PROELTS

FINANCE & ECONOMICS - 3

2012-01-23T13:27:00.000-08:00

The Spanish companies among the world's top 50 retailers

Zara company's fashion stores among fastest-growing with widest global network

EL PAÍS

Spain's Mercadona, El Corte Inglés, and the myriad Inditex clothes shops, among them Zara, are among the world's top-50 shops and distribution chains according to the 2012 Global Powers of Retail survey, carried out by consultants Deloitte in conjunction with Stores magazine.

Supermarket chain Mercadona, which has enjoyed a meteoric rise in Spain over the past decade, increased its lead over El Corte Inglés, although both fell in the annual ranking, to 42nd and 47th place respectively.

The Valencia-based company, set up in 1977 and presided over by Juan Roig, saw its net turnover for 2010 - the year that the ranking is based on - grow by 5.8 percent to 15.2 billion euros.

Overall, El Corte Inglés, the country's best-known department store, still has greater total turnover than Mercadona of 16.4 billion euros. But Deloitte's ranking is based only on retail sales, and does not include wholesale, direct sale or public supply contracts.

For the first time, in 2010, Mercadona surpassed El Corte Inglés in profits, reporting 398 million euros compared to the long-established department store's 319 million euros.

But neither can come close to Inditex's 1.7-billion-euro profit.

Of the three companies in the top-50, the only one to have improved its standing in the latest study is Inditex, moving up one place to 49th. The group set up by Galician Amancio Ortega and now presided over by Pablo Isla, is also among the 50 companies that have experienced the most growth over the five years prior to the preparation of the report, despite not having made any major purchases.

The giant fashion retailer's business model and its geographic diversification have allowed it to continue growing throughout the current economic crisis.

Inditex, whose high-street brands include Zara, Zara Home, Pull&Bear, Massimo Dutti, Bershka and Stradivarius, is also among the companies present in the greatest number of countries: 78, according to the company's latest information, and is only just behind LVMH, in 84 countries, and PPR, in 91, with computer giant Dell present in a total of 180 countries.

Spanish supermarket chain Eroski is ranked 98th out of the total of 250 companies in Deloitte's annual survey. A sharp fall in sales and the depreciation of the euro against the dollar (the currency that the survey is carried out in) saw the company slip 17 places from the previous year.

Deloitte and Stores' ranking does not include what is now the fourth Spanish retail outlet, ahead of Eroski: Dia. The low-cost supermarket chain split from Carrefour last year. Its earnings for 2010, 9.7 billion euros, would actually put the company in 70th place.

The world's leading retail outlet remains US outfit Wal-Mart, followed in distant second and third places by France's Carrefour and Britain's Tesco respectively.

Drugstore chain Walgreen is the only change among the top-10 retail outlets, which between them make up 29.4 percent of the total sales of the 250 companies on the list.

In all, the companies in the ranking increased their sales by an average 5.4 percent on the previous year, up from 1.2 percent in the preceding survey. Specialists in areas such as fashion, electronics, and furniture outperformed general goods stores.

In the department store section of the survey, the well-known giants from the United States (Sears, Macy's, Kohl's and JC Penney) filled the top four positions. Behind the US quartet came El Corte Inglés, the European leader in this retail category.

For the first time, Apple is among the top-100 leading retail outlets after a spectacular leap of 38 places in one year. The company, responsible for the iPad, iPod, and iPhone products, along with computers and other electronic goods, has opted for a vertical integration strategy, which has seen it become its own distributor both through the internet and retail outlets.

What's more, Apple is likely to continue climbing in the ranking, due to its high sales in 2011 and deals with Target and Best Buy to open mini-shops within their stores, as it currently has with, for example, El Corte Inglés.

Deloitte's survey highlights continuing globalization as the major trend in retailing, which will see companies need to open stores in new markets. It also points to multi-channel retailing through catalogues, internet, social networks and cellphone technology.

Stores will remain at the core of the big retailers' businesses, but their role is set to be a fast-changing one: "The transition will oblige retail outlets to innovate and to rethink their operating models in ways that they would not have imagined even five years ago," says the survey.

CURRENT AFFAIRS - 5

2012-01-16T12:24:00.000-08:00

Nine in every 10 Spaniards feel uncomfortable speaking English

A new survey has shown that nine in every ten Spaniards still feel uncomfortable speaking English, despite the fact that 37% of them have spent more than 15 years studying the language. Thirty five percent said they felt insecure and embarrassed, and 4% said they would not make the attempt in case they seemed ‘ridiculous’.

Europa Press reports that one in two, although knowing that their grammar was not correct, would however try and speak the language.

The survey by ‘Pueblo Inglés – More than English’ also revealed that 98% of those questioned felt that the standard of teaching English in Spain’s schools was not the best. Many felt that more time should be spent on the subject in schools, with particular emphasis on conversations with English speakers and on role playing for real life situations.

CURRENT AFFAIRS - 4

2012-01-16T03:26:00.000-08:00

Spain Franco-era politician Fraga dies, aged 89

THE BBC

Manuel Fraga Iribarne - the last surviving senior politician from General Franco's era in Spain - has died at his home in Madrid, aged 89.

Mr Fraga died of heart failure, a family member was quoted as saying.

He was information and tourism minister under Gen Franco, but then played a key role in the transition to democracy after the dictator's death in 1975.

Mr Fraga helped to write the country's constitution and founded the party that is today the ruling conservative party.

He dominated politics in the north-western Galicia region until 2005.

He remained in politics up until September 2011, retiring because of health problems.

Speaking at a public event in 2011, Mr Fraga made no apology for being a minister in Gen Franco's cabinet.

"One cannot choose the period of history in which one lives,'' he said.

A hero to many in Galicia, an authoritarian relic to others, he counted the Cuban leader Fidel Castro among his friends.

Mr Fraga married Carmen Estevez in 1948 and they had five children. She died in 1996.

CURRENT AFFAIRS - 3

2012-01-09T12:39:00.000-08:00

Spain's white elephant airport spents 30 million euros on advertising

The scandal of a "ghost" airport in Spain that has yet to see a single passenger through its terminal has deepened with revelations that 30 million euros has been spent on advertising it.

The Telegraph

Castellon airport in Spain's Valencia region was inaugurated in March last year after an estimated 150 million euros (£130m) was spent on its development.

But not a single aircraft has landed on its runways after the airport failed to secure a license and was unable to attract airlines to add the destination in their routes.

The airport has become a symbol of reckless public spending on ill-thought out projects across Spain that has left the country crippled with debt. A recent report showed that only 11 of Spain's 48 airports were profitable.

Now, Just days after the debt-laden autonomous region was forced to seek assistance from the central government to stall a default on a loan of 123 million euros, details of the accounts of the Spain's newest airport have been made public.

It emerged that 30 million euros was spent on publicity for Castellón's airport as it was promoted at tourism fairs, according to a report in Spain's daily El Pais newspaper.

The airport even became the sponsor for first division football club Villarreal CF, whose players bore the airport logo on their strip for three seasons in exchange for 2.35 million euros. The sponsorship was later extended to CD Castellón.

But while all advertising for the stricken airport has now been put on hold, a 25 meter high metal sculpture is currently being erected in front of the gleaming, and abandoned terminal, at a reported cost of 300,000 euros.

The sculpture, by artist Juan Garcia Ripolles, is said to represent Carlos Fabra, the former premier of the Castellón province, who masterminded the airport project.

After 16 years in power for the conservative Popular Party, he was forced to step down last June pending an investigation into tax-fraud, influence peddling and bribery.

It was hoped that Castellón airport would open up a new area of Spain's eastern coast to tourism, although the region is already served well with busy international airports in Valencia and Alicante to the south and Barcelona to the north.

CURRENT AFFAIRS - 2

2012-01-08T10:09:00.000-08:00

Isaac Díaz Pardo Staunch defender of Galician language, culture dies at 91

The son of a Civil War atrocity victim, he worked tirelessly to reconstruct a local culture under threat

EL PAÍS

Isaac Díaz Pardo, one of Galicia's great painters and an early champion of the region's culture, died on Thursday at the age of 91 in Santiago de Compostela. After the Transition, Díaz Pardo embarked on a mission to remind people not to forget the victims of the Spanish Civil War and the 36 years of repression that followed under the Francisco Franco dictatorship; especially the attempts to eradicate the local language of the northwest region.

In July 1936, his father, Camilo, a well-known painter and illustrator, was "taken for a walk" by fascist forces while Díaz went into hiding for several days until he could flee Santiago de Compostela. In one of his last interviews, given to the Historical Memory Commission, Díaz recalled that the long-distance bus that took him to A Coruña had to stop every so often because of the dead bodies blocking the roads. "They didn't leave them in the ditch but instead left them out in the open to frighten people," he said.

His father had been one of the founders of the pro-Galician independence and cultural movement Irmandades da Fala (Brotherhoods of Conversation), a fraternity made up of the region's important intellectuals at the time, including writer Castelao, and which promoted a single language and culture in the region.

Camilo was shot dead at the start of the Civil War, along with other pro-Galician nationalists.

Díaz would always remember the "martyrs" of the civil war and decided early on to continue their personal missions to defend all things Galician. That is why at age 28, after studying art in Madrid and Barcelona, he chose to give up his painting career. There were more important things to do, he would later explain when asked about his decision.

Just like writer Luis Seoane, a friend and partner who devoted all of his time to Galician and leftist causes, Díaz wanted to reconstruct, strengthen and preserve Galician culture. He did it through a number of projects, including art dealing, becoming a Galician-language editor, working as an industrial art designer - he designed the stained glass in Galicia's parliament chamber - and writing. Diáz was successful in all fields except - as he would later say - starting up his own newspaper, Galicia.

In 1963, he began work on a Galician cultural center in Argentina, along with his friend, Seoane, who was living there in exile. Díaz was a humble man who always played down the importance of the number of recognitions and prizes he was awarded over the years. Some years back, when he was turned away in Ourense at one award ceremony in his honor, he left quietly without clarifying that he was the person the event was staged for.

He always seemed available to collaborate on many projects (Díaz once said he edited more than 1,500 books on Galician history and culture) and he had a keen eye for good business. "Did you know there's a guy in A Coruña who knows how to sell low-cost clothes without the need of having to distribute them at a department store?" some of his closest collaborators would often hear him ask with admiration about fellow Galician Amancio Ortega of Inditex before the Zara brand took off.

On December 22, he was admitted to the San Rafael Hospital suffering from pneumonia. When he asked the nurses to keep his visits to a minimum, they asked him how because there were so many. "Spread out the visits," he responded.

CURRENT AFFAIRS - 1

2012-01-05T03:09:00.000-08:00

Three kings day in Spain.

On 5 January Spain celebrates the end of Christmas with a great party where everybody gives and receives presents. It is to celebrate the arrival of the Three Wise Men - Melchior Caspar and Balthazar - to the city where Jesus was born. In the same way that the Three Wise Men gave gifts to baby Christ, here they share out presents amongst children around Spain - in fact; they are more popular than Santa Claus.

There are lots of processions of the Three Wise Men in each city, the children go along with there parents to see the kings and receive sweets from them.

Before going to sleep, children put some milk and biscuits next to the Christmas tree for the Three Kings and some water for their camels. They also leave out their best pair of shoes to be filled with presents.

On the next day, 6 January children wake up and see how many presents they have received. If they have been good, they will find a lot of good presents but if they have been naughty they will find coal. These days, the coal is actually made of sugar, but some years ago it was real coal.

During this day, all families enjoy a piece of roscon (a sugar-frosted fruit-filled bread) for breakfast tradition says that the person who finds a novelty such as a coin, in his or her portion will have good luck for the next year.

Both young and old enjoy opening their presents on this day, but sadly it also marks the end of Christmas.

FINANCE & ECONOMICS - 2

2012-01-05T03:05:00.000-08:00

Spain sees €50bn of new bank provisions

By The Financial Times

Spain says it expects its banks to set aside up to €50bn in further provisions on their bad property assets as part of a new round of reforms for the country’s financial sector.

Luis de Guindos, economy minister in the centre-right government that took office two weeks ago after defeating the Socialists, said on Wednesday it was essential that the banks clean up their balance sheets without imposing a burden on the treasury.

The €50bn figure, equivalent to about 4 per cent of Spain’s GDP, is higher than private expectations by bankers.

Some analysts had speculated that the Popular party government of Mariano Rajoy, prime minister, would set up a large, state-funded “bad bank” like Ireland’s Nama to absorb the non-performing assets of lenders hit by the collapse of the housing bubble in 2007 and the subsequent European economic crisis.

However, strong Spanish banks such as Santander and BBVA opposed the “bad bank” idea, arguing that they could handle their own problems and that weaker lenders should if necessary be absorbed by their stronger rivals.

That is the path now being taken by the government with Mr de Guindos saying there should be another round of consolidation among cajas, or savings banks.

“If you take international valuations as in the case of Ireland, at the most you are talking about the need for €50bn of extra provisions [by banks in Spain],” he said. “In the great majority of cases, they can provide it themselves from their profits … and it could be done not in one year but over several years.”

Of the €338bn of property-related assets in the Spanish financial system, about €176bn are bad loans, substandard loans or repossessed properties and land, according to the Bank of Spain.

The banks have already covered a third of these bad assets with provisions. They were expecting to be told by the government and the Bank of Spain to set aside a further 20 per cent. An extra €50bn – more than 28 per cent – would be more of a stretch, especially when they are simultaneously trying to increase capital ratios to meet European regulatory demands.

Mr de Guindos said: “We have a property problem in Spain, but it’s manageable … This €50bn is about 4 per cent of Spanish GDP. This is not Ireland. It’s a completely different order of magnitude.”

Ireland’s budget deficit ballooned when it bailed out its banks, and the country itself had to be rescued by the European Union and the International Monetary Fund. Spain has already bailed out or nationalised seven lenders, spending over €21bn in state aid, some of it repayable, and deposit guarantee funds.

Mr de Guindos, former head of Lehman Brothers for Spain and Portugal until the investment bank collapsed in 2008, outlined other reforms that Spain will implement while also imposing new austerity measures.

They include strict new budgetary controls on the country’s 17 autonomous regions, which are blamed for contributing to Spain’s €22bn overshooting of its 2011 deficit target, and labour reforms that will give companies more power to set their own wages outside collective bargaining agreements for entire industrial sectors.

On Thursday, the cabinet is expected to announce plans to restructure the central government administration and rationalise state companies. A new round of cuts is due in March when the 2012 budget is unveiled.

FINANCE & ECONOMICS - 1

2012-01-05T02:58:00.000-08:00

FT interview transcript: Luis de Guindos

This is an edited transcript of an interview with Luis de Guindos, Spain’s economy and competitiveness minister.

Financial Times: How are you going to achieve growth and job creation at the same time as austerity?

Luis de Guindos: First, the reduction of the public deficit, which is unavoidable. You have seen that the first reaction of the Spanish government to the fact that the deficit outcome [for 2011] was about 8 per cent [of GDP] … the first reaction of the government was obviously to apply an adjustment programme of €15bn [$19bn], or about 1.5 per cent of Spanish GDP, to send a very clear message of the government’s commitment to budget consolidation, austerity and so on. As you know this is divided between €9bn of spending cuts and €6bn in personal income tax rises ... Evidently increasing income taxes for a centre-right party is a painful measure, but obviously essential. Spain could not come out within two or three weeks with a [deficit] figure of about 8 per cent, without a significant budgetary adjustment. So there is a real commitment. From there, the budgetary policy that we have to deal with this is Spain’s budgetary stability programme which we have to present in the months ahead in agreement with Brussels. From March, from the budgetary stability programme, we set out the path of the public deficit, and [in] March we present our national budget. This €15bn of adjustment already allows the next budget to converge with the numbers to which we committed ourselves, to converge towards the 4.4 per cent [of GDP deficit target for 2012] ... There, and this is especially important, a particularly intense effort will be demanded, in terms of budgetary adjustment, of the autonomous regions. And following the amendment to the constitution, on the issue of budgetary balance, the organic law will establish strict instruments of control over the budgets of the autonomous regions, which form an important part of the overshoot we had last year.

FT: This law is separate from the budget law in March?

LDG: Yes, the organic law on budgetary balance. What’s important is that there will be additional instruments of control and budgetary adjustment for the finances of the autonomous regions … The liquidity difficulties are truly an opportunity to impose hard conditions and measures in terms of reining in the deficits of the autonomous regions.

FT: Is the 4.4 per cent of GDP target [for the 2012 deficit] still valid?

LDG: The Spanish government maintains its budgetary commitments. Obviously we’ll have to see – it’s an important issue, we have already taken 1.5 percentage points of measures – but there are still differences and we’ll have to see how it’s distributed between the different administrations. But our commitment stays.

FT: Are there talks with the IMF or the EU on changing that given the size of the adjustment needed?

LDG: Any modification of the budgetary objectives … must be discussed at the level of the European Union, never at the level of Spain, so we will join the general trend. What is important is that in addition to the very notable budgetary adjustment of the central government, the autonomous regions will have to make a very big adjustment and with the new organic law I mentioned there will be very intense and strict control from the Spanish treasury and the Spanish budget ministry.

FT: Some people won’t like it.

LDG: It will fundamentally be to their benefit.

FT: But I must emphasise again, that it’s a huge adjustment required, perhaps €40bn, especially when GDP is expected to fall?

LDG: It is an important issue, obviously, but the initial idea of the Spanish government is to fulfil its commitment. For that we are fully aware that you must take important measures from the point of view of structural reforms, and furthermore very quickly, and we have a demanding agenda both as regards timing and content.

FT: Where will the growth come from, where will employment come from? Is labour the priority?

LDG: Labour reform and the financial sector, the banking industry. So the central point of the labour reform has to be modification of the system of collective bargaining in Spain. In Spain, the way companies adjust to a fall in demand is always through layoffs, essentially of those on temporary contracts, who are mainly young people, which explains why there is almost 50 per cent unemployment among the young. There is a problem from the point of view of the capacity of Spanish companies to deal with a fall in demand. In Spain, the fall in GDP during the crisis was average, but no other country, not even those bailed out, suffered such a deterioration of the labour market. Yes, it has a lot to do with construction, where adjustment has already happened, but also with the ability of companies to adapt to conditions. Firing people is the only way out. The modification would be to give much more emphasis to company wage agreements, in each company. Now in Spain what you have is sectoral wage bargaining agreements.

FT: It’s a bit like the UK in the 1960s?

LDG: It’s a legacy of Francoism and the single trade union, it’s corporatism … If you have to have sectoral agreements, what ought to be possible is that companies can detach [descolgarse] themselves, that they can set their own conditions, that they have a way out, if they think that the working hours, salary conditions and so on are not suitable for them. In Spain, there have been cases where companies have suffered a 50 per cent fall in demand for their products and the agreement has imposed on them a salary increase of CPI [inflation] plus 2 per cent. The only alternative that companies had was to lay people off. This is what needs to be changed.

FT: And financial reform? Spanish bankers are talking of having to add 20 per cent to provisions for bad property assets.

LDG: Let’s see, Spanish banks, with the injection of liquidity from the ECB with full allotment for three years and so on, liquidity has ceased to be a big problem ... So the issue is the problem of valuation of assets, toxic assets, of real estate exposure. I think the government will demand – there are three priorities. First, you must proceed with the clean-up [of balance sheets] and do so in a clear and very conclusive way, especially with the most problematic asset which is land. Two, this must be accompanied by a new round of consolidation, above all in the cajas de ahorros [savings banks]. This process of consolidation allows you to rationalise, reduce capacity, make efficiency synergies, etc. Three, it’s about minimising the cost impact on the Spanish treasury. We cannot contaminate the sovereign risk with the banking risk.

FT: But it’s already contaminated in both directions.

LDG: But this is a priority issue … When you look at the figures for a clean up, above all using international standards, the additional provisions are about €50bn for Spain … Total problematic real estate assets according to the Bank of Spain are about €170bn, of which 30 per cent have been provisioned already. If you take international valuations as in the case of Ireland, at the most you are talking about the need for €50bn of extra provisions [by banks in Spain]. In the great majority of cases, they can provide it themselves from their profits … and it could be done not in one year but over several years … This €50bn is about 4 per cent of Spanish GDP. This is not Ireland. It’s a completely different order of magnitude. We have a property problem in Spain, but it’s manageable ... It’s manageable for institutions with a new round of consolidation because remember that for Santander, the big banks, it’s obviously doable, but it’s not distributed evenly [among the different banks] – so you need an extra round of consolidation … Transparency and the clean up of the balance sheets is vital.

FT: What message are you sending out in your international meetings?

LDG: I have it very clear that in the Spanish economy we have profound imbalances. We have a public deficit that is close to 8 per cent of GDP, we have liquidity difficulties in the regional governments, we have a labour market that is the worst performing in our market all over Europe and the OECD, we have the necessity to introduce further transparency and clean up in our banking industry. I acknowledge the imbalances. But simultaneously the bright side, the silver lining as it were, is that you have the potential there, if you implement rapidly, swiftly and decisively a labour market reform, a banking industry restructuring and you put in order your public finances and show that you are going to put in place a serious government, I think the perception for Spain will be modified, and I think that markets discriminate at the end of the day.

FT: I’m sorry to keep emphasising this but I still wonder how you will combine growth with austerity.

LDG: I think we have to stress the importance of these reforms and their potential. I think these reforms might produce in terms of confidence and very rapidly positive effects on the Spanish economy, and afterwards this commitment with austerity creates also confidence in the marketplace. We cannot afford to go to the markets and say that, well, Spain is not going to be an orthodox campaign in terms of fiscal policies and in terms of reforms. This is something that would be extremely detrimental to the perception of the Spanish economy and extremely detrimental to the single currency. So it’s not only a national commitment, it’s also our main contribution to the future of the single currency.

FT: Do the Germans appreciate this? All five big European economies now have centre-right governments.

LDG: You have seen the statements from Germany. We are going to be very co-operative and very loyal members of the eurozone and we will try to do our best … I think that the single currency – reining in public deficits is important but I also think we will have to put much more stress and much more attention on structural reforms.

FT: Specifically how will you implement these controls on the regional government budgets?

LDG: It’s going to be in the law, but for instance you will have a priori controls. Before approving the budget ministers they will need the green light from the central government.

CURRENT AFFAIRS - 4

2011-12-28T10:53:00.000-08:00

2011: The year when a lot happened

A look back at the big stories on the BBC News website suggests it's been a tumultuous year, with uprisings across the Arab world, an earthquake in Japan and the deaths of Osama Bin Laden and Kim Jong-il. But can you instantly know if a year is going to go down in history.

BBC

As 2011 staggers to a close, it does feel somehow more momentous than an ordinary year. Regimes have crumbled, despots and demagogues were toppled, cities blazed and capitalism itself started looking a bit rough.

Even the speed of light changed, allegedly. Could this turn out to be a big, historical year to rank alongside 1989 (tanks in Tiananmen Square, dancing on the Berlin Wall), 1968 (tanks in Prague, riots in Paris, the death of Martin Luther King) or 1956 (Hungary, Suez, Elvis on the Ed Sullivan show)?

It's probably fair to say that the top story has to be the Arab Spring, although as a historical event, it's still a work in progress. And there are still arguments as to whether it is best regarded as a single event or a series of discrete revolts; it's fair to ask if a single Tunisian street vendor had not reacted to official harassment, would events have played out in the same way.

And there is always the matter of perspective. If you're not directly affected by events in North Africa or the Middle East, your own big headlines of 2011 might have been the births of the seven billionth child or South Sudan, the earthquakes in Turkey or New Zealand, the elections in Ireland or DR Congo or the deaths of footballer Socrates or singer Amy Winehouse.

But two facts are clear. One is that there are very few big stories that remain purely local. The knock-on effects of the tsunami in Japan forced governments around the world to review their nuclear power policies. Economic woes in a handful of countries affected the whole eurozone and beyond. The "Indignant" protesters in Spain set the agenda - fluid and unfocused as it may have been - for the Occupy movements in New York and London and beyond.

The floods in Thailand engulfed dozens of factories making electronic components, which means your next laptop or phone or games console may well cost more, wherever in the world you buy it. Followers of British politics will be sick of hearing it, but we really are all in this together.

The other change is that the way in which we receive and consume news of these events has become as significant as the events themselves. The first inkling of the raid that killed Osama Bin Laden came not from President Obama's solemn press conference, but from one of the al-Qaeda leader's unwitting neighbours in Abbottabad, musing aloud on Twitter about the US helicopter that had suddenly disturbed his evening.

As English cities smouldered after nights of guerrilla consumerism, politicians and pundits debated the logistics of suspending the social media sites with which marauding hoodies had supposedly plotted the riots. And how many people first got the news of Steve Jobs's death via one of his own devices?

But it wasn't just the speed with which the news travelled, or the medium that carried it, that made 2011 stand apart from previous big years.

The news itself, the whole convoluted question of what we should and shouldn't be allowed to know, hogged the headlines for weeks on end. Julian Assange went from crusading hero to arrogant, dangerous weirdo, depending on who was telling the story, but the questions raised by Wikileaks, of the extent to which governments should be entitled to keep secrets from the people who elect them, remain live topics.

The super-injunctions saga in the UK prompted smirks and sniggers - again, many of them echoing around social media sites, which tend to be less nervous about libel laws - but did raise significant questions about whether public figures should be entitled to private lives.

And then the phone-hacking scandal at Rupert Murdoch's News of the World, which had been rumbling for years, suddenly burst into public view, engulfing several careers, dragging several other newspapers into the argument and alerting us to Hugh Grant's middle name.

There were, as in any year, a number of natural disasters but in terms of death toll no single catastrophe to compare with the Bam earthquake in 2003, the tsunami in 2004 or the Sichuan quake in 2008. That said it's an uncomfortable truth that people in the West have a more intense reaction to such events befalling advanced, developed places such as Japan and New Zealand, compared to the response when they happen elsewhere.

So was 2011 really a big news year, like 1956, 1968 or 1989? Or is it just that each news story that rolls into view is now immediately seized on not just by the news media but by bloggers and Tweeters and Google+-ers who analyse it from every known political and religious and philosophical standpoint, with a good few conspiracy theories thrown in, so everything seems bigger and more complex - and usually far worse - than it might have done otherwise?

And even those who don't see themselves as part of either mainstream or unofficial media have taken the chance to peek behind Oz's curtain, to see how politicians and journalists and bankers and lobbyists have tweaked reality to their own ends.

In the end that - rather than any revolution or riot or earthquake or media scandal - may turn out to be the biggest, most historically significant story of the year.

FINANCE & ECONOMICS - 2

2011-12-14T03:29:00.000-08:00

Inditex sales growth slows on warmer weather

The Financial Times

Sales growth in the third quarter at Inditex, the owner of the Zara clothes chain, was its second slowest quarter since 2001 in spite of the company achieving its highest ever gross margin.

Against a backdrop of unseasonably hot winter weather across Europe that has slowed sales of coats and jumpers, Inditex, which this year surpassed H&M to become the world’s largest listed clothing retailer by value, said that sales for the third quarter rose annually by 4.8 per cent to €3.5bn.

The Galicia-based outlet’s rapid proliferation of stores continued apace, opening 358 new outlets over the first nine months of the year, or almost 10 new stores every week across 45 separate countries. Its total store count now stands at 5,402 up to the end of October.

This included 79 new stores in China, taking its count to 250 across 42 cities. At the end of the third quarter the company said it had opened its first stores in South Africa, Taiwan and Azerbaijan, and would soon open outlets in Georgia and Peru.

Shares in Inditex, founded and still majority controlled by Amancio Ortega, Spain’s richest man, have hit all-time highs this year in spite of a large sell-off in the general market as the company has continued to show few severe signs of being affected by a sharp drop in consumer spending across Western Europe.

In Madrid, on Wednesday, shares were up more than 3 per cent in early trading at €63.63.

Inditex’s gross margin, a measure closely watched by investors and analysts anxious that rising costs have not shaved its profitability, was the company’s highest on record, increasing 100 basis points to 61.7 per cent compared to the third quarter in the previous year.

The company had previously pledged to investors to hold on to at least half of its gross margin gains from last year. By the third quarter all of its brands, which include Massimo Dutti, Pull&Bear, and Oysho, had launched online stores in Europe. The company does not yet split out its online sales.

Earnings before interest, taxation, depreciation and amortisation rose 5.8 per cent for the quarter from the year before to €956m, while net profit increased 6.4 per cent to €586m.

Earnings per share rose from €0.88 in the third quarter last year to €0.94.

CURRENT AFFAIRS - 3

2011-12-13T14:28:00.000-08:00

Italian black cat becomes a fat cat after inheriting 10 million euros

A black cat in Italy has lived up to its reputation for good luck after inheriting 10 million euros (£8.5 million) from his adoptive owner, a widowed heiress.

The Telegraph

Four-year-old Tommaso, who was saved from a hardscrabble existence on the mean streets of Rome, Italy, as a kitten, is now the proud owner of cash, shares and a property empire which includes flats and houses in Rome and Milan and land in Calabria.

Tommaso went from flea-bitten alley cat to "pussy galore" after being rescued by a lonely old lady, named only as Maria Assunta, who was married to a property tycoon but widowed at an early age. The couple had no children.

She became besotted with her pet but as her health began to fail, feared for his future.

So in November 2009 she wrote out a will in which she bequeathed her "entire estate" to the unknowing Tommaso.

She instructed her lawyers to "identify an animal welfare association or group to which to leave the estate and the commitment of looking after Tommaso".

But none of the animal welfare associations matched up to the old lady's exacting standards so she instead decided to leave her fortune to Tommaso through the nurse who had cared for her in her final months, a woman named Stefania.

The will came into force when the heiress died two weeks ago at the age of 94.

"She had become very fond towards the nurse who assisted her," Anna Orecchioni, one of the lawyers, told Il Messaggero newspaper.

"We're convinced that Stefania is the right person to carry out the old lady's wishes. She loves animals just like the woman she devoted herself to right up until the end."

The nurse said she had no inkling that her charge was so rich. "I promised her that I would look after the cat when she was no longer around. She wanted to be sure that Tommaso would be loved and cuddled. But I never imagined that she had this sort of wealth. She was very discreet and quite, I knew very little of her private life. She only told me that she had suffered from loneliness a lot."

Tommaso now lives with his new owner and another cat in a house outside Rome. The address is being kept a secret, out of fears that the newly-enriched moggy will be besieged by fortune hunters and con men.

CURRENT AFFAIRS - 2

2011-12-12T12:47:00.000-08:00

Spain tops the European table for number of overqualified workers

Almost one out of three people in jobs that do not match education level

EL PAÍS

Spain is the European Union country with the greatest amount of overqualified workers, meaning those with a college degree or vocational training certificate who hold a job beneath their training level. While the average for the EU of 27 was 19 percent, that figure reached 31 percent in Spain, according to a Eurostat study using 2008 figures.

These numbers refer to the native-born population. For the foreign-born, the over-qualification rate jumped to 58 percent in Spain versus 34 percent for the 27 members of the EU as a whole. The study concludes that "when employed, foreign-born persons often have more difficulties in finding a job corresponding to their level of education." The highest gap between overqualified natives and overqualified foreigners was to be found in Belgium, with rates of five percent and 14 percent respectively.

Over-qualification has been a serious problem in Spain for years, as the schooling level of the general population - especially attendance at higher education centers - has risen much faster than the number of available jobs for highly qualified workers. In a country whose economy has rested mostly on construction and the services sector, notably tourism, the percentage of the Spanish population with higher studies grew from 21 percent to 30 percent in the space of a decade, between 1999 and 2009.

An earlier study using 2006 data already showed Spain as being one of the countries with the largest number of overqualified workers (38 percent) in Europe. That study, however, did not differentiate between native-born and foreign-born workers.

