque Country, with increases of 0.9% and 0.7% respectively. The biggest declines occurred in La Rioja (-54.4%) and Asturias (-53.1%).

The region with the highest average mortgage was Asturias, with 212,633 euros, which also presented the highest positive year-on-year variation (71.1%).

The communities in which most changes in conditions per 100,000 population were recorded for rural buildings, were Castilla-La Mancha (140) and Valencia (121), and the greatest number of mortgages cancelled per 100,000 inhabitants, were recorded in the Balearic Islands (166) and Castilla-La Mancha (130).

The number of self-employed foreigners in Spain grew 4.8% in 2011, reaching 208,512, which is 9,580 more than a year ago, according to a study released yesterday by the National Federation of Independent Workers Associations (ATA).

The report, which was drawn up from Social Security data, also shows that in 2011 the percentage of foreigners self-employed increased in all regions.

The largest increase was recorded in Melilla, with an increase of 13.8%, followed by Cantabria with 8.5%, and Catalonia with 7.2%.

Also with increases above the national average of 4.8%, stood Castilla-La Mancha (6.4%), Madrid (6.1%) and the Basque Country (6%).

Below the national average were Aragón, which reported an increase of 4.5%, Andalusia with 4.4%, and Asturias at 4.1%.

Other regions with lower growth were Castilla y León and Navarre (both with a 3.9% increase), Valencia (3.6%) and Galicia, Extremadura and Ceuta (all three with an increase of 3.3%).

The communities which recorded the least growth in self-employed foreigners in 2011 were the Canary Islands (2.4%), the Balearic Islands (1.7%), La Rioja (1.4%) and Murcia (1.3%).

In absolute terms, the highest increases in foreign entrepreneurs were recorded in Catalonia, Madrid, Andalusia and Valencia.

An analysis of the country of origin showed that China accounted for 17.5% of the self-employed foreigners, followed by Romania, with 11.1% of the total, and the United Kingdom with 8.8%.

Cinco Dias reported that the ATA study also noted that the numbers of self-employed Chinese “continues its unstoppable growth” ending 2011 with an increase of 13.2%, or 4,256 more self-employed, and accounted for four out of every ten (44.4%) new self-employed registrations made last year.
In addition to China and Romania, the report indicates that the other countries who have seen “significant” increases in the number of self-employed in Spain, were Morocco (6.1%), Italy (1.9%) and Argentina (0.1%).

In contrast, the countries which recorded the largest declines were Portugal (3.5%), Ecuador (2.7%) and the UK (2.2%).

By sector of activity, construction was once again the hardest hit, recording a decrease in the number of foreign self-employed of 6.7%, although, according to the study, the decrease has moderated month by month.

The other sector which lost autonomous foreign affiliates in 2011 was in administrative activities which registered a decrease of 145.

On the opposite side, agriculture recorded a growth in the number of autonomous foreign affiliates of 15.9%.