crisis

BBVA will pay €1.187 billion to the Fund for Orderly Bank Restructuring (FROB) for the nationalised Catalan bank, beating the other two offers in the final phase of the auction process presented by Santander and Barcelona-based CaixaBank. This means that Spanish taxpayers will lose €11.84 billion considering guarantees and due to the fact that the Spanish Government injected €12.622 billion into Catalunya Banc since it was nationalised in 2011. Catalunya Banc was a private bank owned by CatalunyaCaixa, the merger of three historical Catalan savings banks (Catalunya, Tarragona and Manresa). It could not face the deep restructuring process required to meet the new banking regulations. The bank had a weak financial position resulting from a high exposition to toxic real estate and mortgages assets, as well as suffering from poor management. The BBVA will become the second largest bank operating in Catalonia, doubling its past position.

CatalunyaCaixa (CX) on Thursday confirmed the sale of its portfolio of high risk loans to US investment company Blackstone, consisting mainly of mortgages with a nominal value of €6.392 billion and provisions of €2.205 billion. The transaction involved the transfer of funds to a portfolio of asset-backed securities for an amount equal to its book value, €4.187 billion, with €3.615 billion supplied by Blackstone and Spain's public Fund for Orderly Bank Restructuring (FROB) providing the remaining 572 million. With this divestment, the CX solvency ratio stood at 14.9% and coverage stands at 81.6%. After this sale, the liquid assets of CX will reach €16.848 billion and the company is now ready to face its full privatisation, after it was nationalised in 2012.  In addition, Blackstone had already bought CX's real estate business in June in a €40 million operation.

The Catalan Government approved on Tuesday a measure to impose a tax on empty flats owned by financial institutions. The aim of the tax is to incentivise banks to rent out the empty homes. Santi Vila, the Catalan Minister for Planning and Sustainability, said that the "mere announcement" of the tax has already caused Sareb [Spain's public 'bad bank'], Catalunya Caixa and Bankia to yield to the Government 1,230 apartments for social rent. During the press conference after the weekly Cabinet meeting, Vila pointed out that the new tax will not apply to individuals and will only be intended for flats that have been taken out of the market for more than two years. The Minister also said that the measure is not simply about "tax collection" but is instead to ease the access to housing market in the midst of a housing crisis.

''The recovery has come and has come to stay,'' according to Salvador Guillermo, Director of the Economy of Catalonia's main association of business-owners, Foment del Treball. Guillermo, who coordinated the report published on Tuesday, said that the analysis of economic data confirms that the positive trends have been occurring a month earlier in Catalonia than in the rest of Spain, "which means that recovery is more entrenched'' in Catalonia. The agents of this recovery are internal demand (consumption and investment) and the fast pace of exports in Catalonia.

Throughout this week the Fira de Barcelona's Montjuic exhibition venue in the Catalan capital is transformed into a business fair for start-ups and entrepreneurs. The BizBarcelona event takes place on Wednesday the 4^th and Thursday the 5^th of June and is the second edition of this innovative business fair. The event serves several purposes and contains as many as six different areas including e-commerce, the financial markets, exports, franchises, business consulting as well as cooperation and networking. The event offers various opportunities for established and future entrepreneurs. BizBarcelona is a welcome initiative. First quarter financial reports revealed a decrease in bankruptcy proceedings, and with a high unemployment rate in Catalonia and Spain it is hoped that these new companies can create jobs.

The Catalan economy grew by 0.4% in the first quarter of 2014, which means that GDP has been increasing for the last 4 consecutive quarters, leaving recession far behind, according to an early estimate published on Monday by Catalonia’s Statistics Institute (Idescat) and the Catalan Ministry of the Economy and Knowledge. Furthermore, between March 2013 and March 2014, Catalonia’s economy grew by 0.8%. In the second quarter of 2013 it registered a quarterly growth of 0.1%; in the third it also posted a 0.1% quarterly growth; between October and December, it increased by 0,2%; and now, between January and March, it grew by 0.4%. The services sector has been the main engine behind this positive trend; in the last 12 months it grew by 1.4%.

The Barcelona-based bank, which was totally nationalised in December 2012 and received a €9.08 billion bailout, has made profits of €532.2 million in 2013, which would represent €167.8 million without the extraordinary profits. In 2012, CatalunyaCaixa posted losses of €11.86 billion. In 2013, the operational costs were reduced by 13.1%, having drastically reduced the number of employees and branches. The bank's capital ratio is now 14.36% and the main capital following Basel III criteria reached 12.3%, which represents liquidity of €15.01 billion. With these figures, the Spanish Government is in a better position to sell CatalunyaCaixa, which forecasts profits also for 2014. This company was the result of merging the banking business of 3 savings banks in 2011: Caixa Catalunya, Caixa Tarragona and Caixa Manresa, which disappeared after a long tradition of social work. The operation was part of Spain's restructuring of the banking sector.