In any case, three long years of economic crisis have elapsed since those figures were collected and analyzed, and there have been dramatic changes in the Spanish unemployment rate, which shot up from 11 percent to over 20 percent (45 percent for young people). In 2009, José García-Montalvo, an economics professor at Pompeu Fabra University, predicted that over-qualification levels in Spain could rise even more in the midterm, since many people with few or no studies and out of a job might take that opportunity to get a higher degree, thus pushing up overall educational levels in the country. Recent enrollment figures seem to confirm that prediction, as registrations in mid-level vocational courses grew over 15 percent in the last two school years, while college admissions rose around 10 percent.

Meanwhile, there is nothing to suggest a similar rise in available jobs for highly qualified workers.

Over-qualification rates may have already varied greatly for foreign-born workers, since nine out of every 10 people who move out of the country are foreigners, according to Spain's National Statistics Institute. The over-qualification rate for foreign-born workers in Spain was 58 percent in 2008, only surpassed by Greece at 62 percent. In general, the gap between both groups is enormous across the 27 member states. Foreigners were also much more likely to fall into poverty (18 percent for natives and 32 percent for foreigners) or to live in crowded dwellings (three percent versus 12 percent), a reflection of a less favorable socioeconomic situation.

VIDEO

2011-12-08T01:27:00.000-08:00

HMS OCEAN´S CREW MIMING TO MARIAH CAREY´S CHRISTMAS SONG

The crew of the Royal Navy warship returning from supporting the UN air mission during the uprising against Colonel Muammar Gaddafi decide to have a bit of fun ! The video on youtube has become a world-wide hit. The worrying thing is that these people are protecting the country !!!

CURRENT AFFAIRS - 1

2011-12-05T09:09:00.000-08:00

THEY are the first daughters of Europe's retail royalty.

Young heiresses Marta Ortega Perez, of Zara, and Topshop's Chloe Green are both being groomed by their fathers to inherit billion-dollar global fashion empires, potentially propelling them into the ranks of the world's richest women.

The athletic and elegant Marta, 27, started work at her father's company Zara, stocking shelves and folding clothes in the Spanish company's London and Barcelona stores.

Her 72-year-old father Amancio Ortega net worth $31 billion is the richest man in Spain and the seventh richest person in the world, according to Forbes.

Marta stands to inherit his fashion giant Inditex's 5221 shops in 80 countries around the world, operating under brand names including Zara, Massimo Dutti, Pull & Bear and Bershka.

The group has 92,000 employees and a $16,874 million turnover last year.

The company also expanded into Australia for the first time, opening a Zara store in Melbourne this year.

Marta's inheritance also includes a massive luxury real estate portfolio, including commercial office blocks in Miami, New York, Lisbon, London, Moscow, Rome, Madrid, Barcelona and Paris; a horse-jumping circuit her father built for her, a stake in a Spanish football team and interests in gas, tourism and banks.

It is a fortune worth 24 times more than Paris Hilton's, according to Vanity Fair.

But unlike Hilton, the university-educated Marta is a mystery to the press.

"Discreet and inaccessible, she doesn't concede interviews," Spanish society magazine Vanitatis said.

"She only has eyes for her family, her boyfriend, horses and the family firm which, perhaps very shortly, will be more hers than ever."

Co-workers at the Zara branch in London's Chelsea, where Marta worked in 2007, recalled a shy girl.

"Sometimes she doesn't even look up from the ground," a former co-worker told Spanish newspaper El Correo.

"One day, when I didn't know who she was, I looked and saw a really expensive Rolex watch on her wrist.

"In Zara, we can all wear the latest fashion items but not a watch like that.

Ortega, the son of a railway worker, made dressing gowns in his living room before opening his first shop in 1975.

He handed the direction of Inditex to his number two, Pablo Isla, 46, when he stepped down as president of Inditex at the start of this year.

Marta, who has worked in the company's offices in Paris and Asia, will be handed control from Isla when she feels ready, industry analysts predicted.

Marta is believed to be working in the company's marketing department and is due to marry show jumper Sergio Alvarez Moya in Spain in February in a Zara-made wedding dress.

"You couldn't say Marta was a pupil who got top marks at school but like her father, she always had a great deal of will and a strong work ethic," a family friend told El Pais.

"She's also a very sensible person and that can make her appear older than she is."

Marta's father is adamant his daughter stays out of the spotlight, telling reporters in 2008: "Who knows what the future holds? What I don't want is the newspapers talking about her. I want the press to leave her alone so she can learn and work and we'll see what she can do in the future."

FINANCE & ECONOMICS - 1

2011-12-05T03:54:00.000-08:00

Europe’s Financial Crisis, in Plain English

The New York Times

Much like our own recent housing crisis, the European financial mess is unfolding in a foreign language. It is the lingua franca of financial obscurity — “sovereign credit spreads” and other terms that most people don’t need, or care, to know.

Yet the bottom line is simple: Europe’s problems are a lot like ours, only worse. Like Wall Street, Germany is where the money is. Italy, like California, has let bad governance squander great natural resources. Greece is like a much older version of Mississippi — forever poor and living a bit too much off its richer neighbors. Slovenia, Slovakia and Estonia are like the heartland states that learned the hard way how entwined so-called Main Street is with Wall Street. Now remember that these countries share neither a government nor a language. Nor a realistic bailout plan, either.

Lack of fluency in financialese shouldn’t preclude anyone from understanding what is going on in Europe or what may yet happen. So we’ve answered some of the most pressing questions in a language everyone can comprehend. Though the word for “Lehman” in virtually any language is still “Lehman.”

Q: Will the euro survive?

It’s a dangerous question to ask out loud. Suppose a credible rumor spread throughout Greece that, rather than accept the harsh terms of another bailout package, the government was plotting to revert to the drachma. Fearing the devaluation of their savings, Greeks would move their money somewhere safer, like a German bank. The Greek banking system would then, in all likelihood, implode.

But Greece’s economy is too small for an isolated collapse to cause any significant damage throughout the continent. (Even a collapse confined to Greece, Ireland and Portugal couldn’t take down Europe.) So the concern about a run on the Greek banking system is largely about whether a panic might spread to Spain or — worse — Italy, which could topple Europe’s financial system. Maybe that’s why the treaty that created the euro doesn’t say anything about a country’s abandoning the currency. Or why European leaders scarcely mentioned the possibility (not in public, at least) until this fall, two years into the crisis.

Q: Why is it such a bad thing for a country to abandon the euro?

If a country did pull off a surprise euro exit — and get out before everybody could take their money out of the banks — there would still be a period of economic chaos. Exports and imports would shut down. Lending would collapse, which would send companies into bankruptcy. Ripple effects would be felt throughout Europe.

The problem is thorny enough that the British chief executive of Next, a European retailer, recently offered a £250,000 prize for the person who comes up with the best plan for countries to leave the euro without destroying the European economy. (Have a brilliant idea? Entries are due early next year.)

Q: Wait a minute: If leaving the eurozone would be so awful, why would anyone do it?

It’s not all bad. Leaving the euro would allow a country to ignore demands from the leaders of other European countries. It could simply refuse to pay its debt.

After the short-run pain, weaker European countries could also see a long-term benefit. If Greece or Portugal went back to the drachma or the escudo, the cost of their exports would fall. Because it would be cheaper for foreign travelers to stay in their hotels and eat in their restaurants, their tourism industries would get a bump, too. The alternative is to spend the next decade as poor countries tied to a rich one’s currency.

Q: Why exactly does Angela Merkel always look so woebegone?

For the euro to survive in the long run, Germany — the zone’s biggest economy — will most likely need to vouch for the debt of struggling eurozone members. And it will become more expensive to borrow money if bond investors fear the country is becoming overextended.

The Germans are also wary of the widespread calls for the European Central Bank to buoy Spain and Italy by buying their bonds. If they know the E.C.B. will bail them out, what will be their incentive to act responsibly in the future? Worse, Germans argue, printing money to pay off government debt (which is what the E.C.B. would essentially be doing) is the first step to hyperinflation.

Q: What happens to the European Union if the euro crumbles?

It turns out that a bunch of vastly different countries, each with control over its own budget but all bound to a common currency, is not a sustainable economic model. And that leaves Europe with two main, and painful, options.

Option 1: Keep the euro, and make the eurozone even more integrated. While this doesn’t necessarily require a full-blown United States of Europe, individual countries would probably have to give bureaucrats in Brussels or Frankfurt power over how much money they can spend. The E.C.B. might promise to do whatever is necessary to stop a panic, but poorer eurozone countries would very likely endure years of difficult economic adjustments, including falling wages.

Option 2: Greece and perhaps a few other struggling countries on the periphery leave the euro. A Greek exit alone might give the European dream a hard kick in the teeth, but it wouldn’t necessarily be fatal. It might, in fact, even prod European leaders to act more boldly to defend the rest of the eurozone. But the departure of Italy — the zone’s third-largest economy — would be a different story. Italy is what wonks call a systemically important country, which means that it is so big, and so intertwined with the rest of Europe, that it would take the whole eurozone down with it. Think massive disruptions to European trade, chaos in the financial system and a dose of political and social unrest.

Q: What does this mean for the U.S.?

Fortunately, exports to eurozone countries amount to only about 3 percent of America’s overall economy. The bigger worry, though, is the financial system. U.S. banks say their exposure to Europe is manageable, but when you ask smart people what a financial disaster in Europe would mean for the U.S., their answer usually goes, “Blah, blah, blah, Lehman.” To put a finer point on it: when Lehman Brothers went bankrupt in the fall of 2008, it initiated a global financial panic greater than almost anyone predicted, largely because of uncertainty. Nobody knew who owed what to whom. The global financial system froze, with disastrous consequences.

European banks currently hold an extraordinary amount of European debt. And while U.S. banks have been reporting more details about their exposure to European banks, there still is a tremendous sense of uncertainty about who is on the hook, and for what, exactly. If Europe’s biggest banks go down, it could very well cause another Lehman-like crisis in the U.S. The good news: It’s still an “if.”

CURRENT AFFAIRS - 3

2011-11-21T03:16:00.000-08:00

Rajoy sweeps to record victory in Spain

The Financial Times

Mariano Rajoy led Spain’s centre-right Popular party to the biggest election victory in its history on Sunday, consigning the incumbent Socialists to the political wilderness and making them the latest casualties of the eurozone’s deepening sovereign debt crisis.

With 99 per cent of the votes counted, the PP had secured 186 seats in the 350-seat lower house of parliament, leaving the Socialists with just 110.

In an address to the nation from the balcony of the PP’s Madrid headquarters, Mr Rajoy pledged to run an inclusive government to try to restore Spain’s economy and its international reputation.

“There will be no enemies for me other than unemployment, the deficit, excessive debt and economic stagnation,” he said to cheers from supporters in the street below, adding that the task ahead was “immense” and that there would be “no miracles”.

Mr Rajoy also said he would convene a meeting with the governments of Spain’s 17 autonomous regions, which have been blamed for their contribution to a public sector deficit that peaked at 11.1 per cent of gross domestic product in 2009.

The normally undemonstrative PP leader allowed himself a brief jump for joy on the podium in the company of his party colleagues before warning of difficult times ahead and pledging to start work on Monday morning.

Alfredo Pérez Rubalcaba, the Socialist candidate, recognised that his party had “clearly lost” the elections and reminded Mr Rajoy of “the important responsibility” he had during an “especially difficult situation for Spanish society”.

The PP’s victory heralds the latest change of government in the eurozone – following those in Ireland, Portugal, Greece and Italy – as a result of the regional sovereign debt crisis that has already pushed the first three into bail-outs.

Both Italy and Spain are now threatened by the unsustainably high interest rates they have to pay to borrow on the bond markets. So large are their economies and their funding needs that if they too seek help the 17-nation eurozone itself would be at risk of collapse.

Interest rates for Spain and Italy reached critical levels last week, threatening the public borrowing programmes of both countries despite Mr Rajoy’s anticipated election win and the appointment of Mario Monti, a former European commissioner, as Italian prime minister.

President Nicolas Sarkozy of France – also of the centre-right – said on Sunday night that he knew he could count on Mr Rajoy to help overcome the “unprecedented economic and financial crisis” and to restore stability and growth to the eurozone.

On Thursday, the Spanish Treasury issued 10-year debt at an average annual yield of nearly 7 per cent, although intervention by the European Central Bank subsequently brought down rates in the secondary markets.

Details of the Spanish election results, and Mr Rajoy’s announcements, will be examined on Monday by eurozone bond market investors eager to know how Spain plans to continue cutting its annual budget deficit without falling back into economic recession.

Mr Rajoy, 56, has promised to enforce budgetary austerity and liberalise the rigid labour market in an effort to cut unemployment of more than 5m and restore the confidence of jittery international bond markets.

By winning an absolute majority of seats in the lower house of parliament, the PP will not need to rely on support from small regional parties to pass new laws.

Even so, several smaller parties did well in the election, notably the hard-left Izquierda Unida (United Left), which won support from disenchanted Socialists, and Amaiur, which represents radical Basque nationalists. IU won 11 seats and Amaiur took seven, beating the once powerful Basque Nationalist party (PNV).

José Luis Rodríguez Zapatero, the Socialist prime minister since 2004, was applauded by some bystanders and insulted by others when he cast his vote in Madrid on Sunday morning. He has been sharply criticised by business leaders for being too slow to accept that the crisis after the collapse of Lehman Brothers in September 2008 required drastic austerity measures and reforms to restore Spain’s competitiveness.

Spain’s next government, which can take power only after parliament reconvenes on December 13, will face the immediate task of trying to soothe bond markets. Mr Rajoy and Mr Zapatero have agreed to work together if necessary in the interregnum.

Investors have lost confidence in the ability of several eurozone nations to honour their debts following negotiations on a Greek debt restructuring.

On the last day of election campaigning on Friday, Mr Rajoy pleaded with financial markets to grant new governments “more than half an hour” in which to turn round their economies.

Many Spanish voters grew weary of Mr Zapatero and the Socialists after more than three years of crisis, although most of them are aware that the incoming government will struggle to revive economic growth and restore investor confidence.

“We need something fresh,” said José Luis Varela, an architect, shortly before casting his vote for the PP in a wealthy suburb north of the capital Madrid on a rainy autumn day. “A changeover is necessary.”

Aurelio Román, 28, who works in a logistics company, said he strongly believed that Spain needed to push through liberalising reforms, but was not planning to vote for either of the large parties.

“I think the PP could be the party to make some of the reforms we need, but I will not vote for them, as I cannot support their social and religious conservatism,” he said. “We need to make changes in this country but we lack a real liberal party to make them.”

Elena, 35, said she was backing the Socialists. “They have ideas to reduce unemployment, and to exit the crisis, with fewer cuts to social services. The PP have not made any concrete proposals – their programme basically doesn’t exist.”

FINANCE & ECONOMICS - 2

2011-11-16T08:52:00.000-08:00

What's the matter with Spain?

BBC

Whoever wins Spain's general election on Sunday - and it looks likely to be the opposition conservatives - will face a potentially unsolvable economic dilemma.

They may also face a major financial crisis.

Because, with Italy having now joined Greece, Portugal and the Irish Republic on the eurozone critical list, it is looking like Spain will be next.

The government's cost of borrowing money on the financial markets for 10 years - a popular barometer of lender fear - has risen to 6.3%.

That's close to the level where other eurozone governments turned to their neighbours for a bailout.

In comparison, Germany only has to pay an interest rate of 1.8%.

Off-message

However, Spain's descent into the financial abyss is important for more than the fact that it is - like Italy - an enormous economy that may be too big to rescue.

It is because Spain does not fit the narrative.

Indeed, Spain's story lays bare the fact that the eurozone's problems run far deeper than the issue of excessive borrowing by ill-disciplined governments, which most politicians have focused on.

Until now it has been easy to blame southern Europeans for their economic woes.

Greece couldn't control its spending, and lied about its borrowing statistics.

Portugal also borrowed and spent too much.

Italy, while more frugal, simply has way too much debt - a legacy of government profligacy from way back in the 1970s and 1980s.

But Spain has been a model European. Unlike, say, Germany.

Breaking the rules

When the euro was first conceived in the 1990s, Germany insisted on a "stability pact" to ensure that governments inside the eurozone would keep their finances in order.

Each government promised to keep their total borrowing each year to less than 3% of their GDP - the total output of their economy.

And to join the euro in the first place, they were also supposed to have debts less than 60% of their GDP.

That latter requirement was dropped at the outset, because otherwise Germany itself would have failed to qualify. Its debts, when the euro was created in 1999, were 60.9% of its GDP.

Then the entire stability pact had to be scrapped, as Germany broke the 3% annual borrowing limit every year from 2002 to 2005.

What about Spain? When it joined the euro in 1999, it admittedly also broke the debt rule, with a ratio of 62.3%.

But the Spanish government then proceeded to run a balanced budget on average - that is to say, its borrowing was zero - every year until the eve of the 2008 financial crisis.

And as Spain's economy grew rapidly, its debt ratio fell to a mere 36% of GDP by 2007. Germany's, by contrast, continued to rise.

So, given this record, why are markets telling us that they fear Spain may not repay its debts, while they think Germany's debts are the safest bet within the eurozone?

It doesn't seem entirely fair.

Boom and bust

The reason is that Spain is facing an impossible economic dilemma.

When Spain joined the euro, interest rates fell to the much lower levels typical in Germany.

While the Spanish government resisted the lure of cheap loans, most ordinary Spaniards did not.

The country experienced a long boom, underpinned by a housing bubble, as Spanish households took on bigger and bigger mortgages.

House prices rose 44% from 2004 to 2008, at the tail end of a housing boom, according to ministry of housing data. Since the bubble burst, they have fallen 17%.

During the boom years, Spaniards earned more and spent more.

That helped to flatter the government's finances. More economic activity means more tax revenues.

But it also helped push Spanish wages up to uncompetitive levels.

Unit labour costs in Spain - a measure of the cost of employing an average Spaniard - rose 36% from the euro's creation in 1999 until the end of 2008.

Contrast that with Germany, where unit labour costs rose just 3% over the same period.

Shrunken economy

Now Spain is bust.

Its workers are overpriced compared with German workers. Its construction sector - bloated during the building boom - has collapsed.

Households are cutting their spending as they struggle to repay their debts. And unemployment - always high in Spain - has shot up to 21.5% of the workforce.

The economy, which grew 3.7% per year on average from the euro's foundation until the end of 2007, has since shrunk at an annual rate of 1%.

So, although the Spanish government still has relatively little existing debts, it is now having to borrow like crazy to fill the gap left by the jump in unemployment benefits and collapse in tax revenues during the downturn.

And the government may also have to throw a lot more money at its banks, which are looking very exposed to the housing collapse thanks to all the mortgages they have lent.

All of which makes financial markets nervous about lending to Spain.

Inflate or devalue

But here is the nasty dilemma facing the incoming Spanish government.

To get out of its economic hole, Spanish workers need to regain their competitive edge. That will boost demand for Spanish output, and help the economy grow.

And a growing economy is one that can support a heavy debt load.

But how will they do this?

If workers agree to large wage cuts - which is unlikely unless unemployment rises even higher - they will find their mortgages even harder to repay.

So most Spaniards would spend less, and many might be unable to repay the banks, all of which would make the economic downturn even more severe.

On the other hand, if Spanish workers increase their wages, they will become even less competitive and lose even more business to their eurozone competitors.

There are two possible solutions.

First, German wages could rise much more quickly. That means Spaniards could regain a price advantage without having to take a wage cut.

To achieve this, the European Central Bank would probably need to raise its inflation target to a level higher than the current 2% rate. That is an absolute no-no at the ECB, particularly among its German members.

The alternative is that Spain could leave the euro and devalue the newly recreated peseta. Spanish wages would fall with the peseta's value, but so would their debts.

Leaving the euro would also largely eliminate the risk of the Spanish government running out of money, because the Spanish central bank would be free to bail it out - something the ECB has refused to do.

However, it is precisely the possibility of a break-up of the euro that now has financial markets most worried of all.

FINANACE & ECONOMICS - 1

2011-11-06T08:58:00.000-08:00

Eurozone crisis: The possible resolutions

BBC Nov 2011

What could happen next?

Option 1. Countries muddle through

Leaders introduce measures on a gradual basis to try to contain the problem

Likely impact

•Uncertainty and risk remain and the restoration of market confidence is delayed
•The lack of confidence has a negative effect on borrowing costs and growth, not just in Greece and other eurozone countries, but elsewhere
•Recession becomes a near certainty in Japan, Greece, Portugal, Italy and Spain. The probability of a recession in the UK rises to about 70%

Option 2. Economy after economy defaults

A default in one country, such as Greece, forces other vulnerable eurozone economies to default

Likely impact

•Once Greece defaults, other countries become more likely to default as investors become worried about risks in the region. Other European banks and pension funds that hold large amounts of Greek debt would also face losses
•Portugal is the most likely next candidate for default. Other vulnerable countries include Irish Republic, Spain and Italy
•Defaults by several eurozone countries would make a generalised banking crisis likely

Option 3. Greece exits the euro

Allowing or forcing Greece to leave the eurozone

Likely impact

•Greek devaluation would be certain - as investors would attach a high risk to the country - and default would be likely
•A run on Greek banks would follow, meaning a collapse of the Greek financial system. International creditors would incur huge losses, Greek businesses would go bust, and the Greek people would face high inflation
•Other possible consequences are mass emigration, especially of skilled labour, towards other EU countries offering higher wages. There could also be new barriers to trade. Overall, UBS estimates leaving the euro would cost every Greek person up to 11,500 euros in the the first year

SOURCE: NATIONAL INSTITUTE OF ECONOMIC AND SOCIAL RESEARCH, UBS, ROBERT PESTON

CURRENT AFFAIRS - 2

2011-11-04T11:25:00.000-07:00

Spain election campaigning starts

BBC News

Campaigning has officially started for Spain's parliamentary elections, which are taking place in two weeks.

All the opinion polls point to the centre-right opposition Popular Party (PP) beating the governing Socialists (PSOE) by at least 15 points.

Spain is facing its worst economic crisis in decades, with an unemployment rate close to 22% - more than twice the European Union average.

There are also signs that the country is heading back to recession.

Punishment vote

This election will show exactly how Spaniards feel about the state of their economy.

"Election campaign begins, crushed by the economic situation," was today's headline in El Pais newspaper. "The unemployment election campaign begins," said El Mundo.

Job creation is the key issue here - almost the only topic of discussion in the campaign. Almost 5m people are out of work, and 1.5m households now have no wage-earner at all.

The Socialist government of Prime Minister Jose Luis Rodriguez Zapatero is trying to blame this desperate state of affairs on the global economic crisis.

But all the polls so far predict its resounding defeat.

They suggest it will be a punishment vote, which will likely hand the Popular Party an all-out majority in parliament.

The party's candidate for prime minister, Mariano Rajoy, has already lost two general elections.

This time, victory for Mr Rajoy, 56, would be almost by default.

Positioning himself carefully as a moderate, he is pitching this election as a vote for change whilst steering clear of radical proposals.

Mr Rajoy slammed Spain's unemployment rate as "unbearable and unacceptable" as the latest data showed 4,350 people per day losing their job in October.

The Socialists, he said, "did not know how to manage Spain's economy, and now the Spanish people are paying the price for that."

He promises he will shepherd Spain out of crisis - recovering the shaky confidence of international investors and so reducing the government's ominously high borrowing costs.

Contagion fears

The debt crisis in Greece has raised concerns over the solvency of other weak economies, like Spain.

So the PP campaign slogan calls on voters to "Join the change!"

The party manifesto stresses its commitment to cutting the country's swollen budget deficit in line with EU requirements.

It proposes tax breaks for savers and small firms who hire staff; benefits for those who take on young employees; more flexible labour contracts and wage negotiations and big cuts in red tape, to encourage entrepreneurs to set up in business.

At the same time, it pledges to protect public healthcare and education, saving money through efficiency and better management.

Welfare at stake

The PSOE's candidate for prime minister is former Interior Minister Alfredo Perez Rubalcaba.

The party's campaign slogan captures its embattled mood. "Fight For What You Want!" it urges voters, and posits the party as the only true defender of the welfare state.

Mr Rubalcaba has pledged to raise taxes on the wealthy to help pay for that. He warns that the PP is planning deep and painful cuts in social spending to meet its deficit targets.

He argues that too much austerity endangers economic growth and he is calling for stimulus investments, at a European level.

The PSOE insists the battle is not over.

It still hopes the historic end of violence by the Basque separatist militant group Eta will bring in votes. And its rhetoric has begun to include clear appeals to the 'Indignant' movement which began a wave of street protests back in May.

But Mr Rubalcaba was the number two in government before the election campaign and his party has been in power for eight years.

So his claim that he now has the solution to Spain's problems rings pretty hollow with many voters.

Two weeks of intense campaigning and debate lie ahead. But as it stands, the Socialists appear to be heading for overwhelming defeat at the polls.

The latest survey from the government's Centre for Sociological Research (CIS) suggests the Socialists are heading for their worst ever defeat - a full 16.7% behind the PP.

CURRENT AFFAIRS - 1

2011-11-04T11:13:00.000-07:00

Spain's stolen babies and the families who lived a lie

BBC News, Spain

Spanish society has been shaken by allegations of the theft and trafficking of thousands of babies by nuns, priests and doctors, which started under Franco and continued up to the 1990s.

I first met Manoli Pagador in Getafe, in a working-class suburb of Madrid. She was attending a meeting for people affected by the scandal Spaniards call "ninos robados" - stolen children.

She has three daughters and lots of grandchildren, but she has never got over the loss of her first-born - a son - nearly 40 years ago.

She had come to think she was crazy for believing he was alive, instead of dead and buried as hospital doctors had told her.

"Now," she said, gripping my hand tightly. "Look around the room at the other women here. All like me. The same background. The same experience. I'm not mad and my family finally believes me."

In 1971 Manoli, who was 23 at the time and not long married, gave birth to what she was told was a healthy baby boy, but he was immediately taken away for what were called routine tests.

Nine interminable hours passed. "Then, a nun, who was also a nurse, coldly informed me that my baby had died," she says.

They would not let her have her son's body, nor would they tell her when the funeral would be.

Did she not think to question the hospital staff?

"Doctors, nuns?" she says, almost in horror. "I couldn't accuse them of lying. This was Franco's Spain. A dictatorship. Even now we Spaniards tend not to question authority."

The scale of the baby trafficking was unknown until this year, when two men - Antonio Barroso and Juan Luis Moreno, childhood friends from a seaside town near Barcelona - discovered that they had been bought from a nun. Their parents weren't their real parents, and their life had been built on a lie.

Juan Luis Moreno discovered the truth when the man he had been brought to call "father" was on his deathbed.

"He said, 'I bought you from a priest in Zaragoza'. He said that Antonio had been bought as well."

The pair were hurt and angry. They say they felt like two dogs that had been bought at a pet shop. An adoption lawyer they turned to for advice said he came across cases like theirs all the time.

The pair went to the press and suddenly the story was everywhere. Mothers began to come forward across Spain with disturbingly similar stories.

'Approved families'

After months of requests from the BBC, the Spanish government finally put forward Angel Nunez from the justice ministry to talk to me about Spain's stolen children.

Asked if babies were stolen, Mr Nunez replied: "Without a doubt".

"How many?" I asked.

"I don't dare to come up with figures," he answered carefully. "But from the volume of official investigations I dare to say there were many."

Lawyers believe that up to 300,000 babies were taken.

The practice of removing children from parents deemed "undesirable" and placing them with "approved" families, began in the 1930s under the dictator General Francisco Franco.

At that time, the motivation may have been ideological. But years later, it seemed to change - babies began to be taken from parents considered morally - or economically - deficient. It became a money-spinner, too.

The scandal is closely linked to the Catholic Church, which under Franco assumed a prominent role in Spain's social services including hospitals, schools and children's homes.

Nuns and priests compiled waiting lists of would-be adoptive parents, while doctors were said to have lied to mothers about the fate of their children.

The name of one doctor, Dr Eduardo Vela, has come up in a number of victim investigations.

In 1981, Civil Registry sources indicate that 70% of births at Dr Vela's San Ramon clinic in Madrid were registered as "mother unknown".

This was legal under Spanish law, and was meant to protect the anonymity of unmarried mothers. It is alleged that this was also widely used to cover up baby theft and trafficking.

Dr Vela stands accused of telling women their babies had died when they had not and handing over those newborn children to other couples for cash.

A Spanish magazine published photographs of a dead baby kept in a freezer at the San Ramon clinic, supposedly to show mothers that their child had died.

He refused to give the BBC an interview. But, by coincidence, I had recently given birth at a clinic he founded, so I was able to book an appointment with him.

We met at his private practice in his home in Madrid. The man painted as a monster in the Spanish media was old and smiley, but his smile soon disappeared when I confessed to being a journalist.

Dr Vela grabbed a metal crucifix which had been standing on his desk. He moved towards me brandishing it in my face. "Do you know what this is, Katya?" he said. "I have always acted in his name. Always for the good of the children and to protect the mothers. Enough."

Dr Vela insists he always acted within the law.

Empty graves

After Franco's death in 1975, the major political parties agreed an amnesty to help smooth the transition to democracy.

But this amnesty law has never been repealed, so attempts to investigate Spain's baby trafficking as a national crime against humanity have been rejected by the country's judiciary and resisted by its politicians.

"Thirty-five years have passed since the death of the dictator… Evidently, we still have problems from the past. Social problems and personal or even cultural problems and the policy of this government has been trying to solve them," says the justice ministry's Angel Nunez.

The Spanish government's refusal to set up a national inquiry into the scandal has frustrated affected families, who in many cases are carrying out their own investigations, as best they can.

Babies' graves have been dug up across the country for DNA-testing. Some have revealed nothing but a pile of stones, while others have contained adult remains.

Spaniards have flocked to clinics to take DNA tests in the hope of reuniting their families.

The first few matches have now been made between so-called stolen children and their biological mothers. But there could potentially have already been so many more. Data protection laws prohibit DNA banks from sharing or cross-referencing data and the Spanish government has yet to fulfil its promise to set up a national DNA database.

Manoli Pagador is still tortured by the events of 40 years ago. She told me she has been taking medication ever since.

"You can't just say to yourself, I have to forget it and that's it.

"It's not something you forget, it's with you for the rest of your life."

CURRENT AFFAIRS - 2

2011-10-21T09:54:00.000-07:00

Eta declares halt to armed conflict

Basque separatist group renounces use of arms after year in which it has observed unilateral ceasefire

The Guardian

Half a century of bloodshed in the Basque country has come to a historic close after the separatist group Eta finally renounced the use of arms and sought talks with the Spanish and French governments.

Three leaders in masks announced that the group was calling a final halt to the use of bombs and bullets in a video obtained by the Guardian and other news media.

"Eta has decided the definitive cessation of its armed activity," they said. Eta was following a peace script put together with the help of mediators led by the former UN secretary general Kofi Annan, after a year in which it had observed a unilateral ceasefire.

The Guardian revealed exclusively on Monday that a definitive end to Eta's armed campaign, one of Europe's bloodiest, was due to be announced this week, in response to a petition from Annan's group and following pressure from Eta's political allies in the so-called "Basque separatist left".

Annan's group made its petition late on Monday, urging Eta to make "a public declaration of the definitive cessation of all armed action". Leaders of the separatist left publicly backed the call the next day.

Eta's swift response indicates that separatist-left politicians such as Rufino Etxeberria and Arnaldo Otegi, both of whom have served Eta-related prison terms, exercise growing power over the group, according to sources close to the negotiations.

It also suggests that Eta has lost not just power over political allies, but also the support they once enjoyed among the 10%-20% of Basques who traditionally voted for pro-Eta parties.

Spanish prime minister José Luis Rodríguez Zapatero welcomed Eta's statement as a victory of democracy over terrorism. "For many, too many, years, we have suffered and battled against terror," he said. "We have done so until democratic reason has won out definitely."

"Ours will be a democracy without terrorism but with memory; the memory of 829 victims and their families, of so many wounded who suffered the unjust and hateful blow of terrorism," he added.

While Zapatero said the task of deciding what happens next should be left to the administration formed after the general election on November 20, it was not immediately clear how the governments of Spain and France would react to Eta's request for negotiations that it said should address "the resolution of the consequences of the conflict … to overcome the armed confrontation".

