Current Affairs: 2011: The year when a lot happened

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: Inditex sales growth slows on warmer weather

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

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: Spain tops the European table for number of overqualified workers

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

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

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: Europe’s Financial Crisis, in Plain English

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: Rajoy sweeps to record victory in Spain

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: What's the matter with Spain?

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.

Finance&Economics: Eurozone crisis: The possible resolutions

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: Spain election campaigning starts

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

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: Eta declares halt to armed conflict

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

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Finance&Economics: Spain's No. 5 retail bank Banco Popular launched an all-share bid for its smaller rival Banco Pastor

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

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: Ex-Caja Directors Face Payout Investigation, Cinco Dias Reports

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: Spain nationalises three more savings banks

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

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 - Some controversial comments from a Market Trader about the economic crisis

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

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

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: Education: Young failed by system in need of structural adjustment

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.”