On Wednesday evening the main Catalan small- and medium-sized enterprises association, Pimec, organised a protest conference in which they accused the Spanish and Catalan Governments of politically and financially "discriminating" against them. With the slogan #diguemprou (#wesayenough) 1,400 owners of SMEs and self-employed workers protested against both Governments for not taking SMEs into account and only working for the interests of large corporations. The protest was explicitly backed by 220 guilds and associations, as well as by 9 professional associations and that of self-employed workers. The event issued a manifesto compiling a list of grievances, split into 7 different areas: entrepreneurship; loans and funding; taxation; labour market; energy; training and employment; and internationalisation.

The Catalan Parliament held on Wednesday a monographic session on poverty, which has increased over the past few years, spurred by the financial crisis. According to a report published by the Red Cross this week, there are 200,000 families in Catalonia which live below the poverty line and since the crisis started, 88 Catalans a day have crossed such a line. With a population of some 7.5 million and a GDP per capita of around €28,000 (similar to the UK's) Catalonia posts a 22.3% unemployment rate and a 26.4% child poverty rate. Opposition parties asked for greater efforts and further measures to fight the poverty increase. The Catalan Government emphasised budget figures and detailed several actions in different areas to show they are tackling the issue. In this vein, the Executive criticised that child poverty stood at 22% in 2006, in prosperity years. Furthermore, they complained about the limited fiscal powers on taxation and public deficit, which seriously reduce spending possibilities.

On Tuesday the Barcelona-based bank, which is the largest financial entity within the Spanish market, attracted a strong €2.6 billion demand, 88% of which came from international investors. It was CaixaBank's 10-year mortgage covered bond first issue since 2007, before the financial crisis. The operation will boost the Catalan bank's liquidity position, which stood at €60.762 billion at year-end 2013, 17.9% of its total assets. In addition, it satisfies demand from institutional investors for this product. The issue price was 80 basis points over the mid-swap rate and better than expected thanks to strong investor demand. This means CaixaBank sold the mortgage covered bonds at an interest rate of 2.625%, 67 basis points below the last rate for a similar issue by the Spanish Treasury.

The Catalan Minister for Territory and Sustainability, Santi Vila, who is also in charge of housing policies, presented on Tuesday the draft of a new tax bill on empty flats and houses owned by financial institutions in Catalonia. During a press conference, Vila explained that such a tax is looking to be an “incentive” for banks to make available their 15,000 flats spread across 70 municipalities with “proven demand” for housing, mainly around Barcelona, Tarragona, Lleida and Girona, and which have been empty for more than 2 years without a justified cause. The amount of the tax will be based on the total number of square meters owned by the banks and will include significant accumulative bonuses if the institutions decide to rent their properties, notably for social housing. The Catalan Government estimates that banks own around 40,000 empty flats, including in areas with housing demand.

The Catalan economy has continued on a positive trend during the fourth quarter of 2013, also speeding up the recovery process. According to data released on Friday by the Catalan Ministry of Economy and Knowledge alongside the Catalan Institute of Statistics (Idescat), Catalonia’s GDP grew by 0.4% in the fourth quarter of 2013, while the Spanish average stood at 0.3%. In the whole year, the Catalan GDP has decreased by 0.6 %, while in 2012 it dropped by 1.3%. The continued good results in exports due to the increasing external demand and the improvement of the domestic demand have driven the economy forward.

Housing prices increased by 0.8% in Catalonia during the third quarter of 2013, which is the first quarterly increase in the last three years. However, despite the positive figures, in annual terms prices at the end of September were 8.1% lower than those registered 12 months ago, due to the price falls registered in the second half of 2012 and the first 6 months of 2013. Between July and September 2013, prices of newly-built flats and houses in Catalonia rose by 5.7%, while those of second-hand housing were still decreasing (-0.3%). However, overall figures suggest that the real estate market may have reached the bottom and that its recovery might be about to start. In the whole of Spain, housing prices rose by 0.7% in the third quarter of 2013.

The Catalan Government wants energy companies not to cut off the domestic power supply to people in financial difficulties who are temporarily unable to pay their bills. The Catalan Ministry of Business and Employment aims to fight so-called ‘energy poverty’: people who are obliged to do without electricity or gas because they simply cannot afford the bills. In the current economic crisis, thousands of Catalan households (around 20%) are facing this problem, which means they cannot use the heating during winter or they have problems cooking meals. In order to achieve this objective, the Catalan Executive is looking at modifying Catalonia’s Consumption Code to include this initiative fighting ‘energy poverty’.

The President of the Catalan Government, Artur Mas, replied that “nobody believes” in the “apocalyptic” message sent by the Governor of the Bank of Spain, who was appointed by the current Spanish Government in 2012. Mas asked Luís María Linde for “caution” and “to serve the whole of Spain and do not take sides”. Linde stated in Madrid that “independence is unviable”. He argued that the European Central Bank only funds Member States and thus Catalonia would be “obliged to issue its own currency” and have “its own banking supervisor”. On the same day, the Spanish Finance Minister, Cristóbal Montoro, said that if Catalonia were independent it would have “to abandon the Euro” and this could even lead to putting the entire Eurozone at risk. However, in September the European Commission confirmed that an independent Catalonia could continue to use the Euro in different scenarios.