That is taken to mean, among other things, talks about the future of the 600 Eta members in Spanish and French jails.

The Spanish government will also come under immediate pressure to legalise the Batasuna party and other separatist organisations that were banned for being Eta fronts.

Although Zapatero's government did not meet Annan when it travelled to San Sebastian on Monday, observers speculated that group members – including former Norwegian prime minister Gro Harlem Brundtland – would not have gone to Spain without government consent.

The regional prime minister of the Basque country, fellow socialist Patxi López, has already suggested that Eta prisoners be moved to prisons closer to their families.

The centre-right People's party, led by Mariano Rajoy, which has traditionally been tough on Eta, is expected to win a landslide in the general election. If it does it will come under fierce pressure from Eta victims, including the families of PP politicians it has killed, not to concede anything to the group.

While other members of Rajoy's party have insisted that they will accept nothing less than Eta's surrender and dissolution, he has not commented publicly.

"He is a perceptive, intelligent and responsible person," said Brian Currin, the South African lawyer who has done much of the mediating work. "I am sure he will take the step to lead this process to its natural conclusion."

The announcement came 53 years after Euskadi ta Askatasuna, which means Basque homeland and freedom in the region's Euskara language, was founded by young separatists while Spain was ruled by the military dictator General Francisco Franco.

The group claimed its first victim, a civil guard police officer gunned down in Adona, near the northern Basque city of San Sebastian, in 1968.

Most of its victims, however, died in the years after Spain's transition to democracy and the approval of a statute of partial self-government for the region in 1979.

The group has been seriously weakened by police action in recent years, and some observers claim it has simply been defeated.

VIDEO - THE SMALLEST CAR IN THE WORLD

2011-10-13T10:33:00.000-07:00

TOP GEAR is a very successful BBC TV programme about CARS. The presenters are famous for their sense of humour and sarcasm. Watch this part of a programme where Jeremy test drives the smallest car in the world. I think you will enjoy it ...

FINANCE & ECONOMICS - 4

2011-10-09T08:56:00.000-07:00

(Reuters) - Spain's No. 5 retail bank Banco Popular launched an all-share bid for its smaller rival Banco Pastor on Friday, proposing a merger that would give the two poorly capitalised banks a chance to cut costs and pool resources.

Popular offered 1.115 new shares for each Pastor share, and said the deal was subject to approval from a majority of Pastor shareholders.

A source close to negotiations told Reuters that Popular has a commitment from shareholders with some 50.1 percent of Pastor capital to take up the offer.

"The proposal to buy Pastor was announced after ensuring that, in principal, both Pastor's chairman and its core shareholders would take up the offer," the source said.

Neither Pastor nor Popular confirmed, however, that the deal has received the green light from Pastor chairman Jose Maria Arias Mosquera or from other core shareholders, Spanish retailer Inditex founder Amancio Ortega and Spanish savings bank Novacaixagalicia, each with 5 percent.

The deal implies a premium of about a third, valuing Pastor at about 1 billion euros compared with its market capitalisation of some 826 million euros.

After the capital hike to issue new shares, the premium would be 16 percent, Bankia analyst Javier Bernat said.

The Spanish stock market regulator had suspended trading in both shares earlier on Friday, sparking speculation of a merger.

Spanish banks are under pressure to close offices and sack staff as they grapple with falling profit, closed money markets and demands for increased provisioning against rotten real estate assets.

Pastor failed Europe-wide bank stress tests in July, which measured how banks will fare in a deep economic crisis including sovereign debt defaults. Popular passed, but by such a low margin that it must boost capital.

The Spanish banking sector is in the midst of restructuring, as the government forced on it a wave of mergers between unlisted savings banks, and recapitalisation.

"The deal makes all the sense in the world because Popular is very efficient and Banco Pastor has liquidity problems," said Jose Carlo Diez, chief economist at Intermoney Valores.

The Spanish merger comes as German and French leaders meet to decide how to strengthen European banks shaken by exposure to Greek debt, which hovers on the brink of default. But Spanish banks' exposure to Greek bonds is relatively small.

CONSOLIDATION

A tie-up would be the second merger between listed Spanish banks since the nation's economy took a dive following the bursting of a housing bubble in 2008. Mid-sized bank Sabadell took over smaller peer Guipuzcoano in September 2010.

"It was time that we had an acquisition on a bigger scale amongst the private banks, given how important the recapitalisation process is for the Spanish financial sector for the future," said Santiago Carbo Valverde, economics professor at Granada University.

Popular's total assets at the end of 2010 were 130 billion euros, making it Spain's No. 5 bank by assets. Its market capitalisation is almost 5 billion euros.

Pastor's total assets at the end of last year were 31 billion euros. It is one of Spain's smaller listed banks.

Popular's Tier 1 capital ratio in the European bank stress test in July was 5.3 percent, against 3.3 percent at Pastor.

Both banks had been rumoured to be looking at savings banks as possible purchases. Government-driven consolidation reduced the number of these unlisted, regional banks to 15 from 45 last year.

"Buying Pastor is a much better deal for Popular than one of the savings banks. Pastor has been on the market for some time and (Barcelona-based) rival Caixabank was really interested in getting its hands on it," a source close to the deal said.

None of the savings banks, known as cajas, managed to seal deals with private equity firms this year, and the Bank of Spain took over three last week, valuing them at practically zero.

Pastor's home base is Galicia, north-west Spain, where it controls 20 percent of the market. Like Popular, it focuses on loans to small and medium-sized businesses.

Apart from operational synergies, Popular's swoop on Galicia is also strategically sound because of the proximity to Portugal, where it has a growing banking business, Bankia analyst Javier Bernat said.

Spain's banks will face a massive spike in funding needs next year - around 130 billion euros ($174 billion) of Spanish bank debt will come to maturity in 2012, according to Thomson Reuters figures.

FINANCE & ECONOMICS - 3

2011-10-05T11:43:00.000-07:00

Inditex SA : Zara improves its ranking in Interbrand’s annual list of global brands

The brand has climbed four places, to 44th position in the ranking of the most valuable global brands released by brand consultancy Interbrand. According to the 2011 ranking, the Zara brand is valued at USD 8,065 million (EUR 6,056.5 million), 8% higher than the previous year. Zara first joined the annual list in 2005 when it was ranked at number 77.

In the 2011 ranking, Interbrand highlights out the constant renewal of the latest fashion trends offered by Zara, its logistics system as well as its presence on the Internet and the social networks.

Interbrand is the world’s leading brand consultancy and its ‘Best Global Brands’ rankings one of the key indicators to measure brand value and influence.

2011 RANKING OF THE TOP 100 BRANDS (top 10)

1. COCA COLA (brand value USD 71,861 million)

2. IBM (brand value USD 69,905 million)

3. MICROSOFT (brand value USD 59,087 million)

4. GOOGLE (brand value USD 55,317 million)

5. GENERAL ELECTRIC (brand value USD 42,808 million)

6. MCDONALDS (brand value USD 35,593 million)

7. INTEL (brand value USD 35,217 million)

8. APPLE (brand value USD 33,492 million)

9. DISNEY (brand value USD 29,018 million)

10. HP (brand value USD 28,479 million)

FINANCE & ECONOMICS - 2

2011-10-04T03:17:00.000-07:00

Ex-Caja Directors Face Payout Investigation, Cinco Dias Reports

Former executives of Novacaixagalicia, the savings bank that received a 2.5 billion- euro ($3.3 billion) bail out from Spain last week, face an investigation over million of euros in payments they received on leaving the lender, Cinco Dias reported.

The new management, headed by Chairman Jose Maria Castellano, will examine the payments after Novacaixagalicia was taken over by Spain’s bank rescue fund last week, the newspaper reported, citing people familiar with the process.

Former managing director Jose Luis Pego was paid about 8 million euros in pension contributions and compensation when he left the bank in September while Javier Garcia Paredes and Oscar Rodriguez, who served as deputy managing directors, received about 7 million euros, the newspaper said

FINANCE & ECONOMICS - 1

2011-10-03T03:12:00.000-07:00

Spain nationalises three more savings banks

By The Financial Times

Spain’s official bank rescue fund has nationalised three more struggling savings banks, valuing them even lower than their directors’ worst expectations of only a few weeks ago, according to the Bank of Spain and private bankers.

Miguel Angel Fernández Ordóñez, governor of the Bank of Spain, said on Friday that the Fund for Orderly Bank Restructuring or Frob was spending €4.75bn on recapitalising the banking operations of NovaCaixaGalicia (NCG), CatalunyaCaixa and Unnim.

The takeover of the three was expected. September 30 was the deadline for banks to find new capital to ensure that their “principal capital” – akin to tier one core capital under international banking rules – reached 10 per cent of risk-weighted assets for lenders without outside investors.

Valuations were exceptionally low however, suggesting that the Frob was unimpressed with the assets of the cajas or savings banks concerned, all of which have been affected by the collapse of the Spanish property bubble since 2007.

NCG’s banking business was valued at 0.12 times book value, CatalunyaCaixa’s at 0.09, and Unnim at zero, said Mr Fernández Ordóñez and Javier Aríztegui, who heads the Frob executive. That gives the Frob 93 per cent of NCG, 90 per cent of CatalunyaCaixa and 100 per cent of Unnim, they said. Unnim was assigned a nominal value of €1.

“When a caja is worse, as when anything is worse, then it’s worth less,” was the blunt comment of Mr Fernández Ordóñez.

By contrast, CaixaBank, the new banking arm of Barcelona-based La Caixa, was floated at 0.8 times book value, while Bankia, a merger of Caja Madrid and six other savings banks, managed 0.4 times.

Spanish regulators have consistently been more optimistic about the state of the country’s banks than Spanish commercial bankers and foreign analysts, arguing that tight supervision has limited potential losses.

Regulators say the Frob is investing a total of €7.55bn, with private investors having put in €5.84bn, most of it through the initial public offerings of Bankia and Banca Cívica in July. Spanish officials insist that they see no immediate need for further recapitalisation of the country’s lenders, although independent analysts say €30bn or more of extra injections may be needed to stabilise the system.

“As of September 30, the process of recapitalisation is complete,” said Mr Fernández Ordóñez.

In the restructuring of the Spanish banking sector, the number of cajas has been reduced from 45 to 15 through mergers.

But successive interventions to rescue failing cajas – first Caja Castilla La Mancha, then CajaSur and most recently Banco Cam (formerly Caja Mediterráneo) – have weakened the case of the authorities. Soon after each rescue, published figures showed loan losses to be much worse than thought.

After being seized in July, Cam reported a first-half net loss of €1.14bn and disclosed that its bad loan ratio had risen to 19 per cent of assets, compared with the officially published figure of 9.1 per cent in December.

The authorities will now try to sell the cajas controlled by the state, starting with Cam, but are expected to find it difficult to find buyers unless they offer generous “asset protection schemes” to insure the new owners against loan losses.

CURRENT AFFAIRS - 1

2011-10-03T02:58:00.000-07:00

Excitement in Spain as eccentric Duchess marries man 24 years her junior

The flamboyant Duchess of Alba, Spain's much-loved 85-year-old grandee, will this week marry a civil servant 24 years her junior - to the initial horror of her children.

The Telegraph

Her first wedding was the most expensive the world had ever seen - a marriage so spectacular, so regal, that there were fears it could overshadow the nuptials a month later of Princess Elizabeth of England. Her third wedding may pale in comparison - but it is still one of the most sought-after invitations in Europe.

The 85-year-old Duchess of Alba, a Spanish aristocrat famed for her eccentric fashion sense and £3 billion fortune, is set to walk down the aisle this week, to marry a civil servant 24 years her junior.

She has overcome objections from her six children, concerned about their inheritance, and even the King of Spain, who also had his doubts about the suitability of Alfonso Diez. But Cayetana Fitz-James Stuart, descended from Churchill and King James II, is nothing if not single minded.

"I'm a very determined person," she said. "I've got my own ideas about things and I try to make them reality."

On Wednesday, at 1pm, the Duchess will marry at the chapel in the grounds of the Palacio de las Duenas, a majestic 16th-century estate where she lived with her two previous husbands and raised her children.

The King and Queen of Spain - close family friends - will not be present, owing to protocol which states the Royal family only attend first marriages. But last week the Duchess introduced Mr Diez to the king at his Madrid palace - a necessary act of ceremony for the woman who, it is said, could walk from the northern tip of Spain right to the farthest southern point without ever leaving her ancesteral lands.

The duchess is a distant relative of Queen Elizabeth, but - it is claimed - is more "noble". She holds the world record for the most aristocratic titles, being a duchess seven times over, a countess 19 times and a marquesa 23 times. Indeed, her full name is Maria del Rosario Cayetana Alfonsa Victoria Eugenia Francisca Fitz-James Stuart y de Silva.

As head of the 530-year-old House of Alba, she is entitled to ride her horse into Seville Cathedral, and according to protocol does not have to kneel before the Pope. Some geneologists even claim that the Queen must bow to her, owing to the fact that the duchess is descended from James II through his illegitimate son James Fitz-James, while the Queen is from the "upstart" Saxe-Coburg-Gotha line.

The heavy weight of history, protocol and expectation would prove an almost unbearable burden for most. But the duchess has somehow managed to resist the pressures of her role and carve out her own path with undeniable flair. Invariably sporting hippy bracelets and ankle charms, her love of bohemian, brightly coloured clothing has made her a contstant site on the nightly gossip chat shows. She revels in eccentricity, famously declaring that her style icon was "myself".

She had lost her first husband, Luis Martinez de Irujo y Artazcoz, in 1972. Her wedding to him in 1947 was considered the last great feudal wedding in Spain, with the cream of Spanish nobility gathering to witness the beautiful young heiress tie the knot with a dashing naval officer.

Following his death she married again, to Jesus Aguirre y Ortiz de Zarate - an intellectual and former Jesuit priest - but he died in 2001.

The twice-widowed duchess was friends with Mr Diez for over 30 years. His brother Pedro, an antique dealer, was a close friend of the duchess's second husband.

Both brothers lived quietly in Madrid's leafy, middle-class district of Chamberi. Alfonso worked as a civil servant at Spain's ministry of employment, and was described by friends as being cultured, refined, and interested in art and antiques.

But three years ago he bumped into the duchess by chance, on leaving a cinema. The pair share a love of bullfighting, flamenco, cultural heritage and art, and when Spain's voracious tabloid press heard of the blossoming romance, his quiet existence was rapidly transformed into a very public role in the spotlight.

"I felt very lonely after Jesus died, and I developed feelings for Alfonso," she told Spanish celebrity magazine Hola! in 2008. "When you get to know someone and you like them, you end up falling in love a little, and I fell in love with him.

"At one point, he confessed that he had developed feelings for me over the years. At first, I thought he was crazy. Later it hit me – it was something that would fill any woman with happy pride."

The couple made plans to marry, but her children were worried about their mother - and their inheritance. "My mother can't marry, owing to questions of historic responsibility," said her youngest son, Cayetano Martinez de Irujo.

"They don't want me to marry, but they change partners more often than I do," the duchess has said about her children, all of whom have had high-profile marriages that ended in divorce. "The tough part was that my children didn't understand and they got quite angry with me.

"It's true that I planned to marry. We were both full of enthusiasm for the idea. I took a step back for my children. I saw that everything was going to be very complicated."

But eventually she found a way. Earlier this summer, she divided up her vast wealth – thought to between £524m and £3bn – between them. Mr Diez has also signed away any rights to the fortune. The inheritance includes vast properties in Madrid, Marbella, Ibiza and Seville - her main residence. Among the treasures is a collection of historical documents that include Columbus' first map of the Americas, and the last will and testament of Fernando the Catholic, as well as a library valued at €20.5 million that includes a first edition of Don Quixote from 1605, and a family Bible from 1429.

She also has one of the world's best private art collections, with works by Rembrandt, Reubens, Velazquez and Titian.

Among them is a portrait by Francisco de Goya of her ancestor, the Duchess of Alba, who is said to have been the artist's lover and the model for his masterworks "The Clothed Maja" and "The Naked Maja". Picasso wanted the Duchess to pose naked for his tribute to the Goya works but she declined - much, now, to her disappointment.

With the fortune tied up and Mr Diez written out of the will, the children's objections melted away. "I sorted it out because I wanted to," she told Hola! last month. "Nobody pressured me to do it. Besides, as long as I am alive, everything is still in my hands."

And, as Seville gears up for yet another much-hyped Alba wedding, the city is abuzz with marriage fever. The Duchess, with her outlandish, hippy dress sense, has chosen Sevillian designers Victorio y Lucchino to make her wedding dress - and it is unlikely to be subtle.

Souvenir shops sell face masks featuring the Duchess and Mr Diez. T-shirts are sold, bearing her unmistakable frizzy hair and distinctive features.

People are happy for her - "they tell me so on the street," she said - and admire her resolve in marrying again, in her ninth decade.

But if there wasn't support from her friends, family, and countrymen?

"I wouldn't care," she said. "I'd get married anyway."

FINANCE & ECONOMICS - VIDEO

2011-09-27T00:53:00.000-07:00

Some controversial comments from a Market Trader about the economic crisis. Immoral or free enterprise ?

CURRENT AFFAIRS - 3

2011-09-09T08:00:00.000-07:00

Tourism: Food, festivals and history to replace sun, sea and sand

By The Financial Times

Sun, sea and sand was once the simple maxim that governed the vast stretches of resorts lining Spain’s Mediterranean coastline.

Fuelled by cheap holiday packages dropping millions at its airports each summer, and cheap credit helping the construction of new hotels to house them, for decades there seemed little reason to find a new philosophy.

That benign climate, however, has long since ended. For the country’s hoteliers and tour operators, the past three years have been the most difficult in their professional memories. In 2009, the number of foreign visitors to Spain slumped by 10 per cent, leaving thousands of cheap hotel rooms empty and English-themed pubs in locations such as Benidorm eerily subdued.

The secondary effects on Spain’s domestic economy have been bleak. The tourism sector, which represents 12 per cent of gross domestic product – compared with building and construction’s pre-crisis peak of 18 per cent – has shed about 180,000 jobs in the past three years, escalating national unemployment levels that remain above 20 per cent.

At the same time as the collapse of Spain’s construction industry, the country’s other great economic motor, the model of playa y sol, or bulk sale beach tourism, has been called into question by industry experts who argue that structural changes will need to be made to persuade tourists to pick Spain over cheaper competitor nations such as Croatia and Turkey.

“Spain still has a model of offering capacity, with operators typically saying, ‘I have this many beds, how can I sell them?’,” says Professor Philip Moscoso of the Iese Business School.

“The type of tourist demand over the past 10 years has been changing, but the offer we have as a country has remained largely the same. Now, more people are coming on their own, using the internet more than tour operators, so Spain must start to think harder about how to differentiate itself.”

One way destinations can win back visitors is by trading on their cultural attractions, an advantage that some experts argue should see Spanish operators attempt to emulate Italy’s ability to project the attractiveness of its cuisine and art globally.

Michelle Obama’s visit to Marbella last year brought welcome publicity to the increasingly unfashionable region, with operators later reporting that the First Lady’s reflected glamour triggered a rise in interest from the US and beyond.

Such “cultural tourists”, Prof Moscoso argues, are likely to be of higher value in the amount of money they spend and, while still a small portion of the yearly numbers of visitors, could provide a route out of high-volume, low-value beach holidays to the Canary islands and eastern coast.

Spain’s cultural pull is also expected to draw more visitors from Asia over the next decade, a trend that has seen a renewed round of investment in the country’s hotel industry from foreign companies.

“Europe has the most visitors of any continent in the world ... and we think that emerging markets will provide a tremendous influx of new travellers to Spain,” says Bill Marriott, chairman and chief executive of Marriott International, the US hotel chain. In June, it signed a distribution deal with Spain’s AC Hotels that will see them renamed “AC by Marriott”.

Cultural events, such as the growing series of music festivals, are increasingly capturing a younger market of European travellers that would have previously attended similar events in their own countries.

Barcelona has enjoyed particular success on this front, with the Sonar festival in summer and the Primavera Sound festival in the spring, which has grown from attracting just under 8,000 people in its first year in 2001 to more than 100,000 this year.

With performances from mostly American and British acts, Primavera Sound’s organisers have managed to build the international profile of the festival to a level where it now regularly attracts groups of international stature and draws most of its audience from other European countries.

Bulk tourism still dominates for now, with the political upheaval and revolution in north Africa expected to increase the number of visitors to Spain by 1m after two years of successive declines. This has coincided with signs that tourism is starting to emerge from the downturn. In April, the number of foreign visitors was up 13 per cent on last year at 8.1m, with the total amount spent by tourists increasing by 24 per cent to €4.2bn ($6.1bn).

For the country’s hard-pressed hoteliers the spring also brought better news, with 53 per cent of rooms being registered as occupied by the government’s national institute of tourism, an annual increase of 10.6 per cent.

For Prof Moscoso, while such signs are encouraging, they should not distract from the need to use Spain’s cuisine, museums, religious monuments and festivals to reduce dependence on more fickle bulk tourism.

“We have a top location, so what can we offer, not just to compete on price, but to differentiate ourselves? This is where culture, the arts, and our historical heritage come in.”

CURRENT AFFAIRS - 2

2011-09-09T07:47:00.000-07:00

Education: Young failed by system in need of structural adjustment

By The Financial Times

Less than a month after furious Spanish youth unexpectedly took to the streets of Madrid to protest against the country’s political establishment, normal life is beginning to return to the city’s occupied central square.

Bemused tour groups trundle between the scores of improvised administration tents and camp sites spread around the Puerta del Sol, and men in bright yellow jackets offer to buy gold jewellery off those passing through on their journey to work.

In spite of hundreds of open meetings held by youthful activists in the squares of Madrid and other large cities, frustration has appeared to replace the initial fervour of the “indignant ones” – the name given to the young people enraged by a sense that they are being failed by a state that has allowed youth unemployment to rise to 45 per cent.

Many of the protesters hold degrees, and the number of Spaniards attending tertiary education has increased by about 7 per cent a year since 1998, according to the Organisation for Economic Co-operation and Development. The unemployment rate for university graduates in Spain is about twice the European Union average, not helped by the country’s inflexible labour laws.

Few can deny the extent of Spain’s young unemployed “lost generation”, as tens of thousands have graduated into a stagnant economy.

As a panel comprising top businesspeople consults with the government about strategies to improve the country’s competitiveness, the crisis has also forced academics and policymakers to focus on ways that education reform can bolster the economy from the bottom up.

According to Jordi Canals, dean of the Iese business school, education reform over the coming years will be crucial to remedying economic problems.

“Education is the most important thing for the economy,” he says. “The top educational institutions are world class, but we have too few of them.”

The number of Spanish graduates in unskilled work is about 6 per cent higher than the EU average, according to a study by a Spanish knowledge and development think-tank – a factor that has formed part of the anger of those partaking in the recent protests.

Spain has two universities ranked in the world’s top 200, according to the Times Higher Educational Supplement rankings, compared with France’s four, and Germany’s 14.

Mr Canals argues that a large number of Spanish people are leaving school at the age of 18 with a lower standard of education than their western European counterparts.

As he sees it, this is a consequence of overly centralised educational institutions that are rarely accountable to students and teachers because of their close links with local and national government.

“What we should do is very clear,” he says. “We need to improve the quality of the secondary education of kids between 10 and 18, to raise the standard of basic stuff.

“In France and Germany, the skills high school graduates have who enter straight into the workforce tends to be higher.”

“Our educational institutions should be run by people who know the most about education, the teachers, rather than trade unions or non-teaching staff. Too often parents feel that the school is not their own, and this means they tend to be confrontational rather than collaborative with teachers"

Another approach to pre-university reform, designed to increase the competitiveness of younger Spaniards in the international labour market, has come in the form of state-run bilingual schools in which at least a third of all teaching time is in English.

In these schools, subjects such as music, physical education and social sciences are taught in English.

For Lucía Figar, head of education for the Madrid regional government, which has spearheaded the policy, an increase in the standards of foreign language learning is crucial to helping Spaniards catch up with other European Union members.

“Spain has not traditionally been a country with a high level of foreign language learning,” she says. “Our model has been successful in teaching pupils English as they learn in a natural way.”

For the graduate protesters in central Madrid, however, the talk of reform, and the programmes already under way, will be too late to be of any benefit to them.

“There is an important need to fine-tune the system,” says Mr Canals. “This is not a question of resources, of spending more money, but one of making the structural changes that will have an impact for the next generation.”

FINANCE & ECONOMICS - 3

2011-09-09T07:40:00.000-07:00

Banking system: Regional savings institutions consolidate

By The Financial Times

Spain’s banking system is undergoing one of the biggest upheavals in its modern history.

Lenders and regulators have on previous occasions struggled through banking busts after the collapse of inflated asset values, but this is the first time such a battle at home has coincided first with a global financial crisis and then with sovereign debt jitters in the eurozone.

When the world was shaken by the collapse of Lehman Brothers in September 2008, Spanish banks found themselves in a relatively comfortable position.

They were already faced with falling property values and rising bad debts, but had little exposure to the complex “toxic” derivatives and US subprime mortgage lending that wreaked such havoc elsewhere.

All Spanish banks and unlisted cajas, the regional savings banks that account for about half the system by assets, were also protected by large reserves of countercyclical “generic” provisions built up in the good years that preceded 2008.

The largest commercial banks, Santander and BBVA, were further insulated from trouble by their investments in fast-growing emerging markets, particularly Latin America, and have continued to generate billions of euros of net profit through the recession and afterwards.

But as year followed year, the property market continued its decline and the generic bad-loan provisions were steadily consumed to protect the bottom line, it became clear the financial system was running out of time.

This was especially true of many of the cajas, which were heavily exposed to property developers and home loans and often controlled by regional politicians lacking the professional skills to manage in difficult times.

Lenders have suffered on several fronts. Bankrupt customers, especially property developers and construction companies, are unable to repay their loans, while the banks and cajas themselves remain dependent on wholesale financing from abroad to fund their operations.

The response of the Bank of Spain and of the current government has been to push through a radical reform of the whole network of cajas, opaque institutions with charitable aims and unclear ownership structures that in many cases date back more than a century.

Two small, failing cajas were “intervened” and then sold by the central bank, while most of the rest were offered loans from the Fund for Orderly Bank Restructuring (Frob) and told to merge, cut costs or rationalise themselves in a wave of deals that has already reduced their number from 45 to 17.

In the latest phase of the reform process, the regulator has threatened the weaker cajas with partial nationalisation if they fail to raise capital from private sources.

Nationalisation is ex¬pected to be the fate, for example, of Caja Mediterráneo (Cam), the savings bank whose plan for a merger with three other cajas collapsed when they concluded that Cam’s loanbook was too burdensome for the merged entity to absorb without itself being nationalised.

Others have sought outside investors, and four groups of cajas intend to list on the stock exchange through initial public offerings. This process is expected to reach a critical stage in the coming weeks when Bankia – the product of the merger of Caja Madrid and six other savings banks and by some measures the largest domestic bank in Spain – seeks €3bn ($4.3bn) to €4bn from the markets.

La Caixa, always the strongest of the larger cajas, is taking a different route and needs no IPO because it is using the existing listing of Criteria, its industrial holding group, as a vehicle to launch Caixabank on the stock exchange on July 1.

The estimates of how much new capital the system needs cover an extraordinarily wide range – the Bank of Spain puts the figure at just over €15bn, while some analysts say it could reach €120bn – but even the worst outcome is regarded as a manageable sum.

Regulators and officials also argue that they have been more transparent than other European countries. That is why Spain is submitting 95 per cent of its system to European “stress tests”, while some European Union states have done only the minimum 50 per cent required.

For Bankia and the other IPO candidates, these are anxious days, given the volatility of European markets and the low valuation that outside investors are inclined to give to Spanish financial institutions.

Bankia, which is so large and systemically important that the success or failure of its IPO will affect Spain’s standing in the sovereign debt markets, is the linchpin.

“Every Spanish institution has an interest in making it work,” says one Madrid-based investment banker. “We can’t allow it not to work.”

FINANCE & ECONOMICS - 2

2011-09-06T02:43:00.000-07:00

'Cheap Chic' Apparel Sellers Heat Up U.S. Rivalry on Web

The Wall Sreet Journal Sept 6 2011

Zara cranks out stylish but affordable clothes—with many items in the $50-$80 range—and attracts mostly a young and tech-savvy crowd. Inditex forgoes traditional advertising, relying instead on carefully selected stores to market its brands. But the retailer has just 49 stores in the U.S., mostly along the East and West Coasts.

The company has 4,000 stores in Europe, about half of which are in Spain. It has roughly 600 in Asia.

Earlier this year, Inditex spent $324 million on a New York property slated to become its new global Zara flagship store. The purchase of the National Basketball Association's old store on Fifth Ave. is the country's most expensive real-estate transaction, measured in dollars per square foot.

"The priority at this moment in terms of growth is Asia and Europe, but on a medium and long-term basis the U.S. market is also very important for us," says Inditex Chairman and Chief Executive Pablo Isla. "In this sense the online launch is a milestone together with the opening of the New York flagship store" next year.

The company doesn't disclose sales by country, but ING retail analyst Jan Meijer calculates that the group now takes in roughly €250 million ($353 million) a year from its U.S. stores. That's a fraction of Inditex's €12.5 billion in global sales last year. Mr. Meijer expects that the group could quadruple sales in the U.S. by 2014, with a majority coming from online sales.

Smaller U.S. rivals already get a good chunk of sales online. At Ohio-based Abercrombie & Fitch Co., online sales represented 11% of total revenue in the second quarter. And Gap, which has sold goods online for more than a decade, gets 9% of its sales online.

H&M—Inditex's main European rival, whose prices are a bit below that of Zara—plans to launch a U.S. online store in the spring. H&M, which is owned by Sweden's Hennes & Mauritz AB, already has Web stores in serving eight European countries. Its first website, in Sweden, launched in 1998.

Zara still lacks the visibility of H&M in the U.S., where the Swedish company has more than 200 stores. In July, H&M had 617,000 unique U.S visitors to its informational website, compared to 189,000 unique U.S. visitors for Zara, according to data compiled by market researcher Nielsen. Hennes & Mauritz reported 2010 sales, excluding value added tax, of 108 billion Swedish kronor ($16.71 billion).

But analysts say Inditex performed better in the economic downturn than rivals including Gap and H&M because of the tight control it has over production and the speed with which it can get the latest trends from the design table to stores.

Store managers communicate directly with Zara designers and feed them data on what sells well and what doesn't. If managers say a polka-dotted-black dress is flying off the racks, it is able to turn around quickly and churn out polka-dotted dresses in other colors and have them in stores in a matter of weeks.

The strategy allowed Inditex to adapt to a sharp drop in consumer spending in Spain. It also seems to fit snugly with the Internet rollout.

At the heart of this model is a complex logistics system, and heavy use of information technology to track data on consumer tastes gathered at each of its stores around the world.

Inditex makes half of what it sells close to headquarters, and delivers new garments in small batches to all its stores by plane or truck twice a week.

Every item in stores has to go through one of Zara's three logistics hubs, all in Spain. A pair of pants made in China for Zara is shipped to Spain first, even if the final destination is China.

The setup makes production costs higher than rivals like H&M, which sources a bigger portion of garments in China. But it also gives Inditex better control over inventory.

Just as Inditex now ships twice a week to stores, it says it easily delivers individual packages to online shoppers.

"It basically follows the same model as our regular store expansion," Mr. Isla says of the online rollout. "For us to enter a new country has a very small cost because, with our twice-a-week delivery model we have few start-up costs. We don't need large logistical infrastructures, marketing departments or big central operations. The model allows us to have a light structure, and that applies to online as well."

Inditex spent €24 million over the past two years in preparation for its online launch in the U.S. and it has high hopes for online demand. Some 200,000 people have downloaded the Zara application for Apple Inc.'s iPhone or iPad from the U.S., according to the company.

The U.S. consumer has cut down on shopping in stores in the downturn, but e-commerce has grown steadily.Recent data from the U.S. Census Bureau showed that second-quarter retail sales online totaled $44.2 billion, growing at an annual clip of 17%. Annual online retail sales are set to climb to $250 billion by 2014, according to research from Forrester, a consultancy.

Shares of Galicia-based Inditex have held up well during global market downturns, doubling in value over the past three years to about €36.1 billion.

FINANCE & ECONOMICS - 1

2011-09-06T02:25:00.000-07:00

City feeling lucky as Spain's national lottery prepares to float

• Spain's largest ever listing to raise up to €9bn

The Guardian

A select number of the City's bankers are set to collect winnings of almost €100m (£90m), as the €25bn privatisation of Spain's national lottery – including the famous El Gordo, or The Fat One – begins in London on Tuesday.

The early marketing for the offer of about 30% of the state-owned Loterías y Apuestas del Estado – which is set to be Spain's largest ever stock market listing by raising up to €9bn – is to begin with the arrival of chairman Aurelio Martinez, finance director Luis Palacios and chief operating officer Marcelo Ruiz to target City investors.

The float is being led by a quartet of bulge bracket banks – UBS, Credit Suisse, JP Morgan Cazenove and Goldman Sachs, along with BBVA and Santander of Spain – to be joined by a host of rival City firms including Citi, Deutsche Bank, Morgan Stanley and Barclays which also have their names on the ticket in smaller roles.

Market watchers predict that the offer will result in a timely fee windfall for London's embattled investment banking sector, although observers suggested that it was not akin to winning a rollover week. Loterías is thought to be paying fees of about 1%, considerably less than the City norm due to a combination of the business being state-owned and bankers, anxious for some of the action, offering deals.

One source close to the deal said: "The banks have fallen over themselves as business is lean and Spain may also be looking to sell other assets in the future."

The listing has been pushed through by Madrid as part of a privatisation programme including a planned sell-off of part of the state airports authority in order to lower Spain's borrowing requirements. The country's bonds have been pummelled by investors who fear Spain may need a bailout like those given to Greece and Ireland. It is also understood the government has plans to sell off a further 19% of its lottery company in the future.

Along with the UK's Camelot and France's Française des Jeux, Loterías runs EuroMillions, which is offering punters an estimated jackpot of £110m in tomorrow's draw. But its most famous payout is El Gordo, the world-record-breaking prize fund in Spain's 199-year-old Christmas lottery which shelled out €2.3bn in December.

Spaniards spent an estimated €69 a head on Christmas lottery tickets last year in the hope of sharing in the massive prize fund, with many of the winners thought to be fans of Barcelona football club who had opted to buy tickets ending in the numbers five and zero in order to celebrate their team's 5-0 victory over arch-rivals Real Madrid last season.

The company could become the world's largest listed gaming company by value, if the offer is successful, and it plans to pay investors a yield of about 6% on a monthly basis following admission.

It has 10,500 distribution points in Spain – the world's fourth largest lottery market after China, the US and Italy – and following a new national gaming law introduced this year, Loterías was granted indefinite access to Spain's so-called "reserve market" for state lottery games, alongside the Once lottery for the blind.

Loterías, which reported a profit of just under €3bn in 2009, controls 77% of that market from which it derives 95% of its revenues. It also operates sports betting businesses and pool betting operations.

The company is now seeking approval for its offer document later this month, before pricing the shares in October in order to float the business ahead of the country's November election.

Of the shares being sold, 40% will be marketed to institutional investors with the remainder being sold to Spanish retail investors.

Fat chance

Arguably the most famous lottery in the world – thanks to its estimated €2.3bn (£2bn) in prizes – El Gordo has taken place on 22 December every year since 1812. It can create up to 390 millionaires at a time. It is a true lottery, not a lotto, in which players pick a combination of numbers. El Gordo tickets come with the numbers pre-printed.

Ticket numbers range from 0 to 84,999. It is traditional to use significant dates or numbers to choose a ticket. In 2009, tickets printed with the numbers forming the date of Michael Jackson's death – 25609 – were heavily sought after. The game was started as a fundraiser for orphans. The procedure followed for the draw has not varied since it began.

CURRENT AFFAIRS - 1

2011-09-06T02:20:00.000-07:00

Are Barça & Real 'Killing The Game' In Spain?

Barcelona and Real Madrid currently receive 41% of Spain's TV revenue. Some suggest the rest find another league to play in, but it might be the big two that are kicked out...

As a way of reforging friendships in the Spanish camp after the latest Barcelona-Real Madrid festival of feuding, Friday night's approach was a novel yet effective tactic that also happened to involve fisticuffs. Rather than two Spanish tribes going to war once again, the Barça and Madrid footballers fought side-by-side in the final seconds of Friday's stormy 3-2 win over Chile in a big old scrap with their South American opposition.

Physical violence probably won't be enough to heal the enormous divisions that currently exist in la Liga, with warring factions being formed who possess very different visions of the state of the Spanish game. 6-0 and 5-0 victories for Real Madrid and Barcelona respectively and the sight of both teams occupying the top places in la Primera after just one round have reignited a heated debate over what needs to be done to make la Liga more competitive.

A camp lead by Sevilla and Villarreal have been increasingly vocal in opposing the current model which affords Barça and Madrid an enormous financial advantage over the other 18 teams when it comes to the share of TV revenue. This rebellion began last season when a group of seven clubs refused to agree to the terms of a new television agreement due to start in 2014 which saw the big two marginally decreasing their share of the money but still getting an increased amount due to the greater size of the pot.

Barcelona and Real Madrid currently share 41% of the €657.5m deal which gives both clubs a staggering €135m each. Third-placed Valencia get €48m whilst ten clubs are awarded sums varying between €13m and €16m. Two of the new teams in la Primera this season, Rayo Vallecano and Granada, will receive ten times less TV income that Madrid and Barcelona.

Sevilla, who get €104m a year less than the top two, are lead by their club president, José María del Nido, a figure whose criticism of the carve-up has been the most strident. Del Nido cranked up the rhetoric this week by declaring that la Liga "wasn't just the biggest pile of crap in Europe but the world," and that "we are not ruling out taking drastic measures and having boycotts."

Del Nido was joined by Villarreal's owner, Fernando Roig, who claimed that the Spanish League and the TV companies were "killing the game." Roig had extra reason to be upset as his club, who receive €107m a year less than Barcelona, had been forced to sell Santi Cazorla to Málaga to balance the books rather than going into administration. This particular process allows a club to carry on functioning and signing players whilst continuing not to pay its debts - a path that Zaragoza have taken, to much opposition from more ethical Primera clubs who feel that - for want of a better expression - the club is completely taking the piss.

The Spanish League (LFP) does have the power to intervene and influence the way the game is run but there is the perception amongst the rebel clubs that the organisation is merely concerned with the interests of Real Madrid and Barcelona with the rest of la Liga largely being ignored. "The league is a big joke because of an LFP that's only looking for profits and income and has no interest in improving the competition," wrote Roberto Gómez in Marca.

The LFP is also facing opposition from the league's unpaid footballers who recently went on strike over the issue citing a lack of financial support from the organisation and Spain's radio stations who are currently locked out of grounds over an argument over rights.

The immediate forecast for la Primera this season is a gloomy one. Barcelona and Real Madrid are stronger than ever with some expecting both sides to remain unbeaten in 36 of their 38 respective league games. Indeed, this process could well be helped by clubs simply writing off their matches against the pair and fielding reserve teams. "There are some teams that are already doing it," said Sevilla manager and former Racing and Zaragoza boss, Marcelino. "When you are playing at home there is the chance to get a positive result, a small chance but it exists. When you are traveling away, especially at Barcelona it's almost impossible."

The remedy proposed by Del Nido and Roig is a TV income model based on England's or the Bundesliga which sees equal payments, but with some added extras to acknowledge the fact that Barça and Real Madrid are huge money spinners for la Liga when it comes to international profile and sponsorship. The approach is a little more constructive than that of Sergio Ramos, who suggested that Sevilla "find another league to play in."

Although this recommendation was largely made in jest because the Real Madrid defender can't stand his former club president, it's an idea that in three to four years time that won't seem so fanciful. But instead of Sevilla having to find some new friends to play with, it could be Barça and Madrid being told to find a different league as the divisions in the Spanish game widen both on and off the pitch.

CURRENT AFFAIRS - 1

2011-08-05T09:09:00.000-07:00

Spanish politics

Anyone want to run this country?

Floundering Spain looks ahead to an early general election

Aug 2011 The Economist

THE game was up. Last week José Luis Rodríguez Zapatero, Spain’s prime minister, announced that the country would hold a general election on November 20th, four months earlier than planned. In doing so, he was bringing forward a new era in Spanish politics. The unpopular Mr Zapatero, who has responded only belatedly to Spain’s economic difficulties, announced several months ago that he would not seek another term in office. But he knows that his successor as Socialist candidate for prime minister, Alfredo Pérez Rubalcaba, stands virtually no chance of winning the vote. Polls suggest that Mariano Rajoy, leader of the opposition conservative People’s Party (PP), looks certain to triumph.

Mr Rajoy pledges reform, and Spain certainly needs it. The economy is stagnant. At 21%, the unemployment rate is by some way the worst in the European Union. With borrowing costs once again spiralling this week, Mr Zapatero was forced to postpone his summer holiday to cope with the crisis. Mr Rajoy called for the vote to be held sooner, in October.

Mr Rajoy realises that what Spaniards most want are jobs and a sound economy. But he also offers something that stretches credibility: austerity without pain. “I do not intend to make social cuts,” he says.

Since May, when the PP soared to victory over the Socialists in local and regional elections, voters have had a sneak preview of the party in office. The PP now runs 11 of Spain’s 17 autonomous governments; this matters in a decentralised country where regional administrations accounted for almost a third of the overall budget deficit last year.

The signs are not encouraging. Elena Salgado, the finance minister, wants regional governments to do their bit by limiting their budget deficits to 1.3% of GDP this year. At a meeting last week she urged them to return money advanced by central government in previous years on the basis of growth estimates that turned out to be overly optimistic.

Not possible, squealed the PP regions (backed by Socialist Andalusia). Some claimed that sending the money back would squeeze their ability to finance health and education properly. Tiny Murcia—historically a big over-spender—even threatened to hand back administration of those services to Madrid. “The government asphyxiates us,” moaned Salvador Marin, the region’s finance boss. In the end Ms Salgado blinked, offering soft loans to cover half the money the regions must return, and so in effect bumping up the national debt.

Some PP-run regional governments have eked out efficiencies, cut investment and merged departments. Madrid, for example, has been even more austere than the central government wished. But elsewhere, problems are mounting. In Catalonia, whose economy is as big as Portugal’s, the minority nationalist government plans to run a deficit of 2.7% of GDP this year, more than twice Ms Salgado’s limit. The PP, which props up Artur Mas’s administration in Barcelona, has identified €1.2 billion ($1.7 billion) of further savings. But rather than reduce the deficit further it wants this money ploughed back into health services.

Mr Rajoy faces a dilemma over the coming months. To win votes he must seem moderate, but to gain respect from the markets and Brussels he must seem severe. For the moment, votes are what counts. One recent poll showed that the Socialists had cut the PP’s lead to seven percentage points. If that transpires on election day, Mr Rajoy would find himself at the head of a minority government, with less clout over the economy.

Either way, cutting the deficit is likely to be one of his hardest tasks. He is against raising taxes so, if growth does not pick up, he must cut spending instead. This year Spain is aiming to bring the deficit down from 9.2% of GDP to 6%. Next year’s target is 4.4%. In private, some in the PP acknowledge that Ms Salgado has made a good start. It is now time for their leader to show how he means to follow her.

EXAM RESULTS

2011-07-19T15:14:00.000-07:00

*** EXAM RESULTS ***

Enhorabuena a todos los estudiantes que han aprobado el examen oficial de CAMBRIDGE BUSINESS ENGLISH CERTIFICATE (BEC). Todos los estudiantes que se han presentado al examen recibirán un certificado oficial de Cambridge, cada uno con el correspondiente nivel de Business English que ha aprobado.

En el BEC se evalúan las cuatro destrezas del idioma - comprensión auditiva y de lectura, expresión oral y escrita - en un contexto profesional. El examen no es fácil, por lo tanto …

¡ Bien Hecho !

FINANCE & ECONOMICS - 2

2011-07-14T00:44:00.000-07:00

EU debt crisis threatens Spain bank IPOs

By The Financial Times

The escalation of Europe’s debt crisis is threatening to scupper stock market listings by two Spanish savings banks seen as crucial to the overhaul of Spain’s banking system.

Executives from Bankia, Spain’s largest unlisted savings bank, and its smaller rival Banca Cívica, are in the middle of selling €5bn ($7bn) worth of shares in deeply discounted initial public offerings needed to avoid partial nationalisation by the Spanish government.

Cívica, which is aiming to raise €844m, delayed its listing by 24 hours, on a day when the difference between Spanish and German government bond yields hit the highest level in the history of the euro.

A senior commercial banking executive said that they expected the Bankia IPO to be scrapped by Friday if the volatile market conditions continued as shares in listed Spanish lenders dropped for a second day.

Bankia remains officially confident that it will be able to complete its listing. Executives acknowledged that it was a grim time to try to launch an IPO, but said they believed Spanish institutions would support the process and buy shares in order to preserve the credibility of the country’s financial system.

The listing of Bankia, which was formed from a merger of Caja Madrid and six other regional Spanish savings banks, is viewed by Spanish officials as a key step in the government’s attempt to restructure the country’s financial system.

Senior executives at other banks have also said it is in their interest to see the IPO succeed given Bankia’s systemic importance.

“Many of the institutions involved have a vested interested in calming down the market,” said one Bankia executive. “Domestic institutions might see at this stage part of their future being dependent on this happening”.

Bankia has said that it had already seen a high level of subscription by the Spanish public, with the bank planning to sell 60 per cent of the offer to retail clients.

“The process is developing very satisfactorily,” said Rodrigo Rato, Bankia executive chairman and former International Monetary Fund managing director, on Monday. Mr Rato said that the tranche of the listing to be sold to institutional investors had almost been covered, and noted interest from fund managers in the UK, France, Germany and other European countries.

Many of Spain’s cajas, run as private foundations and have no conventional outside investors, have suffered severe losses after the collapse of Spain’s housing and construction boom ended a decade of cheap lending to developers and property speculators.

Bankia has priced its listing at a 54 per cent discount to its book value, with Cívica offering a discount of 60 per cent, decisions reflecting both lenders’ recognition of the need to assuage investors’ concerns about the Spanish economy.

CURRENT AFFAIRS - 4

2011-07-07T09:51:00.000-07:00

NEWSPAPER SCANDAL IN UK - Murdoch: NOTW to close after Sunday

The Independent

The News of the World will close after a final edition this weekend, News International chairman James Murdoch said today.

The tabloid newspaper will be published for the last time on Sunday after it was rocked by the phone hacking scandal.

Mr Murdoch said in a statement: "Having consulted senior colleagues, I have decided that we must take further decisive action with respect to the paper. This Sunday will be the last issue of the News of the World."

The shock development came as police said there could be as many as 4,000 victims of phone hacking by the paper, which has been published for 168 years.

Mr Murdoch said this Sunday's edition of the News of the World would have no commercial advertisements and all the revenue from sales would go to good causes.

He praised the paper's achievements but condemned this week's revelations that phone hacking victims may have included murdered schoolgirl Milly Dowler, bereaved military families and relatives of 7/7 bombing victims.

He said: "The good things the News of the World does, however, have been sullied by behaviour that was wrong.

"Indeed, if recent allegations are true, it was inhuman and has no place in our company."

Mr Murdoch admitted that the paper's internal inquiry into earlier phone hacking claims was inadequate.

News of the World royal editor Clive Goodman and private investigator Glenn Mulcaire were jailed in 2007 after plotting to intercept voicemail messages left for royal aides.

Mr Murdoch accepted that the paper made statements to Parliament "without being in the full possession of the facts" and said he wrongly approved out-of-court settlements without having a "complete picture" of what had happened.

He went on: "The News of the World is in the business of holding others to account. But it failed when it came to itself.

"In 2006, the police focused their investigations on two men. Both went to jail. But the News of the World and News International failed to get to the bottom of repeated wrongdoing that occurred without conscience or legitimate purpose.

"Wrongdoers turned a good newsroom bad and this was not fully understood or adequately pursued.

"As a result, the News of the World and News International wrongly maintained that these issues were confined to one reporter.

"We now have voluntarily given evidence to the police that I believe will prove that this was untrue and those who acted wrongly will have to face the consequences. This was not the only fault.

"The paper made statements to Parliament without being in the full possession of the facts. This was wrong.

"The company paid out-of-court settlements approved by me. I now know that I did not have a complete picture when I did so. This was wrong and is a matter of serious regret."

Labour MP Tom Watson told Sky News: "Let's be clear about this, this paper has closed but the hacking saga has not.

"The issue for me today is not whether Rupert Murdoch closes a paper that was going to go bankrupt because there are no advertisers or readers left, it is whether Rebekah Brooks is going to consider her position and resign as chief executive of News International.

"The anger will only subside when a very senior executive in this company takes responsibility for this heinous attack on British people."

Mr Watson added: "There are only two people in the country left who are supporting Rebekah Brooks today - Rupert Murdoch and David Cameron. I'm surprised she even bothered turning up to work this morning."

The MP said: "No one was going to buy this paper any more. No one was going to advertise in it. They destroyed it. The people who were hacking phones, they were the people who closed this paper.

"I feel very sorry for honest journalists who are left at the paper and I actually have a degree of sympathy for the outgoing editor Colin Myler who, I think frankly has had to carry a heavy load for the wrongdoing of other people in the organisation."

Addressing News of the World staff, Mr Murdoch said he wanted all News International's journalism to be "beyond reproach".

He made it clear that some people would lose their jobs as a result of the paper's closure.

He said: "Many of you, if not the vast majority of you, are either new to the company or have had no connection to the News of the World during the years when egregious behaviour occurred.

"I can understand how unfair these decisions may feel. Particularly for colleagues who will leave the company. Of course we will communicate next steps in detail and begin appropriate consultations.

"You may see these changes as a price loyal staff at the News of the World are paying for the transgressions of others. So please hear me when I say that your good work is a credit to journalism.

"I do not want the legitimacy of what you do to be compromised by acts of others. I want all journalism at News International to be beyond reproach.

"I insist that this organisation lives up to the standard of behaviour we expect of others. And, finally, I want you all to know that it is critical that the integrity of every journalist who has played fairly is restored."

Mr Murdoch said News International was co-operating "fully and actively" with the two Scotland Yard inquiries into allegations of phone hacking and payments to police officers.
He said the company acknowledged it had made mistakes and was doing its "utmost" to "fix them, atone for them, and make sure they never happen again".

The revelations over murdered schoolgirl Milly Dowler sparked a trail of further damaging headlines which prompted nationwide fury.

Tonight's bombshell closure announcement came hours after the the Royal British Legion dropped the News of the World as its campaigning partner and expressed "revulsion" at the latest phone hacking allegations.

As the day went on more and more advertisers - including some of Britain's biggest companies - said they were pulling their campaigns from the title.

The political and commercial pressures had been mounting on News International all week with dozens of MPs, including Labour leader Ed Miliband, saying chief executive Rebekah Brooks had to go.

The crisis deepened after Scotland Yard Commissioner Sir Paul Stephenson said evidence from the company listed illegal payments being made to police officers.

The closure comes a day after Rupert Murdoch said phone hacking at one of his flagship newspapers was "deplorable and unacceptable".

Also yesterday Prime Minister David Cameron ordered a public inquiry into the scandal.

FINANCE & ECONOMICS - 1

2011-07-07T09:21:00.000-07:00

Europe lashes out over downgrades

By The Financial Times

Senior European officials lashed out at Moody’s on Wednesday, questioning the timing of the debt rating agency’s downgrade of Portuguese bonds this week and threatening new regulatory action against all three major rating agencies.

The high-profile criticism follows long-simmering European complaints about Moody’s and its two competitors, Standard & Poor’s and Fitch, centring on whether they have improperly attempted to influence policy-making in the ongoing debt crisis.

The Portuguese downgrade – four notches to “junk” status – comes amidst a heated debate over how hard to push private owners of Greek debt to delay repayments from Athens. José Manuel Barroso, president of the European Commission, questioned the timing, and said Moody’s was guilty of “mistakes and exaggerations”.

“I deeply regret the decision … and I regret it both in terms of its timing and its magnitude,” Mr Barroso said. “With all due respect to that specific rating agency, our institutions know Portugal a little bit better.”

On Tuesday, Angela Merkel, German chancellor, and François Baroin, French finance minister, sought to downplay Moody’s decision, saying it would not affect their decision-making.

But Mr Barroso’s comments, along with similar remarks Wednesday by Wolfgang Schäuble, the German finance minister, appeared a concerted change in tenor, with both men arguing that efforts to reduce the agencies’ power would gain momentum.

“We can’t understand the basis of this announcement,” Mr Schäuble said. “We have to break the oligopoly of the ratings agencies.”

Eurozone markets were hit hard on Wednesday following the downgrade. Portuguese bond yields, which have an inverse relationship with prices, saw one of the biggest daily surges this year and French toll road operator Autoroutes du Sud was forced to pull debt deals.

More worryingly, Italian 10-year yields jumped above 5 per cent for the first time since November 2008. Contagion to Italy could threaten the entire euro project because of the size of its economy.

Rating agencies defended their decisions, with a Moody’s spokesman saying the agency’s continues “providing independent, objective assessments of credit risk on debt securities”. S&P said: “We are focused on our role of providing investors with an independent and globally consistent view of creditworthiness, based on our published criteria.”

Some analysts accused European officials of attempting to distract voters and financial markets from their difficulties in formulating an effective response to the crisis.

“EU leaders will be well advised to stop blaming ratings agencies for their own shambolic handling of the euro area crisis,” said Sony Kapoor, head of Re-Define, an economic consultancy.

The European complaints echo similar criticisms made by Washington in April, when S&P cut its outlook for US bonds in the midst of budget negotiations between the White House and congressional Republicans. At the time, senior US Treasury officials questioned the timing and accused S&P of being misinformed about the budget talks.

European officials have argued that downgrades have frequently coincided with high-profile meetings of European leaders – evidence, they believe, of agency politicisation.

Greek debt was downgraded by S&P a week before last month’s summit of EU heads of government, for instance, and by Moody’s four days before a special summit of eurozone leaders in March. Fitch downgraded Portuguese debt the day of another March EU summit, and Moody’s downgraded Irish debt on the day of a December summit.

“The credit rating agencies are playing politics not economics,” said a senior EU official. “The timings of the downgrades are not a coincidence.”

CURRENT AFFAIRS - 3

2011-07-07T09:10:00.000-07:00

Codex Calixtinus book 'disappears' from Spain cathedral

BBC

A hugely valuable illuminated manuscript has disappeared from the cathedral of Santiago de Compostela in northern Spain, say police.

The Codex Calixtinus dates from the 12th Century and was compiled as a guidebook for medieval pilgrims following the Way of Saint James.

This is the oldest copy of the manuscript and is unsaleable on the open market.
Only a handful of people had access to the room in which it was kept.

This edition of the Codex Calixtinus is thought to date from around 1150.

Its purpose was largely practical - to collect advice of use to pilgrims heading to the shrine there. It also included sermons and homilies to St James.

On Wednesday afternoon, the book was reported missing from the room where it is kept.

"We are investigating its disappearance," a police spokeswoman said, according to AFP news agency.

"It is usually kept in a room to which only half a dozen people have access," she said.

The Codex is only brought out on special occasions, such as last year's visit of Pope Benedict, when it is closely guarded.

If the work has been stolen, it will be impossible to sell it on the open market, says the BBC's arts reporter Vincent Dowd.

CURRENT AFFAIRS - 2

2011-07-06T12:25:00.000-07:00

Huge crowds launch Spain's Pamplona bull-run fiesta

AFP

Tens of thousands of revellers packed Pamplona and soaked each other in sangria Wednesday to kick off Spain's best-known fiesta: the San Fermin bull-running festival.

Swilling gallons of beer, wine and sangria, Spaniards and foreigners jammed into the main Plaza del Ayuntamiento to hear the traditional shout from a City Hall balcony: "Viva San Fermin".

Seconds later, a firecracker known as the "chupinazo" detonated, setting set off celebrations among a writhing mass of people dressed in white with red handkerchiefs, who sprayed each other with sangria.

The frenzy marked the start of a nine-day festival charged with alcohol, and laced with danger.

The most courageous, or inebriated, of the revellers are drawn by the daily thrill of being chased through the northern city's streets from a pack of huge, charging bulls.

It's a combination expected to draw more than a million tourists to Pamplona, popularised worldwide by Ernest Hemingway's 1926 novel, The Sun Also Rises.
Party-goers were already drinking copious amounts of alcohol before the official start, squeezed into the main square. Some sat on friends' shoulders. One woman had stripped to the waist.

"I'm here to have fun, to enjoy with the locals and to run with the bulls," said 24-year-old Australian Adam Espron, wearing yellow sunglasses.

Two large glasses of sangria in his hands, Californian tourist David Panijelene was euphoric. "It is the first time for me. Today is my birthday," he said.

The festival's first bull run will be held at 8:00 am (0600 GMT) on Thursday, when hundreds of people race ahead of six fighting bulls and six steers stampeding through an 848.6-metre course from a holding pen to the city's bull ring.

The bull run takes on average just under four minutes, with 2,000 to 3,500 runners daring to get as close as possible without being trampled or pierced by the beasts' horns.

Every year between 200 and 300 participants are injured. Most are hurt after falling but some are trampled or gored by the bulls despite increased safety measures.

The most recent death occurred two years ago when a bull gored a 27-year-old Spaniard to death, piercing his neck, heart and lungs with its horns in front of the hordes of tourists.

This year organisers have launched a free iPhone app in English to help revellers to assess the chances that they will emerge from the festival unharmed.

It asks users about their behaviour at the festival, including how much they have had to drink and how many hours of sleep they have received.

The daily bull runs are the highlight of the festival, which ends July 14, but there is also dancing and drinking, lots and lots of drinking.

In the evening the beasts are killed in the bull ring and their meat is served up in city restaurants.

The city of some 200,000 residents expects the number of people who will take part in the festival this year will be at least as much as last year when 1.5 million people turned out and hotels reported a 95-percent occupancy rate.

The official opening of the festival and the morning bull runs are broadcast live on public television, drawing millions of viewers.

CURRENT AFFAIRS - 1

2011-07-06T12:19:00.000-07:00

Spain's indignados have new focus: blocking evictions

REUTERS

More than 200 chanting protesters gathered in a Madrid neighbourhood on Wednesday, preventing the eviction of an unemployed woman and her two children, one of whom is disabled.

The demonstration was part of a new wave of protests sweeping Spain, in which groups gather at unemployed people's homes to block their eviction, raising pressure on politicians to help a million Spaniards struggling to pay their mortgages.

The movement gathered steam in May as part of the "indignados" (indignant) protests against the government's spending cuts, failure to revive the moribund economy, and the European Union's highest unemployment rate of 21 percent.

"With the housing bubble burst and unemployment rising, people have had to make a choice -- either they feed their children or they pay the mortgage," said protester David Cobo, a member of a mortgage victims' group called Affected by the Mortgage, shouting above the noise of the crowd.

There are several such protests around Spain every week, organised through social media. In dozens of cases crowds have successfully blocked entry to the building, making it impossible for an official to deliver a court order for eviction.

Of around 300,000 people kicked out of their homes in the last two years, most are among Spain's nearly five million unemployed. Unemployment benefits stop after about two years, leaving many with little or no income.

Last week the government announced measures to help those struggling with high mortgage payments, but consumer advocates said the moves would help only a handful of those pushed to their financial limits.

The ruling Socialists are likely to be defeated in elections due by March 2012, and officials have begun criticising the banks, the major mortgage lenders. Consumer groups dismiss their attacks as mere rhetoric.

Opinion polls show most Spaniards, on both left and right, feel the political class has failed to provide real solutions to the economic crisis.

The government's borrowing costs have soared as international investors worry that Spain could head into a fiscal crisis and need a bailout, like Ireland, Greece and Portugal. The government has responded by cost cutting that has angered Spaniards and hampered economic growth.

HOUSEHOLD DEBT BURDEN

The value of mortgage debt roughly doubled in the five years to 2009, according to Bank of Spain data, as Spaniards were enticed onto the housing bandwagon by easy loan conditions.

"Everyone speculated in some way, giving the impression that prices were going to keep on rising for ever," said Fernando Encinar, analyst at real estate firm Idealista.com.

Property prices have fallen 16 percent in Madrid since the peak of the boom in 2007, and the drop makes it impossible for many to sell their homes without remaining saddled with debt.

Under Spanish law, if a bank forecloses on a home and evicts the borrower, the former homeowner still owes the balance of the mortgage to the bank.

That has kept the property market from an even sharper fall, as borrowers try to hang on to their home no matter what. As a result the Spanish banking sector has stayed afloat, though badly in need of capital .

The overall national level of bad mortgage debt is very low at 2.6 percent of total mortgages, as Spaniards struggle to keep up repayments by renegotiating terms or digging into savings.

"The main problem is not that Spain's (mortgage) law differs so dramatically from other countries. The issue is that Spain has been so much more exposed to the property bubble, and that prices have started to come down while unemployment has gone up massively," said Idealista's Encinar.

Conventional wisdom in Spain has always been that renting was throwing money away. Spanish home ownership is high compared with other countries at 85 percent, according to property firms.

That makes it difficult for any government, of left or right, to draw up a policy which takes the steam out of property prices.

MAKING ENDS MEET

Banking customers' association ADICAE estimates that more than one million families face severe mortgage payment problems, and says many Spaniards are eating in soup kitchens so they can keep up their mortgage payments.

Anti-eviction groups have managed to stop banks and lawyers from repossessing property in dozens of cases, though banks often serve a new notice of eviction some months down the line. So far there has been no violence and police involvement has been limited.

"I'm here because I'm sick of the same people always being at risk while the banks always seem to get away with it," said Javier Gallego, a 41-year-old sound technician who took part in Wednesday's protest in Madrid.

Official data released on Wednesday showed the property hangover could continue for years to come, with about 700,000 properties still empty across Spain at the end of 2010, three years after the boom ended.

FINANCE & ECONOMICS - 2

2011-06-16T00:48:00.000-07:00

Inditex sets the pace for fashion retailers

The Financial Times

Spain’s Inditex, owner of the Zara fashion label, reported robust first-quarter earnings driven by rapid growth in emerging markets, while rival Hennes & Mauritz produced a set of below-forecast sales figures.

Inditex, the world’s largest fashion retailer by sales, continued its breakneck expansion in the first three months of the year, opening new stores at a rate of 12 a week in 29 countries, taking its total to 5,154 stores in 78 countries.

These included the Galicia-based group’s first two stores in Australia, part of an expansion into the southern hemisphere that makes it the first global retailer to sell clothes specially tailored to the region’s seasons.

Inditex said it also planned to launch in South Africa, Taiwan and Peru by the end of the year.

The results were interpreted by analysts as further evidence that Inditex’s production model, by which almost half of its clothes are made in Spain, Portugal and Morocco, was enabling it to avoid problems caused by high cotton prices and rising Chinese labour costs that have troubled rivals such as H&M, which missed analyst forecasts for its monthly sales figures.

H&M reported a 2 per cent increase in like-for-like sales during its fiscal second quarter to SKr27.6bn ($4.26bn), lagging a consensus forecast of SKr28.4bn, with monthly sales figures for May also falling short of expectations, rising 2 per cent versus the consensus forecast of 5.4 per cent.

H&M, which announces second-quarter earnings next week, has been hit harder than Inditex by rising input costs.

“Inditex has ... proven that its differentiated sourcing model can yield higher sales and less gross margin risk,” said Karen Howland, analyst at Barclays Capital.

After opening online Zara stores last year for the first time, Inditex said equivalents for its Massimo Dutti, Pull and Bear, Bershka and three other brands would be opening in Europe in September, along with an online Zara store in the US.

Inditex’s net profits to the end of April rose 10 per cent to €332m ($476.5m), as net sales for the first quarter rose by 11 per cent year on year to €2.96bn.
Earnings before interest, taxation, depreciation and amortisation rose to €601m (€560m).

CURRENT AFFAIRS - 2

2011-06-09T00:13:00.000-07:00

Bilderberg mystery: Why do people believe in cabals?

Ordinary people can only guess at the goings-on at the meetings of the secretive Bilderberg Group, which is bringing together the world's financial and political elite this week. Conspiracy theories abound as to what is discussed and who is there.

BBC JUNE 2011

Meaning of cabal

• The use of the world cabal to mean a "secret or private intrigue of a sinister character formed by a small body of persons; 'something less than conspiracy'", was first used in 1660

Secret talks

• Bilderberg is named after the Dutch hotel where the first meeting took place in 1954
• The initial focus was the state of the trans-Atlantic alliance and the problems facing Europe and the US
• An invitation list is compiled each year by a steering committee
• About 120 people from North America and Europe are invited. About one-third are from government and politics, and two-thirds from finance, industry, labour, education and communications
• Meetings often feature future political leaders shortly before they become household names. Bill Clinton went in 1991 while still governor of Arkansas, Tony Blair was there two years later while an opposition MP

The belief in secret cabals running the world is a hardy perennial. And on Thursday perhaps the most controversial clandestine organisation of our times - the Bilderberg Group - is meeting behind closed doors.

In the manner of a James Bond plot, up to 150 leading politicians and business people are to gather in a ski resort in Switzerland for four days of discussion about the future of the world.

Previous attendees of the group, which meets once a year in a five-star hotel, are said to have included Bill Clinton, Prince Charles and Peter Mandelson, as well as dozens of company CEOs.

First meeting in 1954, the aim was to shore up US-European relations and prevent another world war. Now under the group's leadership of former US Secretary of State Henry Kissinger and one-time EU vice president, Viscount Davignon, the aim is purportedly to allow Western elites to share ideas.

But conspiracy theorists have accused it of everything from deliberately engineering the credit crunch to planning to kill 80% of the world population. Longtime opponent and US radio host Alex Jones, heckled one meeting through a megaphone: "We know you are ruthless. We know you are evil. We respect your dark power."

Part of the reason for alarm is the group's secretive working methods. Names of attendees are not usually released before the conference, meetings are closed to the public and the media, and no press releases are issued.

The gnashing of teeth over Bilderberg is ridiculous, says Times columnist David Aaronovitch. "It's really an occasional supper club for the rich and powerful," he argues.

Denis Healey, co-founder of the group, told the journalist Jon Ronson in his book Them that people overlook the practical benefits of informal networking. "Bilderberg is the most useful international group I ever attended," he told him. "The confidentiality enabled people to speak honestly without fear of repercussions."

The conspiracy theorists may get overexcited but they have a point, says Prof Andrew Kakabadse, co-author of new book Bilderberg People.

The group has genuine power that far outranks the World Economic Forum, which meets in Davos, he argues. And with no transparency, it is easy to see why people are worried about its influence.

"It's much smarter than conspiracy," says Prof Kakabadse. "This is moulding the way people think so that it seems like there's no alternative to what is happening."

The agenda the group has is to bring together the political elites on both right and left, let them mix in relaxed, luxurious surroundings with business leaders, and let the ideas fizz.

It may seem like a glorified dinner party but that is to miss the point. "When you've been to enough dinner parties you see a theme emerging," he says. The theme at Bilderberg is to bolster a consensus around free market Western capitalism and its interests around the globe, he says.

CURRENT AFFAIRS - 1

2011-06-06T07:56:00.000-07:00

Erasmus: Record number of students receive EU grants for study and training abroad

The FINANCIAL -- Brussels, June 2011 - More than 213 000 students received 'Erasmus' grants to study or train abroad during the 2009/10 academic year – a new record and 7.4% increase on the previous year's figure.

Erasmus is the world's most successful student exchange programme and, on current trends, the EU will reach its target of supporting 3 million European students by 2012/13 since the programme's launch in 1987. The three most popular destinations for students in 2009/10 were Spain, France and the United Kingdom. Spain sent the largest number of students abroad, followed by France and Germany. 61% of Erasmus students were female in the year in question. The EU invested € 415 million in Erasmus in 2009/10.

"The Erasmus programme is one of the great success stories of the European Union. The latest figures speak for themselves: Erasmus is more popular than ever and I am committed to securing more resources for it in future. Studying or training abroad opens doors to personal development and job opportunities so we are right to be ambitious when it comes to investing in our young people," said Androulla Vassiliou, the European Commissioner for Education, Culture, Multilingualism and Youth.

Of the total number of students supported through Erasmus in 2009/10, 178 000 spent part of their degree programme abroad at a university or other higher education institution in one of 32 countries then participating in the Erasmus initiative (27 Member States, Croatia, Iceland, Liechtenstein, Norway and Turkey. Switzerland became the 33rd country to join Erasmus this year). The number of students choosing the study option increased by 5.7% compared with 2008/09.

Work placements in companies abroad have been supported through Erasmus since 2007 and are increasingly popular. In 2009/10, 35 000 students (one in six of the total) chose this option. This represents a 17.3% increase on the previous year.

The average monthly Erasmus grant received by students fell by around 7% to €254, due to the increased numbers getting support. Demand strongly exceeds the availability of Erasmus grants in most participating countries. A study carried out for the European Parliament in 2010 stated that only 24% of non-Erasmus students reported not being interested in a study programme abroad.

In addition, 38 000 grants were awarded to university staff and teachers to teach or receive training abroad, 4% more than in the previous year.

FINANCE & ECONOMICS - 1

2011-06-06T01:25:00.000-07:00

Mercadona - Why a low-price retailer is thriving

The Economist June 2011

FEW domestic firms are prospering in crisis-racked Spain, but Mercadona is. Spain’s largest supermarket (by sales) has enjoyed double-digit growth for most of the past decade. When Juan Roig, the chairman, took over in 1981, Mercadona had only eight shops, all in Valencia. Today it has 1,310 and annual sales of €16.5 billion ($23.8 billion). Spain’s economic troubles seem to have made it stronger. Profits dipped in 2009, but surged again by 47% in 2010 after some forceful cost-cutting.

Mercadona’s strength is low prices. The family-owned chain does not fritter away cash on advertising. It mercilessly squeezes the suppliers of its own-brand products. These suppliers, of which there are about 100, put up with Mercadona’s squeezing because they have a long-term relationship with the company and have grown with it. Since 2009 Mercadona has shaved €2.2 billion of costs from its products, often with simple adjustments such as reducing packaging. Tight relationships with its suppliers foster innovation. For example, sticking a plastic lid on a large tin of tuna made it easier to open and increased its sales by 60% in 2010.

Even so, Mercadona does not skimp on technology or logistics. It was the first retailer in Spain to use bar-code scanners. And it owns a fully automated logistics warehouse just outside Madrid. Computers monitor deliveries from suppliers and organise shipments to stores. Robot arms stack goods in crates like a game of Tetris.

“Mercadona is unique in several ways,” says Zeynep Ton of Harvard University, who wrote a case study on the chain. Its 63,500 employees are on permanent contracts (with bonuses), work regular hours and receive 20 times more training than the staff of an average American retailer. This makes them more productive: sales per Mercadona employee were 18% higher in 2008 than at other Spanish supermarkets. Staff turnover is only 4% a year.

Employees constantly gather feedback from shoppers, whom they refer to, accurately enough, as “bosses”. Shops are designed to make shopping quick and easy. The selection is smaller than in other supermarkets, especially after Mercadona took the unpopular decision of eliminating 1,000 products from the shelves in 2009. Own-label items such as Deliplus (a line of cosmetics) account for 38 % of sales. Mercadona products were ranked number one, in terms of value for money, in a recent survey of 5,200 households by TNS, a market researcher.

There is still plenty of room to grow at home. Mercadona accounts for 13.1 % of the floor space in Spanish supermarkets, which makes it the third-largest chain in the country, after France’s Carrefour and the co-operative Eroski. It aims to enter the Italian or French market next year, probably through a small acquisition. Mr Roig doubts that the Mercadona model can simply be copied abroad. “We must learn everything from everyone,” he says.

Unlike most Spanish bosses, Mr Roig doesn’t mince his words. Earlier this year he said the only good thing about 2011 for Spain was that it would be better than 2012. “It will be worse if the Spanish people do not take up the challenge of transforming Spain,” he says, by which he means bringing its colossal welfare state under control.

Mr Roig believes that Spain has “great human capital”. That is true, but Spain’s youth unemployment rate—a staggering 45%—suggests that much of this talent is being squandered. The protesters in the plazas complain that Spain’s politicians have lost touch with how ordinary people live. That is not a mistake a supermarket can afford to make.

CURRENT AFFAIRS - 4

2011-05-20T10:37:00.000-07:00

Spaniards Take to Streets Before Vote

With elections set for Sunday in Spain in more than 8,000 municipalities and 13 of its 17 regions, thousands of people, most of them young, have taken to the streets in Madrid, Barcelona and other large cities this week, calling for an end to suspected longstanding corruption among established parties. Fueling the demonstrators’ anger is the perceived failure by politicians to alleviate the hardships imposed on a struggling population by a jobless rate of 21 percent.

At sit-ins, street protests and on social media networks, the protesters’ message is that of an alternative campaign that could eclipse that of the established parties and result in a decline in voter turnout on Sunday, from 63 percent four years ago.

Some of the youth groups have made the fight against corruption their battle cry, like NoLesVotes, or “Don’t vote for them,” whose manifesto starts with the warning that “corruption in Spain has reached alarming levels.” The group recently published a Web site map pinpointing localities where more than 100 politicians seeking election were also under judicial investigation.

Other protesters are fielding alternative candidates, like the Pirate Party in Catalonia, founded 18 months ago, which is hoping to win about 7,000 votes across Catalan municipalities. One of its candidates in Barcelona, the 27-year-old Francesc Parelleda, said political corruption was a consequence of a “political system in which there is simply zero transparency and democracy within the main parties.”

José M. de Areilza, dean of the IE Law School in Madrid, said, “I don’t think that political corruption is necessarily worse in Spain than in other European countries, but I do think that the economic crisis is now generating a lot more anger and resentment here toward politicians.”

On Sunday, Francisco Camps is expected to be re-elected as head of the regional government of Valencia, which includes the third-largest city in Spain and some of the most popular Spanish resorts.

By the end of the year, however, Mr. Camps is also likely to be in court facing bribery charges, as part of a vast corruption investigation, dubbed the Gürtel case, that has also targeted several other politicians from the main center-right political force, the Popular Party.

Mr. Camps was charged in February for allegedly receiving tailor-made suits in return for granting public contracts, with further possible financial irregularities still under investigation. Nine other politicians standing for the Popular Party on Sunday in Valencia are being investigated or have been charged with fraud. Mr. Camps and his fellow candidates deny any wrongdoing.

For now, the corruption allegations have not hindered Mr. Camps’s re-election bid, according to the latest opinion polls. Like Silvio Berlusconi, the Italian prime minister who is engulfed in scandal, Mr. Camps has portrayed himself as the victim of a witch hunt by political opponents, judges and left-leaning media. Asked in December to comment on some of the allegations, he said that “nobody should believe Soviet-style propaganda against everything that has been achieved in Valencia.”

In fact, “many people in Valencia now talk about the Berlusconization of our society,” said Ferrán Bono, a Socialist lawmaker who represents Valencia in the national Parliament in Madrid. “Some people have seen so many political scandals that they just treat them as banal, but I think many also genuinely believe the conspiracy theory that Camps has been so actively promoting.”

The Gürtel investigation, which also targets some Popular Party politicians in Madrid, involves more than €120 million, or about $170 million, of public funds misspent by politicians in return for alleged kickbacks, according to a summary of the charges presented by the prosecution this year. Its alleged ringleader, Francisco Correa, is in jail awaiting trial.

But corruption investigations have not spared other main Spanish political parties, starting with the governing Socialists of Prime Minister José Luis Rodríguez Zapatero. Socialist politicians stand accused in several of the property-related fraud inquiries that have mushroomed amid a collapse in the Spanish construction sector. Since April, the Socialist party in Andalusia, the largest region in Spain, has also been shaken by an inquiry into whether party officials provided fictitious early-retirement packages to friends and family members.

Mr. de Areilza, the law school dean, said: “We have built a democracy with political parties somehow disconnected from society, who have accumulated a lot of internal powers and have not been regulated in very important areas like their financing — and unfortunately they are also the ones who are in charge of pushing through any reform of the system.”

Mr. Camps’s anticipated victory in Valencia is expected to be part of a countrywide sweep by the Popular Party at the expense of the governing Socialists, whose popularity has plummeted because of the economic crisis.

Whatever the outcome Sunday, Mr. Zapatero announced in April that he would not seek a third term in office, paving the way for the selection of a new Socialist leader ahead of the general election, expected in March 2012.

In their campaigns, many regional and municipal politicians sought to distance themselves from the policies of Mr. Zapatero’s central government in Madrid in order to bolster their own prospects. In the case of Mr. Camps in Valencia, “the message has been that everything that works in Valencia is his doing while everything that is wrong, like a jobless rate that is four percentage points above the national average, is the fault of Zapatero,” said Mr. Bono, the Socialist lawmaker.

The reverse, however, has not been true, with national party leaders careful not to antagonize powerful regional politicians who could influence their chances next March.

For much of last year, Mariano Rajoy, the Popular Party’s national leader, refused to confirm his support for Mr. Camps because of his ties to the Gürtel corruption scandal. On Tuesday, however, Mr. Rajoy went to Valencia to join Mr. Camps at the city bullring. “You are a great president,” Mr. Rajoy told him in front of a cheering audience. “The people vote for you because they love you.”

CURRENT AFFAIRS - 3

2011-05-19T12:52:00.000-07:00

Protest in the Med: rallies against cuts and corruption spread

Sit-ins planned at parks and squares across Madrid, Rome, Barcelona, Milan, and Florence

The Guardian May 2011

A youth-led rebellion is spreading across southern Europe brought into focus by a new generation of protesters taking possession of squares and parks in cities around Spain, united by a rejection of mainstream politicians and fury over spending cuts.

Protests are also planned in Italy, where the tag #italianrevolution is a trend on Twitter. Plans have been announced for a Tahrir Square-style piazza occupation in Florence on Thursday night, and for further protests in Italian cities, including Rome and Milan, on Friday.

In Madrid demonstrators have refused to budge from the central Puerta del Sol despite a police charge that dislodged them temporarily on Tuesday night.

Now they have occupied a quarter of the square, covering it with tarpaulins and tents, setting up kitchens, tapping at laptops and settling down to sleep on sofas and armchairs.

Similar scenes were being played out in Barcelona, where protesters held a midday Argentine-style pan-bashing protest in the Plaza de Catalunya, and in numerous other cities where protesters raised the banner of what they call "the Spanish revolution".

The protests come as Spaniards prepared to vote for municipal and regional governments, which jointly account for half the spending and most of the welfare state in Spain.

Town halls and regional governments are expected to increase the rhythm of spending cuts after Sunday's vote as Spain battles to rein in its budget deficit and avoid the fate of other eurozone countries such as Portugal, Greece and Ireland that have needed bailouts.

"Everyone is here for their own reasons and with their own proposals," said Luis de Pinedo, 20, an anthropology student who was handing out flyers in the Puerta del Sol explaining that the protesters did not represent any political party. "We are having to pay for an economic crisis that we didn't cause but which was provoked by the banks," he said.

Groups of people were gathered in debate. About the only demand most could agree on was a change in the electoral law to end the two-party system that shifts power between the socialists of the prime minister, José Luis Rodríguez Zapatero, and the conservative People's party.

"Mostly people are tired of the two-party system," said De Pinedo. "But I am also angry about corruption."

Javier de Coca, a 32-year-old protester in Barcelona, said: "Some people are trying to turn this into a leftwing or Marxist thing, but that is not what it is about. The really important thing for the moment is that we are raising our voices. No one should think we are just sitting around and taking this."

All age groups were present in the protests but the emerging leaders were mostly under 30, part of a generation suffering 45% unemployment.

Protesters said they were inspired more by the protests that followed the recent banking crisis in Iceland than by those that have swept through north Africa.

"Spain is not a business. We are not slaves," read one of the hundreds of protest posters glued to the Pueta del Sol's metro station walls.

Demonstrations have been arranged outside the Spanish embassy in London and in other European cities. "A lot of people have left the country precisely because of the situation we are in," said De Coca. "And they want to protest too."

Police have been instructed to leave the protesters alone. Political demonstrations and campaigns are banned on Saturday because of the elections. Zapatero's socialists look set to receive severe setbacks across the country amid popular anger over 20% unemployment and the spending cuts. Spain faces a general election next March.

Italy so far has not been forced into the sort of austerity measures imposed on Spain, Portugal, Greece and Ireland. But its economy has barely grown in the last 10 years and there is increasing evidence of exasperation with its billionaire prime minister, Silvio Berlusconi.

Over the past two years the Italian government's time has been increasingly devoted to finding ways of dealing with Berlusconi's legal problems. He is a defendant in three trials in which he faces vice charges and a range of accusations relating to his business conduct.

The frustration was evident in the results of partial local and provincial elections held last Sunday and Monday. Berlusconi's candidate for mayor in his home city of Milan, Letizia Moratti, was outstripped by a centre-left contender in the first round of voting, forcing her into a run-off on 29 and 30 May.

FINANCE & ECONOMICS - 3

2011-05-18T10:20:00.000-07:00

McDonald’s to shake up food ordering system

By The Financial Times May 2011

McDonald’s is to change the way customers order its meals in Europe, partly replacing cashiers and the use of banknotes at its 7,000 fast-food restaurants in the region with touchscreen terminals and swipe cards.

“Ordering food has not changed for 30 or 40 years,” said Steve Easterbrook, president of McDonald’s Europe, in an interview with the Financial Times.

The move is part of the fast-food chain’s efforts to woo cash-strapped customers by making its restaurants more convenient and convivial. It is refurbishing stores, and introducing longer opening hours and new menus.

At a time when many retail and consumer companies are racking up sluggish or even shrinking sales in Europe, McDonald’s like-for-like sales rose 5.7 per cent year-on-year in the first quarter – the highest growth out of its three main geographic regions.

Mr Easterbrook said that the changes would make life easier for consumers as well as improve efficiency, with average transactions three to four seconds shorter for each customer. McDonald’s European stores serve 2m customers a day.

Weiky Filho, a student enjoying a burger at McDonald’s in Wimbledon, London, was in favour of the changes. “You don’t need to communicate with staff and it would be much quicker,” he said.

But Joe Surkitz, 21, was less convinced. “I’m looking for work and if there’s more machines doing jobs I’ll find it harder. Plus you won’t get service with a smile.”

Mr Easterbrook said that the new technology would allow McDonald’s to harness more information about customers’ ordering habits. Supermarkets and other retailers have huge databases of information on customers’ shopping habits, which they gather from loyalty cards.

Diners at the 1,200 McDonald’s outlets in the UK will shortly be able to pay by simply swiping a Visa debit card, just as London’s commuters can swipe their Oyster cards at train stations.

McDonald’s does not expect any reduction in staffing as a result of the changes. “In fact the business is growing so we would expect to see an increase in overall staff numbers and we’re still on track to create an additional 15,000 new jobs in Europe in 2011,” it said.

FINANCE & ECONOMICS - 2

2011-05-13T11:03:00.000-07:00

Spanish economy weighs heavy on Telefónica

By The Financial Times May 2011

Spain’s stuttering economy weighed on Telefónica in the first quarter as growth at the eurozone’s biggest telecoms operator continued to be driven by its Latin American operations.

Telefónica said that revenues in its Spanish business fell by 5.6 per cent in the first quarter to €4.37bn ($6bn) driven by high levels of unemployment and increased price-based competition among domestic operators.

Investor concerns about Telefónica’s Spanish business have depressed the company’s share price, which has underperformed the FTSE Eurofirst 300 telecoms index by 8 per cent over the past year, prompting chairman César Alierta to pledge an increase in pay-outs to shareholders.

Telefónica last month announced that it was preparing to slash up to 20 per cent of its workforce in Spain over the next three years as falling domestic sales dent profitability.

Spain currently has an adult unemployment rate of 21 per cent, the highest rate in the European Union and the country’s highest level of joblessness in 14 years.

A bright spot in its domestic performance was a 17 per cent annual fall in bad debt provisions in Spain to €34m, accounting for 0.8 per cent of domestic revenues in the quarter.

The faltering performance of the domestic business for Spain’s former telecoms monopoly contrasted sharply with its operations in Latin America, where revenues increased by 26 per cent year on year to €7bn.

This expansion, the company said, saw a 9.1 per cent growth year on year in Latin American mobile traffic on its networks, with Brazil, where it owns the Vivo operator, generating 50 per cent of regional revenues.

Rising use of smartphones in Latin America saw revenues generated by data access for mobiles on the continent increase by 32 per cent year on year for the first quarter.

Over all, first-quarter net profit dropped by 1.9 per cent year on year to €1.62bn, below various polls of analysts that had predicted a figure closer to €1.7bn, while group revenues rose by 10.8 per cent over the same period to €15.43bn.

Telefónica’s earnings before interest, tax, depreciation and amortisation rose by 9 per cent from the first quarter of 2010 to €5.574bn, but its overall ebitda margin shrunk by 0.6 percentage points, driven by a 2.5 per cent equivalent drop in the Spanish market.

At the company’s investor day last month it said it was aiming to increase revenues by 2 per cent this year, and spend about €9bn on capital expenditure.

Telefónica shares were flat after the results at €16.97.

CURRENT AFFAIRS-2

2011-05-09T02:14:00.001-07:00

Seve Ballesteros: Spain mourns 'father of Spanish golf'

BBC

Spain's greatest golfer. An icon. An inspiration. These are just some of the tributes flooding in for Severiano, or Seve, Ballesteros, following the news of his death.

The announcement came on Spanish television, TVE, early on Saturday.

The Ballesteros family soon confirmed in a statement that the golfer had died at 0210 (0010 GMT), surrounded by relatives, at home in Pedrena, northern Spain.

He had been fighting brain cancer for two-and-half years, in what he himself called "the biggest battle of my life, my 6th major".

On Friday, his family announced that his health had suffered a severe turn for the worse.

'Symbol for Spain'

The news cast a dark cloud over the Spanish Open golf championship, under way in Barcelona.

Tournament flags were lowered, and players emerged wearing black ribbons in honour of the man they call the father of Spanish golf, their role model.

At 1445 on Saturday, all play froze for a moment of silence in his memory.

Footballers at Seve Ballesteros' local club, Racing Santander, also wore black armbands for their match - a tribute to a great sportsman, and a unique man, who fought against his illness to the last, according to club president, and Seve's friend, Francisco Pernia.

Seve's former golf partner Jose Maria Olazabal was in tears during practice ahead of day three of the Spanish Open. But he said he would play on, as the best possible homage to his role model.

"I have always been grateful to him, for giving me the chance to play at his side," Mr Olazabal recalled, and added that what he would remember is Seve's personality and strength, his passion for everything he did.

Many other sports personalities have expressed their own sorrow at Seve's death.

Formula One driver Fernando Alonso called him a pioneer of golf in Spain: A man who discovered the sport for his country, and someone who would always remain as one of the greatest in Spanish sport.

Barcelona manager Pep Guardiola said Seve Ballesteros was admired and loved in all the world. Footballer Raul commented that Spanish sport has lost one of its greats.

Alongside them, and Spain's Royal Family, the country's politicians have also rushed to remember Seve Ballesteros.

Prime Minister Jose Luis Rodriguez Zapatero said his career marked a turning point in sporting history here.

Seve Ballesteros stormed the international sporting stage in 1976, when he finished second in the British Open. He went on to win three years later.

His huge success then made him an ambassador for a country just emerging from four decades of dictatorship and international isolation under General Franco.

"He was a symbol of the new, democratic Spain," Mr Zapatero said. "Open to the world, without complexes, and capable of being up there with the best in any discipline, including those we had hardly any tradition of, like golf".
His success helped Spain hold its head up high again.

"He was then, what someone like Rafa Nadal is today. But he came at a time, when we really needed those victories, on the international sports stage," agreed Spain's secretary of state for sport, Albert Soler.

As well as putting Spain on the golfing, and sporting, map, many commentators point out the huge boost Seve gave the game at home.

With his flair and famous charisma, he helped make golf something for the masses, not just the elite. He made it popular.

And, in remembering the golfer's life, many have also paid tribute to the great strength he showed in his illness.

The regional president of Cantabria, where Seve was born and where he died, recalled a recent trip to Madrid with the golfer.

"I offered my arm to help him, and he told me: "I'm stronger than you"," Miguel Angel Revilla said.

"He used to walk four or five kilometres a day and lift weights. He thought this was a battle he could win, but about 12 days ago, it seemed he was losing."

Severiano Ballesteros was 54. His funeral will be held on Wednesday, according to Spain's EFE news agency, and the golfer's ashes will then be returned to his home in Pedrena, as he himself wanted

FINANCE & ECONOMICS-1

2011-05-06T09:11:00.001-07:00

Spain’s cajas reshape corporate landscape

The Financial Times

Ongoing restructuring of Spain’s financial system is likely to trigger the largest redistribution of holdings in some of the country’s biggest companies since privatisation in the 1980s and 1990s.

Academics, analysts and bankers argue that the amount of new capital required by Spanish companies during the next two years, combined with the radical financial surgery needed to save some of its savings banks, could dramatically reshape Spain’s corporate landscape.

The savings banks – known as cajas – are judged by the Bank of Spain to need €15bn ($22bn) in fresh capital to mend balance sheets ravaged by a decade of property-related lending now suffering from the country’s real estate bust.

Alongside the option of taking government rescue money, or raising fresh capital by stock market listings or by private investment, many cajas are preparing to offload industrial holdings.

The total holdings of Spanish banks and cajas in listed Spanish companies are estimated at about €40bn, including large stakes in national champions such as Telefónica, Repsol and Iberdrola.

“Spain needs to raise 3-4 per cent of its GDP in financing its current account deficit – or €30bn-€40bn a year; this implies selling Spanish assets to foreigners, as the other way would be to cut consumption or investment by the same amount, and [that] would produce a new recession,” says Ignacio de la Torre, a professor at IE Business School.

The need for foreign investment has led to a parade of private equity groups, hedge funds and sovereign wealth funds descending on Spain seeking bargains.

Last month, the emir of Qatar reciprocated an official Spanish state visit to the Gulf state this year by visiting Madrid and declaring the continued interest of Qatari investment groups in the Spanish banking sector.

In March, Qatar Holdings, one of these groups, made a surprise 6 per cent investment in Iberdrola, Spain’s largest power utility, and it has said it is eyeing further investments in the telecoms and banking sectors.

Other recent purchasers from the Middle East include International Petroleum Investment Company, the Abu Dhabi sovereign wealth fund, which paid €3.7bn to buy shares in the oil company Cepsa that it did not already own, and Royal Emirates Group of Dubai, which purchased Getafe football club for about €90m.

Further investment by foreign buyers could begin to unravel a complex web of political and business relationships that have enabled cajas to exert a degree of control over companies that are viewed as strategically important.

Of the €40bn of listed equity controlled by banks, three-quarters is in the hands of three of the largest groups, Santander, BBVA and La Caixa.

Many of these holdings date back to the privatisation of companies such as Repsol, when government welcomed Spanish banks buying shares in order to maintain a degree of national control.

“The government wanted to retain some influence in the privatised companies and one way to do this was through Spanish banks,” says Professor Eduardo Martínez-Abascal of IESE Business School.

But the bulk of the remaining €10bn controlled by cajas now sits within the recently formed Bankia, a fusion of seven cajas including Caja Madrid.

Bankers working in Spain view the likelihood as high that Bankia will divest some of its holdings, which include 6 per cent of Iberdrola, and 12 per cent of the International Airlines Group, the merger of British Airways and Iberia.

The fate of some of the higher-quality holdings will be sensitive. ACS, the construction company chaired by Real Madrid president Florentino Perez, is involved in a long-running and acrimonious battle to win board room representation at Iberdrola, of which it holds 18 per cent.

The probable availability of Bankia’s 6 per cent stake, and the possibility of the Basque caja BBK relinquishing its 6.6 per cent holding in the utility, means the stability of Iberdrola’s share register appears vulnerable

CURRENT AFFAIRS-1

2011-05-06T09:05:00.000-07:00

Spanish GP's call for co-payment system

New research shows that they consider 28.9% of their consultants are not needed

86% of G.P’s working in Spain have said that they think a system of co-payment, where the patient makes a contribution at point of use, should be introduced.

They say they want the change, not as a punishment, but as a solution to reduce the inadequate and unnecessary use of their time and services by a proportion of the population.

Julio Zarco, President of the Spanish Society of Front Line Doctors, SEMERGEN, was presenting a report on the situation of family doctors in Spain, based on a questionnaire sent to 1,500 doctors.

‘People have to understand that they should not go to the doctor with a cold or fever’, he said, with the research indicating that.

The G.P.’s consider that 28.9% of their consults are unnecessary currently, and take away time from their other duties, such as bureaucratic matters, and increase their stress level.

Zarco said the doctors were also in favour of more attention by phone to patients, and called for better education programs. He also noted that 58% of G.P’s are over the age of 51, and there was a need for a younger team.

FINANCE & ECONOMICS-2

2011-04-15T00:11:00.000-07:00

Complacent Europe must realise Spain will be next

The Financial Times
By Wolfgang Münchau
April 10 2011

European politicians have every incentive to postpone crisis resolution indefinitely, as I argued last week. In the meantime, the debt of several peripheral eurozone countries continues to build up. On Wednesday, Portugal finally accepted the inevitable and applied for a financial rescue. European officials quickly pronounced that this would be the last rescue ever. Everyone in Brussels fell over themselves to argue Spain would be safe.

On Thursday, the European Central Bank raised its main refinance rate by a quarter point to 1.25 per cent. This was a well-flagged move, but more are likely to follow. I expect the ECB’s main policy interest rate to rise to 2 per cent by the end of this year and to 3 per cent in 2013. This trajectory, while consistent with the ECB’s inflation target, will have negative consequences for Spain in particular. Apart from the direct impact on economic growth, higher interest rates will hit the Spanish real estate market. Almost all Spanish mortgages are based on the one-year Euribor money market rate, which is now close to 2 per cent, and rising.

Spain had an extreme property bubble before the crisis, and unlike in the US and Ireland, prices have so far fallen only moderately. According to data from Bank of International Settlements, real house prices in Spain – price per square metre adjusted by the personal consumption deflators – rose by 106 per cent from the beginning of monetary union and to the peak in June 2007. They have since come off by 18 per cent as of end-2010. Calculations such as these are sensitive to the starting date, but Spanish real prices were relatively flat throughout the 1990s, so this is a relatively safe starting point.

Where will it stop? I would expect all of that increase to be reversed. The total peak-to-trough fall would be more than 50 per cent, and prices would have to fall by another 40 per cent fall from today’s level. Is that a reasonable assumption? In the US, real house prices stagnated for most of the 20th century. Increased demand, through immigration for example, should not affect the price level, as long as supply can adjust.

The situation is different in countries with natural or artificial supply constraints, like the UK. But in terms of supply conditions Spain is more similar to the US. I have yet to hear an intelligent reason why Spanish real house prices should be any higher today that they were 10 years ago, and indeed why they should keep on rising.

The most important housing market statistic in Spain is the number of vacant properties, about 1m, which means that the market will suffer from oversupply for several years. This will be the driver of further price declines. Given the stress in the system – recession, high unemployment, a weak financial sector, higher oil prices and rising interest rates – one might even expect house prices to overshoot below the horizontal trend line.

Falling house prices and rising mortgage payments are bound to push up the still moderate delinquency rates and the number of foreclosures. This will affect the balance sheet of the cajas, the Spanish savings banks. The balance sheets carry all property loans and mortgages at cost. As default rates rise, the savings bank system will need to be recapitalised to cover the losses. The Spanish government implausibly estimates the recapitalisation need to be below €20bn, while other estimates put the number at between €50bn and €100bn. The assets most at risk are loans to the construction and real estate sector – €439bn as of end-2010. Spanish banks also have about €100bn in exposures to Portugal, a further source of risk.

The good news is that even under a worst-case scenario, Spain would still be solvent. The Spanish public sector debt-to-GDP ratio was 62 per cent as of end-2010. Ernst & Young, in its latest eurozone forecast, projects the debt-to-GDP ratio to increase to 72 per cent by 2015 – still below the levels of both Germany and France.

But the Spanish private sector debt-to-GDP ratio is 170 per cent. The current account deficit peaked at 10 per cent of GDP in 2008, but remains unsustainably high, with projected rates of more than 3 per cent until 2015. This means that Spain will continue to accumulate net foreign debt. The country’s net international investment position – the difference between external financial assets and external liabilities – was minus €926bn at the end of 2010, according to the Bank of Spain, or almost 90 per cent of GDP.

If my hunch on the Spanish property market proves correct, I would expect the Spanish banking sector to need more capital than is currently estimated. It is hard to say how much because we are well outside the scope of forecasting models. When prices drop so fast, there will be much endogenous pressure that no stress test could ever capture.

The mix of high external indebtedness, the fragility of the financial sector and the probability of further declines in asset prices increase the probability of a funding squeeze at some point. And that means that Spain will be the next country to seek financial assistance from the EU and the International Monetary Fund. As for the large number of official statements that Spain is safe, I think they are merely a metric of the complacency that has characterised the European crisis from the start.

CURRENT AFFAIRS-3

2011-04-08T00:19:00.000-07:00

Swedish couple have honeymoon from hell

A newly-wed couple on a four-month honeymoon were hit by six natural disasters, including the Australian floods, Christchurch earthquake and Japanese tsunami.

The Telegraph

Stefan and Erika Svanstrom left Stockholm, Sweden, on December 6 and were immediately stranded in Munich, Germany, due to one of Europe's worst snowstorms.

Travelling with their baby daughter, they flew on to Cairns in Australia which was then struck by one of the most ferocious cyclones in the nation's history.

From there, the couple, in their 20s, were forced to shelter for 24 hours on the cement floor of a shopping centre with 2500 others.

"Trees were being knocked over and big branches were scattered across the streets," Mr Svanstrom told Sweden's Expressen newspaper. "We escaped by the skin of our teeth."

They then headed south to Brisbane but the city was experiencing massive flooding, so they crossed the country to Perth where they narrowly escaped raging bush fires.

The couple then flew to Christchurch, New Zealand, arriving just after a massive magnitude 6.3 earthquake devastated the city on February 22.

Mrs Svanstrom said: "When we got there the whole town was a war zone.

"We could not visit the city since it was completely blocked off, so instead we travelled around before going to Japan."

But days after the Svanstroms arrived, Tokyo was rocked by Japan's largest earthquake since records began.

"The trembling was horrible and we saw roof tiles fly off the buildings," Mr Svantrom said. "It was like the buildings were swaying back and forth."

The family returned to Stockholm on March 29 after a much calmer visit to their last destination China.

But Mr Svanstrom – who also survived the devastating Boxing Day tsunami that hit southeast Asia in 2004 – said the marriage was still going strong.

He added: "I know marriages have to endure some trials, but I think we have been through most of them.

"We've certainly experienced more than our fair share of catastrophes, but the most important thing is that we're together and happy.

Mrs Svanstrom added: "To say we were unlucky with the weather doesn't really cover it! It's so absurd that now we can only laugh."

FINANCE & ECONOMICS-1

2011-04-05T07:40:00.000-07:00

Spain on track as Zapatero bows out

The Financial Times - April 2011

As dark clouds reappear over the eurozone in the form of a likely financial rescue of Portugal, one bright spot is the improving condition of Spain’s economy and public finances. Thanks to courageous deficit-cutting and structural reforms, Spain is no longer perceived in financial markets as a hapless domino doomed to follow Greece, Ireland and Portugal into the arms of the International Monetary Fund and the European Union. The lion’s share of the credit goes to José Luis Rodríguez Zapatero, Spain’s socialist premier, who disclosed last weekend that he would not seek a third term in next March’s general elections.

Far from injecting uncertainty into Spain’s political outlook, with the risk that the nation might be sucked more deeply into the eurozone’s debt crisis, Mr Zapatero’s announcement looks like a wise move. With nothing to lose except his historical reputation, he has every incentive to continue the reforms he started – admittedly, in the nick of time – after the Greek debacle erupted last year.

Even so, his socialist comrades and the opposition conservative Popular party will both need to show responsibility for Spain’s future over coming months. The socialists must resist the temptation to seek electoral advantage by distancing themselves from Mr Zapatero’s fiscal austerity and labour market reforms. For its part, the opposition should not try to force him from office prematurely by toppling his minority government in a parliamentary vote. Such actions could revive market anxieties and jeopardise Spain’s hard-earned successes.

For Spain is not entirely out of the woods. Unemployment stands at 20.5 per cent of the workforce, the highest in the EU; the jobless rate among youths under 25 is a shocking 43.5 per cent. The central government’s fiscal retrenchment efforts are undermined by indiscipline in autonomous Spanish regions such as Catalonia and Valencia. Spain’s public sector banks require extensive recapitalisation and restructuring, but it is no easy process: last week, an important merger of four savings banks fell apart. Finally, Spain’s banks have a large exposure to Portuguese debt, amounting to $108.6bn last September.

Having suffered the nation’s worst economic crisis since the end of Francoism in the 1970s, Spaniards appear disinclined to re-elect the socialist party. With the passage of time, however, they may come to appreciate the services Mr Zapatero performed for his country in its hour of need

CURRENT AFFAIRS-2

2011-04-01T08:48:00.000-07:00

New Europe: The life of a Spanish family

For the Vega Méndez family in Barcelona, it is strong family ties that will see Spain through its severe recession

The Guardian

At 9.30pm on a Friday, Miguel and Purita's home in central Barcelona has all the bustle and hum of a hot summer fairground. Their children – Antón, 10, and Martiño, seven – are off to bed, having spent the past few hours in a tumult of cooking, drawing, TV-watching and playing Nintendo and the piano. Antón is the quieter of the two; he comes to ask Purita what the word "diagram" means (he's reading a Spanish translation of Harry Potter) and when she says the boys can eat dinner in front of the TV, he asks if he can read instead. His mother blushes with pride.

Martiño is cheekier, more assertive. He doesn't speak much English, but communicates well, bringing me a liquid-filled bouncing ball in which floats an eerie, bloodshot eyeball, and playing for laughs in a pair of sunglasses with flashing frames. He also hangs from the gymnastic rings that swing back and forth in the front room, in a vivid impression of a vampire bat.

As the boys head off, the visitors start arriving. Earlier in the day, Purita had read me the text message she'd sent some friends – inviting them for dinner with "a typical Spanish family". She then fell about laughing. Her friends seem to agree that Purita Méndez Suárez and Miguel Vega Lorenzo, both 43, are atypical, non-average Spaniards; Ines, an interpreter, originally from Uruguay, chuckles at the notion; Eva, a well-travelled Catalonian business consultant, seems equally amused. Nonetheless they're people from whom I can learn a lot about Spanish life, it's agreed, during my three-day stay in their home.

We settle down to a dinner prepared by Miguel, who does most of the cooking. When I ask Purita if the traditional idea of Spanish machismo persists, she immediately answers yes. (Miguel, from another room, yells: "No!")

"Couples still don't share the chores at home," says Purita. "I only know three or four couples who really share taking the kids to school, while he cooks and she does the laundry, or whatever." That's the system in their home, and when I first arrive Purita is instructing Antón and Martiño on how to fold their clothes and sort their socks. "But the rest of the people I know, no, they don't share the work. I remember a friend telling me: 'My husband expects me to bring him clean towels while he's taking a shower,' you know?" Her eyes roll enthusiastically.

We start with a small dish (tapa) known as fideua, which consists of short noodles, fried by Martiño (he's a keen cook and takes a regular class on a Saturday morning). These are then boiled in a fish broth, and baked in the oven, where they pop up like fresh blades of grass. To follow is a delicious black-ink paella, and then the traditional Catalonian dessert brought by Eva – almonds, hazelnuts, sultanas and dried figs. Miguel's best friend, Leo, a German writer and teacher, arrives as midnight approaches, and the group keep Spanish hours, drinking sweet wine and whisky into the night, and arguing over politics, in anticipation of a relaxed nine o'clock start the next morning.

The international spread of Miguel and Purita's friends is at least partly a result of their working lives. Both teach English. Miguel works at the University of Barcelona, at a centre where people can study languages, including Japanese and Swedish, alongside their degree. He was studying for his PhD at the university in 1994 when he was first employed by a director who was keen to take on young, innovative staff.

Purita teaches at a high school in a working-class suburb of Barcelona; she shows me a project her 11-year-olds have just completed, page upon page of beautifully illustrated family trees. She started working as a substitute teacher nine years ago, after Antón was born, and four years ago she passed the tough exam that established her as a permanent teacher and funcionario del estado (civil servant). "Passing the exam means you are in for ever," she says, "which is wonderful. The salary is not wonderful, but you have a job."

This is no small miracle. Last year it was reported that Spain may be facing the same financial devastation as Ireland and Greece, after the property bubble that had made it an economic marvel suddenly, catastrophically burst, and the banks were left with billions of euros in bad property loans. This crisis sparked genuine fear across Europe. The bailout of the Irish Republic had cost the EU, the IMF and the country itself €85bn (£74bn); to put the cost of a potential Spanish bailout in perspective, their economy is twice as large as those of Ireland, Greece and Portugal, combined.

Purita says there were rumours that the frantic international coverage of the situation was trumped up slightly, "especially in England. Talking about us meant that people weren't talking about the crisis in England or France, you see?"

But no one disputes the unemployment figures. Spain now has the highest rate of unemployment in the eurozone, with 20.2% of the population out of work, rising to 42.8% among people under 25. A guaranteed job is therefore highly prized. "Everybody knows a person who has lost their job," says Purita, "and of course it affects the whole family. You hear about it all the time, non-stop, on television, the radio, newspapers."

"It must be difficult for you guys to understand how Spain can have a 20% unemployment rate and not have rioting," says Miguel. (He spent some time working and squatting in London as a young man, so has a good understanding of the anarchic side of British culture. He uses the word "Bollocks!" accurately.)

"To understand why we can sustain the situation a bit longer than many other northern European countries," he continues, "you have to understand the concept of family support and solidarity, the idea that no matter how much you suffer, your extended family will be there for you, which creates this safety network, this idea of protection, which is important not only practically but psychologically, you know? The government has been using that quite cleverly, to pass the responsibility on to families."

Their family hasn't been untouched by the crisis; last year, civil servants across the country, including Purita, took a pay cut of 5%. At around the same time, Purita went on a number of protests, focusing on the conditions in high schools – the increasing class sizes and extra responsibilities for teachers, for instance – but became disillusioned. Each time she and the other teachers went on strike, all that seemed to happen was that their pay was docked, benefiting the government by hundreds of thousands of euros. There was also scant support from the private sector. "They just felt we should feel lucky to have a job," says Purita.

At the end of last September there was a general strike in which workers protested against austerity measures, including raised taxes, reduced welfare benefits and frozen pensions, but Purita had tired of the demonstrations, and sat it out. She wasn't alone. Although the unions described the demonstration as an "unquestionable success", a poll in the left-leaning newspaper El Pais (which Miguel and Purita buy every day) showed only 9% of the population planned to support the strike, down from 15% a few months before.

The couple both come from Galicia, in Spain's north-west corner, and have a strong sense of regional identity; living in Barcelona, which is part of Catalonia, they refer to themselves as immigrants. There are 17 distinct regions in Spain (15 on the mainland, plus the Balearic and Canary Islands), and these include "three old communities", Purita explains, "which each have their own languages. One is Catalonia, the other is the Basque Country, and the other is Galicia."

Under Francisco Franco's rule, regional identities were suppressed, but since his death in 1975, they've risen to the fore again. "It's quite natural," says Miguel, "that now, in a young democracy, regions would be searching for their identities, and expressing them. Politically it's obviously important that we learn to live with one another." The militant Basque separatist group, ETA, announced a ceasefire last year, which they all hope will prove permanent.

Miguel and Purita met while studying on the same English course in Santiago de Compostela, the Galician capital, and when they finished Miguel was offered a year's scholarship to study linguistics in the US. He wasn't keen on leaving Purita, but "he only had half a point more than I did," she says. "So when he said: 'I'm not going', I said: 'I'm next in line, and if you don't, I will.'" He made a list of 19 universities with top linguistics departments, before adding the University of Mississippi on a whim, because he loved the writing of William Faulkner, who had studied there for a year. Inevitably, that was where he was sent.

Purita moved to Barcelona to study linguistics, and found it hard at first, because life in the north-east corner of Spain is so different, culturally, to Galicia. "The people in Catalonia are, in general, extremely nice," she says, "but they are very closed, so it's hard to make friends. I arrived in September and at Christmas I said to my Mum: 'I'm coming home, I feel so lonely.'"

But she stuck it out. Miguel returned from Mississippi, and in 1994, after living together for two years, they were married in a civil ceremony in Barcelona. They were both brought up in the Catholic church, but they're "not practising Catholics", says Miguel, "and we never go to Mass or to church unless it's for a funeral or a wedding – and even at a wedding we tend to stay outside and go to the bar. In fact, more and more people of our generation are losing contact with the church. The church here is perceived as something obsolete, you know? The younger generation don't go to church, or if they do it's often because they're very radical rightwing people."

That same year they bought the first floor of the apartment they still live in, with help from their families. The place was an empty shell – Purita shows me photographs of bare brick walls – and the pair worked to make it habitable together.

Four years later, in 1998, they bought the floor above, and saved the money to knock through and combine the two into a four-bedroom apartment, with a roof terrace. They're not sure what the apartment would be worth now, but house prices in Spanish cities have fallen by up to 25% in the past three years. When we walk past an estate agent, Miguel points out a very grand three-bedroom apartment that he guesses would have been worth €600,000 a few years ago and is now on sale for around €430,000.

They seem very content in their day-to-day lives. In the morning Purita cycles half an hour to work, arriving at 8am, and teaching until 5pm most days – between 1.30pm and 3pm the kids at her school have a break, and the teachers often sneak away to the nearest, most comfortable cubby hole for a 20-minute siesta. Miguel takes Antón and Martiño to school for 9am, and then spends the morning preparing his lessons and marking, before teaching through the afternoon, finishing at 6pm on some days, 9.30pm on others.

The boys finish school at 5pm, but "they never come home then", says Purita. Antón has music lessons three days a week; Martiño sings in a prestigious local choir. Both are learning taekwondo, and also play basketball, the country's second most popular sport. Football is the most popular, and they would play that too, "but we don't have a pitch around the corner," says Purita, "so I would have to take them there and stay for an hour, and I said: 'No, I'm not that kind of mother. I'm not that wonderful.' I think for them to be happy, I have to be happy."

The children also attend a weekly art class, and the flat is filled with their drawings, most of them by Antón. An intricate line drawing of a ferocious tiger is dedicated to Miguel and Martiño; a beautifully shaded picture of a rhino chomping on leaves is dedicated to Purita.

"Children mean happiness, plus worry, for ever," says Purita, and there's no doubting how central they are to the family's life, and also to the life of the community. When I visit them, Purita and the boys are on a week-long break from school, and she has been sharing childcare duties with Eva, who has two boys of the same age – each mother has one day with the kids, the next for themselves. Purita says that while she doesn't have family in Catalonia, "we have friends, and the link with them is so strong that some of them are like brothers or sisters. If I'm ill, I know they're going to pick up my kids and take them to their houses." As we walk to an Italian restaurant 10 minutes from their flat, we bump into person after person that they know.

I ask what they think of José Luis Rodríguez Zapatero, the prime minister and leader of the Socialist government, who was elected in 2004, just days after the 11 March Madrid bombings, which killed 191 people. He immediately pledged to bring Spanish troops home from Iraq. "That shocked the right completely," says Miguel, "and it was a mistake to do it so quickly, because George Bush wouldn't speak to him." "But he didn't care! It was wonderful!" says Purita. "I was actually quite proud," says Miguel.

Zapatero went on to champion gay marriage rights and women's rights, appointing eight men and eight women to his first government; the country's defence minister, Carme Chacon, had a baby while in post. Purita says the way he's opened up the debate surrounding an issue such as domestic violence has been brilliant. "Until now, people didn't talk about it, because who wants to say: 'My father hits me, or my father rapes me'? No one. But he's focused on addressing it through education, which I think is absolutely the point."

The overall impression seems to be that he's well meaning, but weak. Miguel says that while he likes Zapatero personally, "because he conveys this image of being an honest politician, and he tries his best, I also think he's pretty useless. He's a bit mediocre, not very charismatic."

Earlier this year it was announced that Spain was planning to partially nationalise its weakest savings banks, those buried by bad property loans, but Purita isn't impressed by the way Zapatero has handled the crisis. "He hasn't really confronted the banks," she says. "He hasn't confronted the very rich, you know? He doesn't have the balls. He's tried to introduce good social measures, but a lot of those have then had to go because of the recession."

With unemployment rates so high among the nation's young, I wonder whether they worry for Antón and Martiño? "I cross my fingers," says Purita. "I do the best I can at home to get them motivated." She says she recently had a devastating discussion with the father of a student who she'd been encouraging to work harder. "The father said: 'But what for? Doctors, architects, they don't have a job now, so why's it so important?' I didn't know what to say."

Along with the social safety net of the family, the other factor that keeps Spanish people relatively buoyant, they say, is its sporting success. "Our kids can't conceive of any Spanish team or player losing," says Miguel, "because over the last four years they've seen the national basketball team win the European Cup, and the football team win the European and the World Cup. Then there's Rafael Nadal, who's the No1 tennis player in the world, and Fernando Alonso in Formula One – he lost last year, but we always expect him to win. So our kids have started to like sports in this winning environment, which is funny, because we've never experienced that before in our lives, with sport.

"It's good that we're doing so well on that front, but it's also a kind of drug for people," he continues. "It means they can forget their daily lives, which means they don't really respond to the government in the way they should – demonstrating and putting pressure on them."

CURRENT AFFAIRS-1

2011-04-01T08:40:00.000-07:00

The drain in Spain: the country's arts crisis

The country spent a fortune trying to place itself at the centre of the art world. So why do its best artists all leave? Adrian Searle travels to a nation in the grip of a cultural crisis

The Guardian

'Spain is different," the tourist board once touted. It is also complicated. Although a lot of energy, confidence and black money swirled around the Spanish art world over the past quarter of a century, today something is wrong. However lively Madrid or Barcelona might look, and a visit to any regional city greets you with a spanking new public art gallery, something is missing. For all the late dinners and cocaine nights, gleaming museums and prestigious international shows, there is an air of crisis.

"The party's over," Manuel Borja-Villel, director of the Reina Sofía museum in Madrid told me. Previously director of Macba (Museu d'Art Contemporani de Barcelona), Borja-Villel is Spain's most influential museum director. He sees the current economic crisis as an opportunity, even if it is an unwelcome one. There is talk of cuts of up to 50% in the arts. How can art institutions compete with hospitals and education, whatever the talk of the necessity of culture?

From the 1980s until recently, new museums by big-name architects opened all over Spain. Private foundations opened their doors and savings banks formed international art collections, setting up cultural centres as part of their social remit. As I write, I am installing a show for a cultural centre run by the Caja Madrid bank. Around the corner, queues line up for the Prado museum, for the Thyssen-Bornemisza Collection and for the Reina Sofía, Spain's largest and liveliest museum of contemporary art, which opened in 1990. Private galleries flourish – and sometimes struggle – in the small streets behind the museums.

Spanish institutions have always been prey to changes in government, with money and museum directors coming and going whenever political change happens at national, regional and even municipal levels. By achieving greater autonomy, the Prado has extricated itself from this damaging cycle, and the Reina Sofía is set to follow. The two museums now have a far more fruitful collaborative dialogue than the Tate and National galleries in London have ever had, co-ordinating exhibitions and lending works to each other. Regional and smaller Spanish institutions are less protected.

In the early 1980s, the Iberian peninsula felt far from the centre of the arts world, and both Spain and Portugal put a great deal of effort into building new artistic institutions. "We used to think that media attention and crowds coming through the doors was the signal to success and social usefulness," says Borja-Villel. "We mistook our place in the world. We imagined we had centrality. But we were never the centre. Spanish art institutions and artists were like good, diligent students. We didn't realise that there is no centre any more."

But the real problem is a deeper one. Art itself, the only real indicator of cultural vitality, has somehow lagged behind. Going round shows here for over a quarter of a century, I keep thinking it should be better. Why is painting so lousy here? Why is so much meek and secondhand? Of course there are always exceptions, but you often have to leave Spain to find them.

Which partly explains why so many of the best Spanish artists have always left – not just to escape the former dictatorship. Ambitious artists of the post-Franco period, such as Juan Muñoz and Pepe Espaliú, moved to London, Paris, New York. Turner prize contender Angela de la Cruz took off in the mid-1990s. Ambitious young artists still leave. "Everyone should, at some point," said Borja-Villel.

Paloma Polo, still in her 20s, escaped a conservative, moribund university art school in Madrid as soon as she could. "It was like a handicrafts school," she told me from Amsterdam, where she now lives. "There is no real scene of young artists in Madrid," she added, paradoxically putting part of the blame on the grants and prizes young artists have been given. "They get big-headed, even though in the end they're unambitious to be anything more than local artists. No one outside Spain knows or cares about them. I knew from day one I had to leave."

A mountain range of the mind

Unlike the UK, there are few alternative spaces, warehouse shows or ad hoc events in Spain. Those that take place are treated with suspicion. The sense of collaboration, which had certainly existed in the heady days of the 1980s, when I started coming here, did not last long. The sense of being part of a larger art world is somehow still stalled by the Pyrenees, though it is a mountain range of the mind.

Spain has few serious collectors, and those who only began collecting a few years ago are giving up. They're broke, Catalan artist Ignasi Aballí told me. Aballí is surviving the downturn. He's showing everywhere from São Paulo to Ikon in Birmingham. "The only way to survive is to show outside Spain," he said. This was true of artists like Muñoz, too, who died in 2001. He lived and worked near Madrid, but developed his career outside Spain.

The economic downturn is making everyone reassess the place of visual art in Spanish culture. Projects both modest and grandiose are floundering. La Caixa, a Catalan savings bank, has recently donated its collection to Macba. The future of another new project, the Canòdrom contemporary arts centre, still being built on a neighbourhood dog track in Barcelona, is stalled. An overblown new "city of culture", designed by architect Peter Eisenman on the outskirts of Santiago de Compostela in Galicia, eats millions of regional euros and looks unlikely to be completed anytime soon. Cities and regions look for the miraculous "Bilbao effect", the kind of urban and regional regeneration bought about by Frank Gehry's Guggenheim museum in that city, but it is an elusive panacea.

Elsewhere in Galicia, Marco (Museo de Arte Contemporáneo), housed in Vigo's old panopticon prison, is having problems. They're soon mounting Spain's first show of Scottish artist Martin Creed, but the programme is slowing down. "[To us], 100,000 fewer euros is the same as a €1m cut for a bigger institution," Marco's director Iñaki Martinez, told me.

Martinez was also recently appointed president of Spain's Association of Directors of Contemporary Art. "Artists are the ones who are suffering most," he said. "The first thing that is revised is the acquisitions policy. Many public Spanish collections have been blocked, others have reduced their capacity to develop and build their collections. No one knows for certain what is going to happen next with regards to the cultural activity of the savings banks. There are a number of foundations dedicated to the work of single artists that are questioning their continuity." Chillida-leku, the foundation dedicated to the legacy of Basque sculptor Eduardo Chillida, in the Basque region, has recently closed.

"Spain has rushed to create a cultural infrastructure which previously did not exist," says Martinez. "In many cases it was carried out without planning, giving priority to the container, not the content, and now we do not know what to do with all these buildings. The current situation simply demonstrates the result of the politics of waste and showbusiness."

Borja-Villel remains optimistic. "Smaller institutions need to find their own identity," he says. He sees the development of a sense of real communality as a solution. "The question is how to use these spaces in a different way. We cannot be alone any more, we are living through a change in history, and must not be afraid to make mistakes." Better questions and better mistakes would seem to be the answer.

Spain's five hottest artists

Ignasi Aballí (Barcelona, 1958) is an heir to the spirit of conceptualism. Signature works include listings made up of newspaper cuttings and his explorations around colour.

Dora García (Valladolid, 1966) will represent Spain in the Venice Bienniale. Her work has a complex performative dimension originating in her interests in literature and the conflict between reality and fiction

Lara Almarcegui (Zaragoza, 1972, pictured) investigates the relation between nature and urban landscape. She recently weighed and recorded the open spaces of different cities.

David Bestué (Barcelona, 1980) and Marc Vives (Barcelona, 1978) are a good example of how the young generations look at the art of the 60s and 70s from an ironic perspective. Their sardonic approach has strong echoes of Dada.

Paloma Polo (Madrid, 1983) has a profound interest in the cinematic. Her latest work evolves around the subject of light as a metaphor for the emergence of knowledge in the modern era.

CURRENT AFFAIRS

2011-03-23T13:29:00.000-07:00

España está a la cola de Europa en cuanto al dominio del inglés

España está a la cola de Europa en cuanto al dominio del inglés

España está a la cola de Europa en cuanto al dominio del inglés a pesar de que empieza a enseñarlo a edades más tempranas que en países con niveles muy altos, como Holanda y Dinamarca, según el Indice de Nivel de Inglés EF (EF EPI), que compara 44 países y territorios.

El estudio, elaborado por Education First (EF) a partir de pruebas de nivel a más de 2 millones de adultos de todo el mundo, sitúa a España en el puesto 24 (nivel bajo) del ranking mundial, que encabezan Noruega, Holanda, Dinamarca, Suecia y Finlandia (nivel muy alto), seguidos por Austria, Bélgica y Alemania (alto). Solo Rusia y Turquía registran peores resultados que España, mientras que la superan Italia (nivel bajo), Eslovaquia, Hungría, la República Checa, Francia, Portugal, Suiza y Polonia (medio).

Bajar la edad en la que se empieza a estudiar inglés no es suficiente para elevar su conocimiento, advierte el estudio, que considera "mucho más importantes" la calidad de los profesores; los materiales y los métodos didácticos; el número de horas dedicadas al idioma, y el hecho de fijarlo como primera lengua extranjera. Bajar la edad de inicio de estudio del idioma no es suficiente

Asimismo, destaca que la cultura multilingüe no entorpece, sino que mejora el dominio del inglés, como demuestran Finlandia, Bélgica y Suiza, y cita a España como ejemplo de los años que se debe esperar hasta que las reformas educativas se reflejan en la población adulta. España ocupaba, a mediados de la década de los 80, el puesto 45 del mundo en cuanto a gastos educativos por cápita, muy por detrás de la mayoría de los países de Europa occidental.

Para elevar el nivel de inglés de un país recomienda impartir inglés de forma obligatoria en las escuelas públicas a partir de los 12 años, y fomentar su enseñanza en los estudios postobligatorios y en la vida adulta, dando prioridad a las habilidades de comunicación en lugar de a la exactitud gramatical o a la enseñanza memorística.

Otra recomendación pasa por cultivar el multilingüismo, en línea con países como los escandinavos: "Uno de los indicadores de una cultura nacional con un alto nivel de inglés es tener un jefe de Estado capaz de comunicarse en público en este idioma", señala el documento. En Asia, Malasia es el único país con un nivel muy alto, seguido por otros países y territorios con nivel medio como Hong Kong, Corea del Sur y Japón, mientras que China e India tienen niveles bajos. Latinoamérica es la región con niveles más bajos de inglés -sólo Argentina y México tienen un dominio medio-, lo que el informe atribuye al peso del español combinado con la poca calidad de la educación pública y los bajos índices de matriculación.

FINANCE & ECONOMICS-6

2011-03-18T03:19:00.000-07:00

Japan quake: Economic impact felt across Asia

BBC

It is almost a week since the deadly tsunami and earthquake hit northeast Japan, and the economic effects are starting to be felt across Asia.

While efforts to deal with the disaster continue, analysts are starting to look at the impact on various sectors and industries.

Some countries that export energy and raw materials could see a surge in demand from Japan.

But others that rely on Japan for manufacturing components will be bracing themselves for shortages in supply.

South Korea

In the short-term, South Korean companies are already benefiting from the shutdown in manufacturing in Japan.

"In terms of semiconductors, auto and steel companies, South Korean and Japanese companies are competitors," said Huh Jae-hwan from Daewoo Securities in Seoul.

"When Japanese companies shutdown factories and cannot produce their products, demand and orders will be on Korean manufacturers," he added.

But the benefits will only continue as long as the situation in Japan does not start to affect the components that Japan supplies to Korean companies.

"IT companies like Samsung Electronics and Hynix keep inventory so they can supply their products as long as the situation doesn't get worse. if it does they could have difficulty getting supply components from Japan," Mr Huh said.

Taiwan

It's a very similar situation in Taiwan.

Manufacturers making display panels, semiconductor equipment, cars and their parts could suffer because their raw materials are mostly imported from Japan.

The BBC correspondent in Taipei, Cindy Sui, says Taiwanese chip makers have one-to-two month's worth of supply in their inventory.

If Japanese factories cannot return to normal operation soon, consumers could face shortages and price rises.

Sun Ming-Te, of the Macroeconomic Forecasting Centre in Tapei, said: "If the problem doesn't resolve in a few weeks the majorly impacted companies will be mobile phone producers like HTC, semiconductor companies like TSMC, and the factories built by Japanese automobile companies like Nissan, Toyota and Honda."

He also points out that the tourism industry has already been affected, with many Japanese visitors cancelling trips to Taiwan.

Taiwan gets the second-most tourists from Japan, about one million people a year.

China

High-tech electronics and components are important for industry in China and are likely to be affected by the disruption in supply.

The BBC's correspondent in Beijing, Martin Patience, says Japan is China's biggest source of imports accounting for roughly 13% of its purchases from abroad.

Much of what Japan sends to China is assembled into final products which are then exported around the globe.

Stephen Joske, of the Economist Intelligence Unit in Beijing, said: "The price of a Nikon camera has jumped already by 2,000 yuan ($304; £188.50)."

He pointed out that food and vegetable prices, which have already risen significantly in China, could remain high because of demand from Japan.

"China is already experiencing quite heavy food and vegetable inflation in recent months due to bad weather," said Mr Joske.

"What the events in Japan mean is that it will take a bit longer for those prices to come back down again."

Australia

The immediate concern in Japan right now is the extreme power shortages, and the need for alternative sources is immediate.

"Australia is well placed to meet Japan's increased demand for energy products given the significant disruptions to the Fukushima power plant," said Matthew Circosta of Moody's Analytics in Sydney.

Australia is a major exporter of thermal coal and liquefied natural gas (LNG).

"Thermal coal and LNG exports will certainly grow as Japan's energy needs increase," Mr Circosta added.

Over the next few months, as construction and rebuilding begins in Japan, Australia stands to gain further.

Australia exports iron-ore and coking coal which will be in high demand for steel making.

"When you have export benefit, that boost in national income will feed right through the economy," said Mr Circosta.

And while Australian markets have felt some of the volatility seen in the Japanese markets, Mr Circosta says the markets should eventually calm down and reverse their losses.

Indonesia

Indonesia could be another source of energy and raw materials for Japan.

"Indonesian exports to Japan are mainly commodities, iron ore, oil and gas. There will be an increase in demand during reconstruction," said Anton Gunawan of Bank Danamon.

The question is, however, can it boost production quickly.

Eric Sugandi, of Standard Chartered Bank in Jakarta, said: "Indonesia cannot increase oil export abruptly. In fact, domestic production of oil has decreased in recent months because of lack of exploration."

He added that even if Indonesia was able to boost production of LNG, the government has prioritised domestic demand.

India

The impact on India is much more indirect, as Japan is a major source of foreign direct investment into the country.

"Japan is a long-term investor, its sovereign entities have invested in Indian infrastructure such as the Delhi metro and the Delhi-Mumbai corridor," said Ajit Ranade of Aditya Birla Group in Mumbai.

He added that Japan was also a growth sector for Indian IT companies.

"If the Japanese economy suffers, then the long term investment into India could suffer."

FINANCE & ECONOMICS-5

2011-03-10T23:59:00.000-08:00

Carlos Slim tops Forbes rich list as wealth jumps 38%

Mexico's Carlos Slim has topped the latest Forbes magazine rich list, as his wealth grew by more than a third.

The telecoms magnate's fortune rose by $20.5bn (£12.65bn) to $74bn, again beating Microsoft founder Bill Gates ($56bn) into second place.

More than 200 people joined the billionaires list as their numbers rose to a new record of 1,210, Forbes said.

Six billionaires connected with Facebook are now on the list, including Mark Zuckerberg and Sean Parker.

They are joined by Facebook investors Peter Thiel and Yuri Milner as well as co-founders Eduardo Saverin and Dustin Moskovitz, who is the youngest person on the list at 26.

Ikea founder Ingvar Kamprad was the biggest loser, down $17bn to $6bn.
He fell from eleventh spot to 162 and was unusual amongst the billionaires in seeing his wealth decrease.

The collective wealth of the billionaires on the list also hit a new record of $4.5tn.

Russian rich

The world's largest economy, the US, continues to have the most billionaires, with 413.

Asia, for the first time in a decade, has more billionaires on the list than Europe, with 332 against 300.

China and Russia have 115 and 101 billionaires respectively, with Moscow now home to more billionaires than any other city in the world.

The city has 79 billionaires, and Russia has the most billionaires in Europe. Germany is in second place with 52.

Meanwhile, Europe acquired 50 new billionaires in 2011, taking it to 300 in total, with a collective worth of $1.3 trillion.

The UK has 32 billionaires on this year's list, three more than last year.

Despite the property slump, Gerald Cavendish Grosvenor and family remain the wealthiest Britons, with a net worth of $13bn, up $1bn on a year before.

Forbes list of world's richest people

Name, Wealth, Main business

Carlos Slim, $74bn, America Movil, telecoms
Bill Gates, $56bn, Microsoft, software
Warren Buffett, $50bn Berkshire Hathaway, investment
Bernard Arnault $41bn, LVMH, luxury goods
Larry Ellison, $39.5bn, Oracle, software
Lakshmi Mittal, $31.1bn, ArcelorMittal, steel
Amancio Ortega, $31bn, Zara, fashion
Eike Batista, $30bn, Mining, oil
Mukesh Ambani, $27bn, Reliance Industries, Petrochemicals to oil
Christy Walton, $26.5bn, Wal-Mart, retail

SOURCE: FORBES MAGAZINE

LOCAL NEWS

2011-03-07T02:05:00.001-08:00

Spain town reintroduces peseta to boost economy

BBC

A small town in northern Spain has decided to reintroduce the old Spanish currency - the peseta - alongside the euro to give the local economy a lift.

Shopkeepers in Mugardos want anyone with forgotten stashes of the old cash at home to come and spend it.

It is nine years since the peseta was official currency in Spain.

But Spain's economic crisis has forced some to be inventive. The hard times have seen thousands of businesses close and more than two million jobs go.

Forgotten coins

More than 60 shops in Mugardos, a small fishing town in Galicia on Spain's northern coast, are accepting the peseta again for all purchases, alongside the euro.

It is an attempt to get cash registers ringing - and help lift the town out of a long and painful economic slump.

Shopkeepers were sceptical at first, but they now say the scheme is a great success.

People are travelling into Mugardos from outside just to spend the old currency they never got round to converting.

One man visited the local hardware store this week with a 10,000-peseta note he had found at home, and had no idea what to do with.

He is now the happy owner of a sandwich toaster.

The euro was introduced here in January 2002.

Spaniards then had another three months to exchange their old currency at any bank.

That cash can still be converted today, but only at the Bank of Spain itself, and it says a staggering 1.7bn euros ($2.4bn) of cash is still unaccounted for - stashed, perhaps, then forgotten; piles of coins that slipped down the backs of sofas; or even big notes kept by collectors.

That is the reserve the shopkeepers of Mugardos are hoping to tap and give a desperately needed boost to business.

Still, the Bank of Spain estimates that almost half the country's millions of missing pesetas will never be recovered - despite their value.

It believes many left the country long ago, in the purses and pockets of tourists.

FINANCE & ECONOMICS-4

2011-03-07T01:53:00.000-08:00

A special report on property

When the roof fell in

Housing will be a drag on the rich world’s recovery for the foreseeable future

The Economist March 2011

PROPERTY can cause huge problems, but the sector also traditionally leads economies out of recession. Housing is far bigger and more important than commercial property. Residential investment, which is driven by new housing starts, makes up a large chunk of the volatile bit of the economy. That means changes in residential investment have a disproportionate impact on rates of GDP growth. It has played a big part in driving previous post-war American recoveries, and many assumed the same would happen this time round. Things have not worked out that way.

Around much of the rich world, hopes that housing markets would be well on the road to recovery by now have been disappointed. Not everyone is glum. Renters are not bothered by falling prices, and the cash-rich are still having a high old time (see article). But for most people property is a source of worry.

In America the bounce caused by a temporary tax credit for first-time buyers has long since faded. The latest S&P/Case-Shiller home-price indices (which take in figures up to December 2010) showed that prices had fallen in 19 out of 20 cities covered month-on-month, and that the composite index had declined by 2.4% year-on-year. Eleven markets, including Miami, New York and Seattle, hit their lowest levels since prices first started falling in 2006.

Misery index

In Britain a strong start to 2010 also weakened as the year went on. Figures from Nationwide, a lender, showed a 1.1% year-on-year fall in prices in January, the biggest slide since August 2009. In Spain the IMIE index showed a fall of 3.9% in December, taking prices back down to levels last seen in 2005. For sheer awfulness nothing can touch Ireland, where prices dropped by 10.8% in the fourth quarter and the rate of decline increased.

It comes as no great surprise that many markets are still struggling. A common thread in many rich-world economies is uncertainty about the future. Policymakers may worry about the effect of housing problems on unemployment—homeowners in negative equity may not be able to move in search of jobs—but the more important effect runs the other way. Changes in hiring rates are an excellent predictor of homeowners falling behind with their mortgage payments. Fears about sovereign-debt crises, the effects of austerity programmes and job security make it far less likely that people will take the plunge on buying a new home.

Another common feature is a squeeze on mortgage finance. The private market for securitised mortgage loans remains very subdued. Banks have belatedly tightened credit standards, particularly for first-time buyers, who lubricate the housing market for everyone else. According to recent research in Britain by the Home Builders Federation, a trade group, the average first-time buyer aged 30-39 would now have to save 35% of his or her pay after tax every month for five years to scrape together a deposit. Many are turning to the bank of Mum and Dad for help.

In America the government has rushed in to take up the slack. Fannie Mae and Freddie Mac, which buy home loans from lenders, and the Federal Housing Agency (FHA), which insures them against default, between them routinely guarantee more than 85% of new home loans. FHA-insured loans are particularly important for first-time buyers, who need to put down a deposit of only 3.5%. The market is so dependent on these agencies that the government will not be able to withdraw its support any time soon (which is one reason to expect the winding down of Fannie and Freddie to be slow in coming).

Even so, there is a limit to governments’ willingness to take on more risk. Fannie and Freddie have been fighting with the banks about poor-quality loans they originated and then passed on to the agencies. The FHA has gradually been tightening its insurance criteria. Add in the fallout from the “robo-signing” scandal, in which banks were accused of using flawed and possibly fraudulent foreclosure processes, and mortgage approvals will stay sluggish.

Much as these demand-side factors dampen the housing market, the supply side arguably has an even bigger effect on prices. Work on the relationship between housing supply and bubbles by Edward Glaeser of Harvard University and Joseph Gyourko and Alberto Saiz of the Wharton School suggests that places with relatively elastic supply have fewer bubbles, of shorter duration, than those where the supply is more restricted.

Dearth and homes

In many respects the recent boom bears this out. Differences in supply constraints can explain much of the striking disparity between American states, from the modest run-up in prices in Texas, where land is easily available, to the huge surge in places like Nevada, where land-use regulations are tighter.

But elasticity is not always a good thing. When the housing market can respond to demand by adding to supply, there is a greater risk of overbuilding. In theory, booms in elastic markets do not last for long because as new housing becomes available it puts pressure on prices, puncturing expectations of further appreciation and popping the bubble. For the 1996-2006 cycle in America Messrs Glaeser, Gyourko and Saiz find that places with more developable land did have shorter booms.

But when it comes to the biggest house-price bubble in history, theory does not get you very far. In some places the boom was big enough and irrational enough to suppress price signals from lots of new supply. Instead, availability of land simply fed speculative activity, which has made the popping of the bubble much more painful.

In a report last December the Bank of Spain reckoned that the country has a glut of 700,000-1.1m unsold homes, which will continue to weigh on prices this year. Bernstein Research estimates that these unsold houses will take four to five years to clear, and even that may be too optimistic given high unemployment, the threat of a sovereign-debt crisis and fewer immigrants. It could have been worse: Spanish banks have repossessed huge amounts of land that had not yet been built on, and residential-mortgage standards are rather conservative. But the oversupply means that prices will keep falling. They have dropped by only 16% from their peak in real terms, and Bernstein reckons the eventual fall will be more like 30%.

Ireland’s building boom also went over the top. The government relaxed planning laws, the banks threw money at anything involving cement, and investors gobbled up houses in the expectation that prices could only go up. An Irish government report last October into the country’s “ghost estates” identified more than 2,800 housing developments where construction had been started but not completed. Between them these estates had planning permission for 180,000 units, which roughly translates into a new residence for one in every 25 Irish people.

A lot of properties were sold before the market soured, so the report found only 33,000 finished homes remained empty, not the hundreds of thousands forecast earlier. But even if the overall number of unsold units is not as bad as feared, it does not capture the full effects of oversupply.

Take Clongriffin, a huge mixed-use development north of Dublin. The location is good, about 15 minutes from the city centre. Flags extolling “Dublin’s new town centre” hang from lamp-posts outside the local railway station, which opened in 2010. There are some shops on the main street, and cars in many of the driveways. But the overall impression is bleak. Many shops are unoccupied, lots of apartments lie unfinished and there is no sign that work is continuing. Hoarding surrounds large tracts of undeveloped land.

Mixing vacant and unfinished properties with occupied ones drags down the value of everything. The bust also gives developers very little incentive to resolve disputes over maintenance. Clongriffin is one of a number of north Dublin developments involved in legal cases over buildings contaminated with pyrite, a mineral that crumbles as it oxidises.

Clongriffin may also have the wrong sort of properties for this stage of the cycle. During the boom much of the construction activity was in flats. Developers liked them because they could generate more revenue from a single plot of land. First-time buyers saw them as a way to get onto the housing ladder, perhaps hoping to trade up to a house later. But prices have now fallen so far that buyers can skip the flat and go straight to a family home.

Clongriffin’s unsold units will probably find buyers in the end, thanks to its location. Two-fifths of Ireland’s population lives in greater Dublin and the country has one of the highest proportions of 25-45-year-olds in Europe, most of whom will want to own their homes. But lots of the excess was in more rural areas. Marie Hunt of CB Richard Ellis (CBRE), a property consultancy, points out that in such places even an oversupply of 20 homes can make a big difference.

Only in America

Oversupply can take many forms. America’s big housing worry is its huge “shadow” inventory—homes whose owners are seriously behind with their mortgage payments or in foreclosure and which will eventually come onto the market. Even though American house prices are now back at fair value (ie, the ratio of house prices to rents is back to its long-run average), this pipeline of distressed properties is putting prices under continued pressure.

It also helps explain why America has suffered such a sharp fall in prices after the bust despite peaking lower than many other countries (see chart 4). House prices are generally “sticky” on the way down, in part because people are averse to selling at a loss. But America’s bust has brought waves of distressed sales, forcing prices down rapidly. Around a quarter of borrowers are now in negative equity. “The big question is not how fast prices rose but how fast and how much they fell,” says Eric Belsky of the Joint Centre for Housing Studies at Harvard University.

One explanation is that unemployment in America rose more sharply than in other rich economies, and even creditworthy borrowers cannot cope with a sustained loss of income. But the initial drop was down to causes more specific to housing. The most obvious culprit was the extraordinary laxity of America’s mortgage-underwriting standards in the later stages of the boom. With very little equity in their homes to protect them from a drop in prices, lots of high-risk borrowers quickly became submerged when the bubble burst. Housing boffins regard negative equity as the best predictor of default, which is why they take loan-to-value ratios very seriously. It is also what saddles banks with losses when homes end up in foreclosure.

A related issue is the amount of “strategic defaulting” in America: the number of people choosing to walk away from their homes. Its prevalence can be exaggerated, but it has still come as a surprise. Before the crisis the conventional wisdom had been that people would do whatever they could to stay in their houses, giving priority to mortgage payments over all other forms of debt. But Andrew Jennings of FICO, the company behind America’s FICO credit scores, reckons that 25-30% of defaults are now premeditated. He says that many borrowers, often nominally lower-risk ones, prepare for default by making more credit inquiries and taking up other loans. The practice is more widespread in the many American states where lending is “non-recourse”, meaning that lenders cannot come after a defaulting borrower for any debt left over when the property is sold.

In Europe’s frothier markets unpaid debt hangs around the necks of borrowers, giving them a bigger incentive to tough it out in their homes. Speculative purchases also made things worse: people are more likely to give back the keys to homes they are not living in. The report of the Financial Crisis Inquiry Commission pointed out that by the first half of 2005, the peak year for housing sales, more than one in every ten house sales in America was for an investment or a second home.

Housing, flat

Whatever the reasons, the number of properties that have gone into negative equity and into foreclosure is much greater than expected. A system set up to deal with 500,000 foreclosures a year is now running at about 2m a year, says Michelle Meyer of Bank of America Merrill Lynch. Just how bad this glut of unsold houses will get is very hard to say. It depends, above all, on the unemployment rate. But it also depends on the speed and outcome of the foreclosure process and on the efficacy of official interventions. The experience to date has been uninspiring. A government programme to modify mortgages, giving struggling homeowners a subsidy on their payments, has had $50 billion allocated to it, but so far only $1 billion of that has been spent. Many of those who have had their mortgages modified wind up defaulting again.

Sean Dobson, the chairman of Amherst Securities, is more bearish than most. He argues that some 11.5m American homes (out of 125m in all) remain at risk of ending up in foreclosure, and that principal forgiveness for borrowers under water is the only option: “You are not going to create new buyers for 11m homes, short of legalising every illegal immigrant and forcing them to buy a house.”

Others are less apocalyptic, particularly as America’s recovery gathers pace. But the pipeline of distressed homes heading for the market will keep prices down for some time yet. Sandipan Deb of Barclays Capital reckons that the number of such properties probably totals around 4m-5m. He says that prices will fall by 6% or so in 2011 and will then languish for a while before gradually recovering. That may be just what policymakers want. “The objective of the government is to make sure that distressed stock does not hit the market suddenly,” says Mr Deb. Modifying home loans may not avoid defaults altogether, but it should at least space them out.

Despite the woes, America’s system of long-term, fixed-rate mortgages at least ensures that borrowers do not have to worry about interest rates. Many European countries have adjustable-rate mortgages that move in step with changes in official interest rates: two-thirds of the outstanding mortgages in Britain, for example, are of this kind. Much as European borrowers have been helped by ultra-low interest rates so far, they will also be exposed to rising costs when rates go up again. With house prices in Europe having fallen less far, austerity threatening higher unemployment and inflationary pressures prompting hawkish talk about tighter monetary policy, the continent’s housing markets look more likely to suffer new shocks than America’s.

FINANCE & ECONOMICS-3

2011-03-07T01:49:00.001-08:00

Business jet travel rebounds as rich splash out for privacy

By The Financial Times

Private jet travel, shunned in the recession as a sign of ostentation, is recovering in a further sign that the world’s richest people are spending more freely again.

The number of business flights – which includes celebrity, state and business hire – grew 5.5 per cent last year, in both European and US airspace, according to figures from Eurocontrol, the air traffic management co-ordinator, and Argos International, an aviation market research company.

While private take-offs have not yet returned to 2007 levels, a 9 per cent surge in Europe so far this year – compared with January in 2010 – suggests luxury flying is coming back into fashion.

Trips on private jets took off in the pre-crunch years, as executives and self-made millionaires were swayed by flexible schedules, lack of baggage and security restrictions, and departure lounges uncluttered by economy-class travellers.

But the industry was hammered in the recession by the economic downturn and public criticism of private jet travel, particularly over incidents such as flights by car industry executives to Washington for hearings on industry bail-outs.

Flight numbers in Europe fell 16 per cent from a high of 779,000 in 2007 to just 652,000 in 2009.

While private flights are taking off again, the centre of gravity has shifted east.
A quarter of all the increase in business flights in Europe – or 10 per cent of all jet travel – was to Russia, Ukraine or Turkey last year, though the most popular airports remain Le Bourget in Paris, Geneva, Nice, London Luton and Milan Linate.

Flights provided by Netjets Europe, one of the biggest private aircraft operators, to the World Economic Forum at Davos were up 16 per cent on last year, as business and political leaders traded austerity for comfort, the company said.

But if corporate exuberance is back; it is back with a difference.

The trend is away from owning the whole of the aircraft, but towards fractional ownership – a so-called timeshare arrangement for planes.

Flights cost about €4,000 ($5,475) an hour for a short-haul trip, or €10,000 an hour long haul, according to Netjets, with 25 hours of flying time costing €145,000.

There was also a shift in the type of jets, with high-end, 19-seater jets the most popular in 2010.

However, smaller six-seater aircraft also increased in demand, as a new breed of super light aircraft including the Cessna Citation Mustang and the Embraer Phenom 100 soared in popularity.

FINANCE & ECONOMICS-2

2011-03-07T01:44:00.000-08:00

The secret of IKEA's success

Lean operations, shrewd tax planning and tight control

Furniture shops

The Economist Feb 2011

THE paragraphs below are arranged randomly; you will have to assemble the finished article yourself.

Just kidding. But if you shop at IKEA, you are no doubt familiar with the hassle and frustration of assembling its flat-pack furniture at home. Millions of customers endure it, for two reasons: IKEA’s products are stylish and they are very, very cheap.

“We hate waste,” says Mikael Ohlsson, who took over as chief executive of IKEA Group in September 2009. He points proudly at a bright-red “Ektorp” sofa. Last year his designers found a way to pack the popular three-seater more compactly, doubling the amount of sofa they could cram into a given space. That shaved €100 ($135) from the price tag—and significantly reduced the carbon-dioxide emissions from transporting it.

Thrift is the core of IKEA’s corporate culture. Mr Ohlsson traces it back to the company’s origins in Smaland, a poor region in southern Sweden whose inhabitants, he says, are “stubborn, cost-conscious and ingenious at making a living with very little”. Ever since Ingvar Kamprad founded IKEA in 1943, the company has tried to allow “people with limited means to furnish their houses like rich people”.

IKEA presents itself as a green company with a social mission. Mr Ohlsson boasts of its charitable work and its aim to use only renewable energy. He says he wants his “co-workers” to be happy, honest and inclined to think for themselves. He is proud that 40% of the company’s 200 top managers are women.

Business is good. In the fiscal year 2010, IKEA’s sales grew by 7.7% to €23.1 billion and net profit increased by 6.1% to €2.7 billion. Conforama, Habitat and other rivals do not come close. IKEA’s strong brand and low prices helped it to weather the downturn, even though 80% of its sales are in crisis-hit Europe. In 2010 its sales rose by 8.2% in Spain and 11.3% in Italy. The firm is doing well in Bulgaria and Romania and planning to expand further in central and eastern Europe.

Thrifty Germans are IKEA’s best customers, accounting for 15% of sales. It has become part of German culture: in 2009 a Hamburg theatre staged an opera about it, “Wunder von Schweden” (“Miracle from Sweden”), a biography of the “furniture messiah” set to Swedish folk tunes.

Yet behind IKEA’s clean image is a firm that is very Swedish, secretive by instinct and, some say, rigidly hierarchical. All six members of the supervisory board are Swedish. (Mr Kamprad, at 84, is a senior adviser.) Over the years the company has been accused of using child labour in Asia and of buying feathers plucked from live geese. Journalists revealed that Mr Kamprad had backed a Swedish fascist group in his youth; he apologised in an open letter.

More recently, IKEA has had problems in Russia, where it has 12 stores. Having campaigned against corruption and even frozen its investments there for a while to protest against poor governance, last year IKEA was itself involved in a scandal. It had to sack two senior executives in Russia for allegedly turning a blind eye to bribes paid by a subcontractor to secure electricity supplies for its St Petersburg outlets.

When damaging news breaks, IKEA has an admirable habit of coming clean. But the firm’s ownership structure is opaque. Critics grumble that its set-up minimises tax and disclosure, handsomely rewards the Kamprad family and makes IKEA immune to a takeover. The parent for IKEA Group, which controls 284 stores in 26 countries, is Ingka Holding, a private Dutch-registered company. Ingka Holding, in turn, belongs entirely to Stichting Ingka Foundation, a Dutch-registered, tax-exempt, non-profit-making entity, which was given Mr Kamprad’s IKEA shares in 1982. A five-person executive committee, chaired by Mr Kamprad, runs the foundation.

The IKEA trademark and concept is owned by Inter IKEA Systems, another private Dutch company. Its parent company is Inter IKEA Holding, registered in Luxembourg. For years the owners of Inter IKEA Holding remained hidden from view and IKEA refused to identify them.

In January a Swedish documentary revealed that Interogo, a Liechtenstein foundation controlled by the Kamprad family, owns Inter IKEA Holding, which earns its money from the franchise agreements Inter IKEA Systems has with each IKEA store. These are lucrative: IKEA says that all franchisees pay 3% of sales as a royalty. The IKEA Group is the biggest franchisee; other franchisees run the remaining 35 stores, mainly in the Middle East and Asia. One store in the Netherlands is run directly by Inter IKEA Systems.

After the airing of the polemical documentary on Swedish TV, Mr Kamprad retorted that “tax efficiency” was a natural part of the company’s low-cost culture. Yet such diligent efforts to reduce the firm’s tax burden sit uncomfortably with IKEA’s socially conscious image. Mr Ohlsson is trying to defuse criticism of IKEA’s opacity by providing more information on its finances. Last year the firm published detailed figures on sales, profits, assets and liabilities for the first time ever.

Mr Ohlsson argues that IKEA is more competitive as a privately owned company. Instead of sweating to meet the quarterly targets the stockmarket demands, it can concentrate on long-term growth. Mr Ohlsson plans to double the pace of store openings in China, where IKEA already has 11 outlets. Undeterred by the firm’s headaches in Russia, he plans to open perhaps three more stores in the Moscow area in the next few years. Mr Ohlsson hopes to move into India when the retail market opens up there. He even sees room for expansion in Britain. An Englishman’s home is his castle, and castles need furniture.

FINANCE & ECONOMICS-1

2011-03-07T01:39:00.000-08:00

Spain brings in new bank capital rules

By The Financial Times

Spain has approved a law obliging its banks to reinforce their capital by September or face partial nationalisation but has granted unlisted cajas or savings banks until March next year to organise stock market flotations.

Spain’s strict new law on “strengthening the financial sector”, approved by the cabinet on Friday, is the latest step in a plan to restructure a savings bank sector burdened by bad property loans.

As cajas and commercial banks jostle for position amid a welter of financial reforms, the new Spanish banking group led by Caja Madrid has signalled its intention to establish a “bad bank” to absorb non-performing property assets and make a stock market flotation more attractive to investors.

Banco Financiero y de Ahorros (BFA) – the joint banking unit of Caja Madrid, Bancaja and five other unlisted savings banks – said in a regulatory filing that its members had agreed an addendum to their merger agreement so that they could “define the perimeter of the listed banking business”.

This would “allow certain assets to be excluded from the company to be floated, with the aim of optimising its attractiveness to investors and its valuation”.

La Caixa, the big Barcelona-based savings bank, revealed three weeks ago that it would segregate a “bad bank” of repossessed properties and stakes in property developers and place it in an industrial holding group, thus increasing the likely value of the Caixabank banking business to be floated in the summer.

The socialist government of José Luis Rodríguez Zapatero, prime minister, has accelerated the restructuring of the Spanish savings bank system this year as part of a drive to improve Spain’s credibility in the sovereign bond markets.

Caja groups have already been reduced from 45 to 17 through mergers and the seizure of two faltering cajas by the authorities.

The new law says banks must have a core tier one capital ratio, a measure of financial strength, of at least 8 per cent of risk-weighted assets, rising to 10 per cent for those that depend heavily on wholesale markets for their liquidity and lack outside shareholders holding at least a fifth of their capital.

Financial institutions failing to meet these limits by March 10 have three weeks to tell the Bank of Spain how they plan to achieve the target; for example by realising capital gains on industrial holdings or by attracting new shareholders. The targets must be met by the end of September, although in exceptional cases the deadline can be extended to the first quarter of next year.

Elena Salgado, finance minister, on Friday reiterated her view that less than €20bn ($27bn) of extra money would be required to recapitalise Spanish lenders, on top of the €15bn already spent. “I think that’s the absolute maximum,” she said. Some analysts say the final bill could be more than twice as much. Caixabank, with a book value of €20.6bn, is expected to be the biggest newly listed Spanish bank by market capitalisation, and would be number three in Spain after Santander and BBVA.

BFA, which could be renamed BanCaja Madrid, was assessed as having a book value of €10.24bn and a core capital ratio of 7.04 per cent by Rodrigo Rato, its chairman, before taking into account any benefit from the new “bad bank” proposal. With total assets of €328bn, it is the third-largest Spanish bank by assets and says it is the biggest in terms of domestic business. Santander and BBVA have substantial foreign investments

FINANCE & ECONOMICS-4

2011-02-11T00:04:00.000-08:00

Real Madrid top football rich list for sixth year

Real Madrid have topped the league table of the world's 20 richest football clubs for the sixth straight year, according to Deloitte.

BBC

Its Football Money League, based on season 2009-10, also said the combined revenues of the 20 clubs had passed 4bn euros (£3.8bn) for the first time.

Real's arch-rivals Barcelona retained second spot in the list, ahead of Manchester United who remain third.

Manchester City were the biggest climbers, up from 20th to 11th place.

Arsenal, Chelsea and Liverpool were fifth, sixth and eighth respectively.

'Corporate partners'

Seven of the top 20 in Deloitte's table were from England, the other three being Manchester City (11th), Tottenham Hotspur (12th), and Aston Villa (20th).

All the 20 clubs represented are from the "big five" European leagues, with Germany contributing four clubs, Italy four, Spain three and France two.

In a further sign of a financial hierarchy at the top of the European game, the same 10 clubs populated the top 10 places in the Money League for the second successive year.

Deloitte Football Money League

• 1. Real Madrid: 438.6m euros
• 2. Barcelona: 398.1m euros
• 3. Man Utd: 349.8m euros
• 4. Bayern Munich: 323m euros
• 5. Arsenal: 274.1m euros
• 6. Chelsea: 255.9m euros
• 7. AC Milan: 235.8.m euros
• 8. Liverpool: 225.3m euros
• 9. Inter Milan 224.8m euros
• 10. Juventus: 205m euros

Source: Deloitte: 2009-10

And top six ranking places are identical to last year. Meanwhile, six of the top 10 have been in the money league top 10 in each of the last 10 years.

The authors said that Real may now be about to emulate the eight years spent by Manchester United at the top of the rich list, from the first edition in 1996-97, through to 2003-04.

They also said that they had expected to see the full impact of the global economic downturn on clubs during the 2009-10 season.

"We continued to assert that the game's top clubs would be well placed to meet these challenges given their large and loyal supporter bases, ability to drive broadcast audiences and continuing attraction to corporate partners," the report says.
"This was more than borne out by clubs' revenue performance in 2009-10."

Deloitte also says that the established large and loyal supporter bases and historic on-pitch success has "continued to underpin the brand strength" of football's top clubs.

Match-day boost

Real retained top position despite a disappointing season, coming second in La Liga again and being knocked out of the Champions League at the Round of 16 stage by Lyon.

Yet the club was boosted by increased revenues from its three income streams of match day monies, broadcasting and commercial.

Match day revenues grew by 27%, partly because Real hosted the Champions League final in 2010 at their Santiago Bernabeu stadium.

"In the coming years, particularly as UEFA's financial fair play rules take effect, Real Madrid's revenue prowess should, in theory, translate into a competitive advantage on the pitch," said the Deloitte report's editor, Dan Jones.

These Uefa rules are designed to force clubs in European competition to spend only what they earn.

"The much discussed implementation of UEFA's... regulations from 2013-14 will not impact on clubs' revenue generation, with the key principle underlying the regulations being that clubs do not spend more than they earn," Mr Jones adds.

"Indeed, the regulations should help encourage clubs to identify and realise sustainable increased revenues."

'Consolidated'

Real's arch-rivals Barcelona had a successful season, again winning La Liga and being crowned Fifa World Club champions.

Manchester United had to be content with picking up the League Cup, as Chelsea secured a Premier League and FA Cup double.

"Despite the strengthening of sterling against the euro between 2008-09 and 2009-10, Barcelona have consolidated their second-placed position in the football money league, increasing their lead over Manchester United from 38.9m euros in 2008-09 to 48.3m euros," the report says.

The Deloitte review does not include the cost of transfer fees or player wages, or VAT and other sales taxes, and concentrates solely on day-to-day income from football business.

Income includes money from ticket sales, sponsorship, merchandising and other commercial revenues, television monies, corporate hospitality and non-match day stadium use, such as for conferences.

CURRENT AFFAIRS-1

2011-02-04T04:52:00.000-08:00

Five ways to get into Oxford

Oxford University has finished selecting its new intake of students for 2011. It's a world-famous institution that has educated 25 British prime ministers. So what's the secret to getting in?

BBC

Thousands of students have now heard whether they have been offered places at Oxford University.

For those that have nervously opened the envelope to find good news, they have the added satisfaction of knowing they succeeded in what the university says was the most competitive year yet. More than 17,200 people were chasing 3,200 places.

The application process has a daunting reputation and, for state school pupils, it can seem especially difficult. While only 7% of pupils in England and Wales are from the independent sector, they make up around 46% of Oxford's undergraduates.

The university says these stats don't tell the whole story, because a third of students with all A grades in their A-levels - the pool of talent from which Oxford students are drawn - are privately educated.

Getting in is hard, but perhaps not as hard as people think, says Mike Nicholson, the university's head of undergraduate admissions, with on average five applications for every place.

"We're looking for students who are intelligent - very interested in their subject and who can demonstrate their interest," he says.

So what are the ingredients of a successful application?

1. HAVE CHUTZPAH

A touch of impudence can go a long way, says Mark Robinson, head of history at Barton Peveril College in Eastleigh, a state school with a good track record of getting students into Oxford.

"It's about having confidence in your own opinions, even when someone else says 'that couldn't be right'.

"Rather than the pupil giving ground, saying 'oh dear, silly me', we want them to say 'don't be ridiculous, of course that's the case'.

"It's an adversarial style of discussion. When we do our mock interviews and extra lessons with history students, I encourage them to argue."

The small class sizes of independent schools help cultivate this skill because they make pupils feel special and give them a sense of entitlement, he says.

Pupils who stick up for themselves stand out, says Oxford professor Thomas Noe.

"What we are looking for is a student who can address issues in a logical fashion, reason from premises to conclusion, we're looking for someone who can stand up for their own ideas but is not particularly inflexible."

Even if a student is hesitant or shy, how well he thinks will still be evident, he says.

2. UNLEASH YOUR GEEK

Extra-curricular activities are not that important, says Mr Nicholson.

"There is a presumption that if applying to Oxford, you have to be incredibly well-rounded.

"It's not good enough just to be academic. You have to have climbed Mount Kilimanjaro, raised £10,000 for charity and rescued three children from a burning building, all these fantastic achievements. You don't."

Some students have well-rounded activities and some don't. But they are all smart and that's the key, he says.

3. BE PASSIONATE

It's important to communicate your enthusiasm for your subject and not appear like you're regurgitating lines, says Bethany White, 17, who is heading to Mansfield College to study language and literature.

"It was all natural. When I was talking, I hadn't planned anything and maybe that helped. I didn't have preconceived ideas. it was spontaneous."

Go for it and be yourself, adds Bethany, from Taunton's College in Southampton.

"And your passion really. The enthusiasm and passion is really important, and if you haven't got that then don't bother."

4. PUT IN THE HOURS

At some schools, like Barton Peveril, students in their final year complete nearly four hours a week of extra classes in preparation.

Showing a knowledge beyond the A-level syllabus is crucial, and that's what makes the interview the most important part of the application, says Sos Eltis, an English tutor at Brasenose who teaches other Oxford professors how to interview.

It's about identifying the pupils who think more widely, she says, for whom A-levels seem to hold them back.

"You can't see that from paper alone. You have to interview them."

There is also a programme of week-long, residential classes over the summer, run by the university, called Uniq.

Lawrence Holdsworth, 18, who will study history at Somerville College, says it made all the difference to him.

"The Uniq summer school gave me a good taster of the teaching system which was something that I really enjoyed. The debating that comes with it and how you get to explore matters and really go off on a tangent. That is something I definitely advise."

5. GO TO A SCHOOL WITH KNOW-HOW

Schools can develop relationships with colleges, says Mr Robinson. Once you get a student into a college, he says, that college will often write and ask for more.

Anyone can get into any Oxford college, but some colleges seem to take students from the same schools year after year.

Families also play a big part in providing the right encouragement and work ethic at home.

Ragulan Vigneswaran, 17, says his Sri Lankan parents have been a big factor in his success in getting to Balliol College.

"From a young age, my parents really tried to instil into me that education is pretty much the most important thing.

"My mother I remember was teaching me maths from a really young age because she wanted me to become really adept at it and become passionate in the subject in the way she was.

"They have been supporting me continuously and encouraging me to study more - encouraging out of school study - to make myself more knowledgeable and prepared for the future."

FINANCE & ECONOMICS-3

2011-02-04T04:45:00.000-08:00

Spain’s new caja group eyes IPO

By The Financial Times

The newly created Spanish banking group led by Caja Madrid, the unlisted savings bank, will list on the stock market to increase its capital once it has details of Spain’s proposed new regulations.

Chairman Rodrigo Rato, a former finance minister and managing director of the International Monetary Fund, said Caja Madrid and six other savings banks had decided on “100 per cent integration” of their businesses into the new Banco Financiero y de Ahorros (BFA), Spain’s third-biggest bank by assets.

The Spanish government prompted a rush to create banks by the unlisted cajas when it threatened to nationalise cajas that failed to recapitalise themselves with private or state money this year.

La Caixa, the Barcelona savings bank, last week launched Caixabank, a bank with a book value of €20.6bn ($28.2bn).

Banca Cívica, another bank created by three regional cajas, also said on Monday it planned a stock exchange listing.

Caixabank is to have a core tier one capital ratio of 10.9 per cent of risk-weighted assets under the current Basel II capital adequacy rules, well in excess of the 8 per cent minimum for Spanish lenders decreed by Elena Salgado, finance minister.

BFA’s plans are less advanced but Mr Rato unveiled pro-forma 2010 results showing that it had more than €328bn in assets and that it had just spent €9.2bn on cleaning its balance sheet through provisions and write-offs for its property loans, much of it from the €4.46bn provided by the fund for orderly bank restructuring (Frob).

The new bank’s book value is calculated at €10.24bn, and its core capital ratio is 7.04 per cent, making it almost inevitable that it must raise more capital through an equity listing or the sale of industrial holdings. Mr Rato did not reject the idea of following La Caixa and creating a “bad bank” of repossessed properties that could be moved off the bank’s balance sheet to strengthen capital ratios. “It’s undoubtedly a possibility,” he said. “It’s within our reach.”

Ms Salgado has said the maximum in extra capital required by the cajas is €20bn, on top of the €15bn already provided by the Frob and by deposit guarantee funds. In a report on Monday, JPMorgan Chase said Spanish lenders might require an extra €38bn of new capital.

Prime minister José Luis Rodríguez Zapatero, who launched the latest round of savings bank reform in an Financial Times interview in January, conceded on Monday that some cajas would probably fail to secure new capital from private investors.

But he said the Frob, which has until now lent at a punitive 7.75 per cent interest rate, would ultimately profit from any rescues. “There’s no reason for taxpayers to lose money,” he told Spanish television

FINANCE & ECONOMICS-2

2011-02-04T04:41:00.001-08:00

Britain and Brazil prove more profitable for Santander than Spain

Ailing economy hits profits of Santander's Spanish arm

The Guardian

Spanish bank Santander made more profit in Britain and Brazil than in its home market for the first time, it emerged today , as the group admitted the flotation of its UK arm would be delayed until the second half of 2011.

Profits in the Spanish division have been held back by an ailing economy and troubled property market, which has also weighed down the share price of the bank. The shares were down 31% last year when the Bank of Spain took a tougher stance against property loans causing Santander to take an extraordinary provision of €472m (£399m) in the third quarter.

In Britain, where Santander has expanded rapidly in the past five years by buying Abbey National, Alliance & Leicester and parts of Bradford & Bingley, profit rose 11% to £1.7bn, which the bank said was 18% of the total group profit of €8.1bn. Spain contributed just 15% to group profits, which were down 8.5% year-on-year, while Brazil accounted for 25% of the total.

Emilio Botín, Santander's chairman, tried to play down concerns about Spain. "Doubts about Spain are absolutely exaggerated. Frivolous comparisons have been made with other economies whose public finances and financial systems are far more fragile than ours," Botín said.

He has parachuted in his daughter Ana Botín to be chief executive of the British arm after the sudden departure of António Horta-Osório who is taking the helm of Lloyds Banking Group next month.

She has pulled out of talks with the government over its banking plan, known as project Merlin, but said that Santander would "support the broad objective" by making commitments to lending in 2011.

While its market share has been increasing, Santander's net lending in the mortgage market – which includes loans being repaid - fell 27% to £5.5bn.

The UK bank, which is to expand further once completing the takeover of 318 Royal Bank of Scotland branches, reported a decline in margin in the fourth quarter, which it partly blamed on regulatory requirements to hold more liquid assets.

Analysts at Morgan Stanley said this may have a "modest negative read-across" for Lloyds, but noted that impairment charges at Santander UK were improving, down 16% year-on-year to £651m. Santander is on course to have more branches in the UK than its arch rival HSBC.

FINANCE & ECONOMICS-1

2011-02-04T04:37:00.001-08:00

Banco Popular profits hit by stricter debt provisioning

BBC

Spain's third largest bank, Banco Popular, has joined Santander in reporting 2010 profits hurt by new stricter rules on bad debt provisioning.

The bank said net income fell 23% from 2009, to 590m euros ($804m, £498m).

It comes after the bank set aside 1.8bn euros to cover possible losses on bad loans in order to meet new standards laid down by the Bank of Spain.

Fourth quarter profits were hardest hit, down 40% versus a year earlier.

Spain's banks are suffering in the wake of a property market meltdown and a painful recession that has seen the unemployment rate rise to 20%.

Robustness

Banco Popular's non-performing loans increased to 5.2% of its assets at the end of 2010, up from 4.8% a year earlier.

"2010 was a year of severe economic and financial crisis, worsened by a profound deterioration of the sovereign risk of many of the euro area countries," observed the bank in its financial report.

"This situation caused capital markets to remain virtually closed for many Spanish financial institutions throughout the year."

The bank pointed out that it had taken action to increase its robustness to any further flare-up of the eurozone government debt crisis.

Its core capital ratio - a measure of how much losses the lender can absorb without becoming insolvent - rose from 8.6% to 9.4% of its assets, and the bank claimed it was well positioned to meet new, stricter international capital requirements.

The bank also said it had reduced its dependence on short-term funding from the international wholesale markets, making it less vulnerable to a loss of confidence in the banking sector.

The results were anticipated by markets, with Banco Popular's share price largely unchanged at the open of trading in Madrid.

The bank's shares remain 72% below their peak level of early 2007, but are currently about 33% above the low reached during the 2008 financial crisis.

FINANCE & ECONOMICS-2

2011-01-24T04:19:00.001-08:00

China’s ICBC Open An Office Building in Spain

The world’s largest bank, the China Industrial and Commercial Bank of China (ICBC), arrives in Spain with an office in Madrid, as reported by the international real estate consultancy Savills. The bank will open a 1,100 sqm office building in the Paseo de Recoletos number 3, which will be rented for five years with possibility to extend the contract three years.

ICBC has 386,723 employees, 16,232 retail outlets throughout China, 162 foreign branches and serves 3.61 million corporate customers and 216 million private clients worldwide.

FINANCE & ECONOMICS

2011-01-16T23:56:00.000-08:00

Zapatero warns on regional spending

By The Financial Times

José Luis Rodríguez Zapatero, Spanish prime minister, has issued a hardline warning to the country’s autonomous regions that they must curb public spending and debt creation so that Spain can recover from its sovereign debt crisis.

After decades of government concessions to regional demands, Mr Zapatero said in a Financial Times interview that the central government would strictly enforce deficit limits and act against any region that stepped out of line.

“At the end of the day, who is accountable, who is responsible?” he asked. “It’s the central government, isn’t it? And we have to spearhead, lead the way forward with the control of public spending for the autonomous regions. And they have to deliver. They have to fulfil those obligations, because if they don’t, the government will act.”

A high degree of autonomy for Spain’s 17 regions has been a linchpin of the country’s democracy since the 1978 constitution that followed the Franco dictatorship.

Regions account for half of public spending, mainly on health and education, with the centre disbursing about a third and social security the rest.

But after the financial bail-outs of Greece and Ireland, and the threat of a forced rescue for Portugal, foreign investors have expressed concern about the budget deficits and growing debts of devolved regions such as Catalonia and Valencia.

Regional debt has doubled to €105bn ($140bn) in five years, says the Bank of Spain, compared with €541bn for the central government, prompting the national finance ministry to impose new disclosure requirements and deficit limits. Municipalities such as the capital Madrid, which owes €7bn, have also built up their own debt.

“We have powerful instruments,” Mr Zapatero said. “No autonomous regional government could actually issue debt without the backing, without the authority of the central government. So we hold the key.”

Such assertions of central power are resented by nationalists in regions such as Catalonia, a wealthy part of Spain that is a net contributor to the overall budget and thus subsidises poorer regions such as Andalucía.

Mr Zapatero raised another issue in calling for “harmonisation” of business laws across Spain, a response to complaints about the difficulty of complying with different sets of regulations – such as building codes or in the use of particular regional languages for shop signs.

The government would spearhead legislative reforms so there was “less red tape, fewer licences, more flexibility for economic activity”, the prime minister said. “It’s all about cutting down the administrative burden on businesses.”

CURRENT AFFAIRS-4

2011-01-14T23:47:00.000-08:00

Spain's extravagant City of Culture opens amid criticism

Peter Eisenman's complex in Santiago de Compostela was commissioned during the boom, and has cost four times more than planned

The Guardian January 2011

Spain's latest architectural extravagance was finally opened to the public today amid complaints that the massive new City of Culture in Santiago de Compostela is a huge and expensive white elephant.

American architect Peter Eisenman describes his €400m (£332m) hilltop complex overlooking one of Spain's most picturesque and historic cities as something that is meant to appear as though it has "erupted and heaved up" from the ground.

But others see the complex of six buildings in Galicia as a monument to the vanity of the region's former rightwing premier, Manuel Fraga, and an anachronism at a time of austerity. The project, still only half-built, has already cost four times more than originally planned.

"It was born in the Spain of excess and is opening during an economic collapse, as a sort of monument to construction bubble," said columnist Anxo Luxilde in La Vanguardia newspaper.

Two of the six buildings – a library and a newspaper archive – were opened today, 12 years after the project was first commisioned during Fraga's term in office. They will eventually be joined by a 2,000-seat theatre, a museum of Galician history and an international arts centre. A sixth building will house services for the other five.

The Galician region's current premier, Alberto Núñez Feijóo, from the same People's party as Fraga, today compared the buildings to New York's Museum of Modern Art and the Sydney Opera House. "There is now another obligatory stop on the main itineraries of the world," he said.

Building of the theatre and arts centre has yet to be started and questions are already being asked about whether there will be money to fill galleries with art or attract audiences.

The regional government has decided to slow construction further. Culture chief Roberto Varela said the theatre building would not be started for another three years. The international arts centre, meanwhile, may have to be converted into offices.

"We inherited this project in a very advanced state. We had no other option but to continue with it," Varela said. The "spectacular and marvellous" museum of Galicia would open next year, he said.

"It is a cemetery for money," complained Pedro Armas, a spokesman for the opposition socialist party in the nearby city of La Coruña, where the budget for the Galician Symphony Orchestra has just been slashed.

The buildings are set by an arboretum on a 173-acre site on Mount Gaiás with curved roofs that appear to open out on the hill overlooking a city that is one of Europe's main centres of Catholic pilgrimage.

Eisenman said the project could only be compared in scale to the Getty Centre in Los Angeles. "And that took 15 years to complete," he told the Faro de Vigo newspaper. "The size of the project has been increased several times over the past 10 years, so it is not surprising that the costs have increased.

"The scale and the ambition of the job probably make the City of Culture unique in the world. There is no way that it can be considered a waste of money. It is a serious investment in the welfare of Galicia and of future generations."

The computer-generated design saw Eisenman superimpose a map of the old city's streets on to the surface of Mount Gaiás, using software to adapt it to the hill's contours. The centre's curved roofs were partly inspired by the scallop shell traditionally carried by pilgrims to the shrine of St James in the city's cathedral.

Critics complain that the whole project reflects a state of mind that saw signature cultural buildings such as Bilbao's Guggenheim Museum rise in cities across the country during an economic bonanza. Such buildings, they say, are now inappropriate in a country with 20% unemployment and a 9% budget deficit.

A similar, if much smaller, cultural centre designed by Oscar Niemeyer, the 103-year-old Brazilian architect, will open shortly in the northern town of Avilés.

Fraga, a former minister in the dictator General Francisco Franco's governments, was regional premier of Galicia from 1990 until 2005.

CURRENT AFFAIRS-1

2011-01-06T09:18:00.000-08:00

2010: The year of the unconventional

The Financial Times

By any measure, 2010 was the year when conventional wisdom was challenged, redefined or comprehensively overturned. A Conservative-Liberal Democrat coalition assumed power in Britain and the sky did not fall in; the eurozone ceased being a shelter and became a source of instability; Barack Obama succeeded where so many had failed and pushed through healthcare and financial services reform; Silvio Berlusconi survived a string of sex scandals; Tony Blair, reputedly one of the most hated men in Britain, wrote a best-selling memoir; and Qatar, an up-and-coming oil-rich emirate, won the right to host the 2022 World Cup, alongside a Russian bid for 2018 that saw off England.

The global financial crisis and its aftermath continued to preoccupy policymakers. Viewed from Delhi, Singapore or São Paulo, the crisis appeared less acute than in Dublin, Madrid or Washington. The impact of US-led unconventional monetary measures to head off deflation was inescapable and highly controversial. Currencies in emerging markets rose sharply against the dollar, gold soared in value and relatively open economies, such as Indonesia and South Korea, experimented with capital controls to curb the flow of hot money.

After the crash of Lehman Brothers, whose second anniversary passed without celebration in September, the inexorable advance of globalisation looked less certain. BHP, the Anglo-Australian mining giant, abandoned a $40bn bid for Potash, largely because of opposition in the Canadian fertiliser group’s home province of Saskatchewan. Rupert Murdoch’s bid to take full control of BSkyB was put on hold by the UK government, a rare if perhaps only temporary setback for him in Britain. Across the globe, regulators – shoved aside during the credit boom – staged a comeback.

There were extraordinary acts of courage, such as the 33 Chilean miners who survived nearly 70 days buried 2,300ft (700 metres) underground and the defiant dignity of Aung San Suu Kyi, the Burmese opposition leader released after spending almost 15 of the past 21 years under house arrest. Overall, however, seven themes helped to shape 2010.

1 From banking crisis to sovereign debt crisis

The 2009 recapitalisation of the banks, coupled with massive deficit spending, saved the world from a 1930s-style Depression. In 2010, the bill came due in the form of a sovereign debt crisis. Markets woke up to the fact that liabilities and risk had simply been transferred from the private sector to the state. The eurozone suffered the most serious crisis in its 12-year history. Debt-laden Greece, followed by Ireland with its insolvent banking system, were forced to apply for rescue aid that together approached €200bn.

The German public was outraged. Angela Merkel, chancellor, insisted on new rules to deal with fiscal profligacy and future bail-outs. Spain and Portugal wobbled as markets took fright about peripheral economies. By year’s end, the European Central Bank was obliged to delay phasing out its emergency provision of liquidity to stricken banks, and to buy government bonds (though not in sufficient quantity to upset the Germans or to convince the markets that this really was “shock and awe”, with more to come).

The original rules for governing the eurozone proved to be either inadequate or unenforceable. The Maastricht treaty made no provision for bailing out a sovereign member but, in the heat of the crisis, Greece and Ireland had to be saved. Maastricht mandated curbing budget deficits to 3 per cent of gross domestic product, but the rules had earlier been ignored by France and Germany. These same rules failed to address what had become the problem at the heart of the eurozone’s troubles: the huge current account deficits run up by the likes of Greece, Spain, Portugal and Ireland at the height of the boom.

In 2010, Germany, supported gingerly by France, started to rewrite the rules. Many concluded that if the eurozone was to survive it would be on German terms, including the appointment next year of a German (Axel Weber?) to succeed Jean-Claude Trichet as ECB president.

2 American power weakens as China rises

In 2010, China overtook Japan as the second-largest economy in the world and will soon be the world’s largest manufacturer. China also became more assertive, much to the discomfort of its neighbours. Japan was forced into a humiliating climbdown after it arrested a Chinese trawlerman accused of trespassing in its waters. US pleas to Beijing to adjust the value of the renminbi were largely ignored, while at the Group of 20 summit in Seoul, US-led efforts to address global imbalances ran into a wall of Chinese-organised opposition.

Behind the new-found swagger, not all went according to plan in China. A wave of labour unrest swept through factories midyear, though foreign-owned businesses were most affected. Food prices rose, a reminder of how a burst of inflation preceded the street protests around Tiananmen Square in 1989. The authorities clamped down further on the internet, helping to drive Google offshore. The furious official reaction to the award of the Nobel Peace Prize to Liu Xiabao, a long-time human rights activist, underlined the regime’s insecurity.

In the US, the recovery faltered, forcing the Federal Reserve to order a fresh round of quantitative easing, dubbed QE2. Mr Obama’s popularity fell and the Democrats suffered a “shellacking” in the midterm elections. The populist Tea Party gained congressional seats and Sarah Palin’s popularity rose. So did the stock of Glenn Beck, a rabble-rousing Fox News television host who regularly accused the president of being “unAmerican”. Yet Mr Obama still has no credible challenger in the Democratic or Republican party.

Abroad, the US military campaign in Afghanistan picked up pace but corruption and weak civil institutions undercut the strategy. Mr Obama blinked first in the stand-off with Israel over settlements in the West Bank. More significant in the long term was Hillary Clinton’s statement that the US had vital interests in the Pacific, a belated recognition of China’s growing power in the region.

3 Nick and Dave double-act defies the doom-mongers

Before the UK general election in May, it was received wisdom that a “hung parliament” (whereby no individual party gained a parliamentary majority) would be disastrous. Financial markets would react badly and the British people would be denied “the firm smack of government”. Yet David Cameron, the Conservative leader who fought a timid campaign, and Nick Clegg, the feisty head of the Lib Dems, seized the moment and forged a coalition, leaving Gordon Brown and the Labour party on the sidelines after 13 years in power.

Mr Cameron and Mr Clegg opted for a comprehensive deal that included electoral reform, a share-out of cabinet seats and an ambitious programme of spending cuts to shrink the deficit. The markets were impressed. So was Mervyn King, governor of the Bank of England. Mr King had urged tough action ahead of the election, lest Britain suffered a slump in confidence like countries caught in the sovereign debt crisis. Some colleagues on the Bank’s independent Monetary Policy Committee thought the governor should keep his nose out of fiscal policy. With hindsight his warnings about the need to reassure the bond markets appeared pertinent.

What surprised many commentators – and many Whitehall civil servants – was the shoot-first, ask-questions-later tendency within the coalition. The National Health Service, welfare and student fees were all targeted for reform, though there were signs of second thoughts about the NHS. The spending review was brutal in numerical and rhetorical terms, especially in respect of defence where Britain is only just hanging on as a serious military power. Violent student protests against tuition fee rises foreshadowed trouble ahead. The true test of the coalition’s durability will be in 2011.

4 The reassessment of risk

Successive earthquakes in Chile and Haiti reminded us of the misery inflicted by natural disasters, but it was a man-made calamity that dominated the news. BP’s oil spill in the Gulf of Mexico cost the company billions of dollars and forced the resignation of Tony Hayward, the cherubic chief executive who became a hate figure for environmentalists and politicians. BP was sneeringly called by its old name of British Petroleum, which may explain why the board chose an American – Bob Dudley – as Mr Hayward’s successor.

The Macondo well explosion illustrated the risks of operating on the frontiers of technology, several miles underground, in search of oil. Although the risks of an accident were judged to be infinitesimal, the actual disaster proved disproportionately damaging – a little like the global banking crisis. A similar story unfolded in the Chilean mining accident, though the company – San Esteban Primera – escaped the same degree of attention as BP.

At year’s end, Rolls-Royce, another top British company and world-class aero-engine maker, struggled to deal with the fallout from a far less serious accident: the failure of one of its Trent 900 engines on a Qantas Airbus 380. In spite of its excellent safety record and proven technology, the company was put on the back foot, partly because of the new superjumbo’s iconic status.

5 Bankers still don’t ‘get it’

The passage of the Dodd-Frank measures marked the most far-reaching reform of the US financial services industry since the 1930s Glass-Steagall Act that separated commercial and investment banking. Wall Street lobbied ferociously to prevent a return to Glass-Steagall but accepted some curbs on the ability of banks to trade on their own book. The future business model of big investment banks such as Goldman Sachs remains open in a world of lower leverage and correspondingly lower returns.

Bonuses remained a source of controversy. Bank bosses complained about a one-off tax in Britain and muttered about leaving the City of London. John Varley, the outgoing chief executive of Barclays, quietly tried to rally fellow bankers around “Project Merlin”, an effort to cap bonuses, settle tax issues and promote a better image for the industry. But it proved impossible to organise agreement, not least because banking is a worldwide business and the Wall Street players had no intention of joining a “little England” effort.

Stories of excess continued to emerge, especially in Ireland where the banks’ irresponsible lending on real estate was laid bare. There was anger when the Financial Services Authority, the UK’s financial watchdog, exonerated Sir Fred Goodwin and the board of Royal Bank of Scotland of mismanagement – a decision made worse by the FSA’s initial refusal to publish its own report.

6 WikiLeaks and the world of open source(s)

A previously obscure computer geek-turned-gadfly called Julian Assange turned the worlds of diplomacy and journalism upside down. Mr Assange and his internet site WikiLeaks engineered two industrial-scale dumps of confidential US government data. The first involved dispatches from the front lines in Iraq and Afghanistan, and offered vivid – if partial – snapshots of modern war. The second featured 250,000 classified diplomatic cables featuring tittle-tattle about leaders such as Nicolas Sarkozy, Vladimir Putin and Silvio Berlusconi. But there were far juicier extracts offering insights into US involvement in Yemen, as well as concerns in Saudi Arabia and Gulf emirates about Iran’s nuclear programme and their apparent willingness to support US military action against Tehran.

As the leaks turned into a cascade, Mr Assange was arrested in London, though later released on bail. He faces deportation either to Sweden to face rape allegations or extradition to the US where prosecutors are scrambling to prepare charges, possibly under the 1919 Espionage Act.

7 The death of newspapers has been much exaggerated

Technology continued to recast the media industry. The explosive growth of Facebook and Twitter as social networks contributed to further decline in newspaper circulation in many markets. But it was not all gloom. The ex-KGB officer Alexander Lebedev added to his stable of British print publications with the purchase of The Independent for £1. His Evening Standard went free and took on a new lease of life. And, most important, the iPad arrived. Steve Jobs’ latest product is a game-changer because it and other “tablet” devices such as Samsung’s Galaxy combine interactive applications with the newspaper reading experience. Hold the front page!

CURRENT AFFAIRS-2

2011-01-06T09:04:00.000-08:00

A Look Back At The Top Stories Of 2010 - Part 2 ...

CURRENT AFFAIRS-3

2011-01-06T08:47:00.000-08:00

A Look Back At The Top Stories Of 2010 - Part 1 ...

FINANCE & ECONOMICS-1

2010-12-10T02:44:00.000-08:00

Spain seeks to impress with austerity

Financial Times : December 3 2010

Spain has raised tobacco tax, reduced windpower subsidies and brought forward pension reform in the latest measures to reduce the budget deficit and convince financial markets it has embarked on fundamental economic improvements.

Prices of sovereign bonds issued by Spain, Portugal and other “peripheral” eurozone economies fell sharply early in the week amid fears of debt defaults following the rescues of Ireland and Greece. But they recovered after the European Central Bank made large-scale bond purchases on Thursday.

Spain has sought to restore confidence in its solvency with a steady stream of announcements regarded as positive by investors, and has said it is on track to cut the budget deficit from 11.1 per cent of gross domestic product in 2009 to 9.3 per cent this year and 6 per cent in 2011.

Luis Garicano, professor of economics and strategy at the London School of Economics, described the pension announcement as a “big deal” and “very good news” but said it was essential to implement other structural reforms to enhance competitiveness and growth.

“With Spain’s large volume of private sector debt, you need some clear perspective that we are going to grow to get out of the hole,” said Mr Garicano. “You need a sustained calendar of very consistent reforms to get out of these recurrent crises.”

Elena Salgado, finance minister, said after the weekly cabinet meeting on Friday that the increased tobacco tax would raise an extra €780m ($1bn) a year assuming constant consumption. A separate government announcement confirming a 35 per cent cut in windpower subsidies said a new alternative energy plan would save €1.1bn up to 2013.

Alfredo Pérez Rubalcaba, the deputy prime minister, also said a plan to reform pensions by increasing the retirement age gradually from 65 to 67 would be proposed by the government on January 28. The Socialist government had previously alarmed investors by putting the reform on the backburner.

José Luis Rodríguez Zapatero, prime minister, cancelled a visit to Argentina for an Ibero-American summit to oversee the latest round of economic measures, which include the partial privatisation of the state lottery company and of the airports authority, and the abolition of a €426 monthly payment for the long-term unemployed.

His government is also cutting corporation tax for small businesses and making it quicker and cheaper to set up companies.

Ms Salgado said Spain was engaged in “accelerated fiscal consolidation that is bearing fruit and a period of deep reforms”.

Such measures are welcomed by most Spanish business leaders and by foreign investors, but economists remain concerned by unemployment that remains above 20 per cent of the workforce and a sluggish economy at risk of falling back into recession.

Spain’s industrial production fell 1.9 per cent in October from a year earlier, after a smaller fall in September and a rise in August, according to figures released on Friday by the National Statistics Institute.

Raj Badiani, economist at IHS Global Insight, described this “an exceedingly poor outcome” given that industrial output had fallen 9.1 per cent in October 2009.

He said the data release “supports other key indications which signal that the economy is failing to generate any recovery momentum after stalling in the third quarter”

MUSIC VIDEO

2010-12-05T13:21:00.000-08:00

The classic John Lennon Xmas music video ...

FINANCE & ECONOMICS

2010-12-05T13:08:00.000-08:00

BUSINESS NEWS SHORTS ...

Inditex to close out year with 5,000 shops around the world

Spanish fashion company Inditex will close out the year with 5,000 establishments, following the 245 shops to be opened in the second half of the year: 40% more than in the first half, according to calculations by Spanish newspaper El Economista.

The Spanish multinational opened 173 establishments in the first half of its financial year, for a total of 4,780 premises in a total of 77 countries. The idea now is to accelerate the expected plan and open, in the second half of the financial year, which closes in February 2011, around 245 shops; that is, 41% more than those opened in the previous six months.

Inditex opens between one and three shops a day around the world, making it one of the most powerful firms on the international scene.

Iberia and British Airways shareholders approve merger

Iberia and British Airways shareholders have given the green light to the merger between the two companies. The general shareholders’ meetings of both companies were held in Madrid and London, respectively, and voted in favor of the operation, which will give rise to one of the most powerful groups in the air sector.

According to Iberia, this was the final requirement needed to carry out the merger. A series of purely formal administrative procedures still have to be completed from now until International Airlines Group shares start to be listed at the end of January.

The airlines are confident they will obtain annual synergies of €400 million from the fifth year of the merger onwards. IAG will be a Spanish company with fiscal residence in Spain, and most of the meetings of its board of directors and all its shareholders meetings will be held in Madrid. Its financial and operational base will be in London.

Gas Natural Fenosa to invest 85 million in Mexico in 2011

The energy company Gas Natural Fenosa is to invest €85 million in energy projects in Mexico during 2011. The majority of the investment will be used to expand the gas distribution network, according to a statement by the company.

Indeed, some 45 million will be allocated to expanding the existing 16,350 kilometers of distribution network that the company already has. The group hopes to attract 85,000 new natural gas clients during the coming year and estimates a potential market in the North American country of around 3.5 million clients.

The energy multinational is the current market leader in the country with 1.2 million clients. Natural gas is one of the energy sources with the best growth prospects in Mexico, according to a report by Gas Natural Fenosa, which operates in eight states in the country. Between January and September this year sales of natural gas in Mexico totaled 30,022 gigawatt hours (GWh), an increase of 9.4% compared to the same period in 2009. The energy multinational also has 2,270 megawatts (MW) of electricity generation power, following the start-up of the El Norte Durango combined-cycle power plant in August, which has a 450 MW capacity.

Gas Natural Fenosa’s Mexican subsidiary will continue to participate in tenders by the Federal Electricity Commission (CFE) for independent generation plants and the company continues to examine opportunities for wind development in the country. Its power stations in Mexico generated 12,207 GWh of power between January and September, an increase of 1.8% compared to the same period the previous year.

Online exports of Spanish products rise by 10%

Exports of Spanish products carried out using eCommerce exceeded €176 million (up by 10.5%) in the first nine months of 2010, according to a recent study by the Telecommunications Market Commission.

This report, presented at Expopyme 2010, the Fifth Professional Trade Fair of Products and Services for SMEs, shows that 77% of Spanish overseas sales were made to the European Union, while 7.7% were purchases made from the United States, and 5% from Latin America.

In total, revenue from electronic channels over this period in Spain reached €1.67 billion, with the business areas reporting the greatest volume of electronic transactions being air transport (14.9%), travel agencies and tour operators (8.2%), direct marketing (7.5%), terrestrial travel (6.7%), betting and gaming (6.3%), artistic, sporting and recreational spectacles (5.7%), legal services, accounting and management (4.3%), education (2.6%), computers and IT programs (2.5%), and fashion (2.5%).