Europe has a bad night

Another night of poor European data, firstly with Spanish bank bad loans hitting yet another new record:

Spanish banks, awaiting the first payments from a 100 billion-euro ($127 billion) European credit line, saw bad loans hit a new high in September, new data showed on Monday.


Bank of Spain data showed banks’ bad loans stood at 10.7 percent of their outstanding portfolios in September, the highest level on record and up from 10.5 percent a month earlier.

Loans that fell into arrears increased by 3.5 billion euros from August, reaching 182.2 billion euros in September.

Given that nearly every metric in Spain is going the wrong way at present, including the Tinsa housing index, this really isn’t a surprise and there is no reason to suggest that yet another record won’t be set again when we get the reading for October. In response to the on-going crisis stemming from the collapse of the housing market the Spanish government looks to be coming up with some fairly desperate ideas in order to attempt to generate some demand:
Spain may offer automatic residency to foreigners such as Chinese and Russians who buy homes in the country, aiming to help the ruined housing market, a government official said Monday.

“We have proposed to the other ministries that for residents who acquire a home in Spain for more than 160,000 euros ($205,000), that will automatically entail a residency permit,” said junior trade minister Jaime Garcia-Legaz.

“We are thinking of markets such as the Russian and the Chinese ones,” he added, speaking at an economic gathering in comments broadcast by national television.

What can possibly go wrong?
Italian industrial orders also gave a poor reading, but given the PMI data, again this was no surprise:

Italian seasonally adjusted industrial orders fell 4.0 percent month-on-month in September, after a 0.6 percent increase in August, data showed on Monday.

September’s drop was the steepest since a 7.5 percent monthly decline in January.

Orders were down 12.8 percent in unadjusted year-on-year terms after a 9.0 percent fall the month before, national statistics office ISTAT reported.

Industrial sales fell a seasonally adjusted 4.2 percent month-on-month in September after a rise of 2.7 percent in August, and were down a work-day adjusted 5.4 percent year-on-year.

As the Italian economic data slowly deteriorates it appears that Mario Monti is losing his silver-lining with a recent poll showing his popularity as a technocratic leader has halved in a year and 62% of people polled were against him having a second term as the head of the government. As I stated in back in July, what happens after Mario Monti departs presents political risk to the rest of Europe and this is certainly a story to watch closely as we move into 2013.

Finally on the data front,  Euro area production in construction down by 1.4% and down by 1.8% in EU27.

In the meantime the procrastination over Greece, not to mention the EU budget, continues with conflicting reports of what it going to be decided, or not, today coming from the German camp:

German Finance Wolfgang Schaeuble reiterated his opposition to any haircut on Greek debt held by the public sector, speaking during a television interview on Sunday.

Schaeuble told German ARD public television that under national budget rules such a haircut would forbid the government to give any new loans to Greece or sign guarantees for loans given to the country.

“By the way, the European Central Bank, which is [Greece’s] main creditor is also categorically rejecting” a haircut on the Greek debt it is holding, he remarked.

Meanwhile Joerg Asmussen finally broke the truth in an interview on Sunday:
European Central Bank Executive Board member Joerg Asmussen said Sunday that Greece is likely to need a third bailout program, since expectations that the country can regain access to capital markets by 2015/2016 appear unrealistic.

Official creditors should agree next week on funding for Greece for 2013 and 2014 and address follow up funding at a later stage, the German Executive Board member said in an interview with German public broadcaster ZDF.

Both of these positions point to another ‘can kick’ but that is unlikely to satisfy the IMF which has made it clear recently that it wants a credible plan to lower Greece’s debt to something they consider sustainable by 2020. Greece is currently projected to have a debt of 190% of GDP in 2013 which means in order to reach 120% by 2020 they would need to be running high single digit surpluses or the next 8 years. For 2012 the deficit is likely to be around 7% so you can see just how ridiculous the current situation is.
The reality is, and has been for years, that ultimately all Greece’s creditors are going to have to pay more because the current policies of the Eurozone have always failed to address the issue of what to do about existing debts as internal devaluation lowers the nations ability to service them. But we’ve got 10 months until a German election and I am very doubtful that anyone in ruling German politics wants to speak that truth until after September 2013.
In breaking news. Moody’s has downgraded France from the AAA club, personally I’m surprised it took them so long.
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  1. That is hilarious! But at least they are admitting they want to use immigrants to prop up the housing market.

    • My question is, who in their right mind would want to become a Spanish citizen? Those who can afford it don’t need it, those who need it cannot afford it.

      • Handy for the Russian mafia to have a nice place to escape to from the Russian winter. Or to escape to permanently if you find a horse’s head in your bed.

      • Very expensive given the Euro is still the common currency, though local vendors are no doubt killing margins.

    • The far right moron luvvy hijack club

      Well when it becomes a competition for people, it will soon become a competition for which type of people?

      and where does this leave Australia – land of the bogan king?

      Yeah, Spain has very very major issues. But if you can work outside Spain (remotely) it means you can have an EU passport, live somewhere with a nice climate and nice food, and if they are looking to import Russian women then there is further upside.

  2. At least there is now a figure on how much it costs for a residency permit.
    Will be interesting to see if any of the other EU members undercut the Spanish and offer a residency permit for a cheaper price.

  3. I believe the US was also proposing a bill to give people residency who purchase a house.. not sure if it made it through though.

    If ever there was perfect example of a slow motion train wreck this has to be it.

    You can just see Van Rumpuy, Barosso, Merkel et all sitting playing their instruments with gusto as the Titanic begins to list…

  4. Geez I tell you what….. having seen how much dirt cheap housing there is in Spain I am inclined to cal them up and see if they will give residency to Australians who spend 160K EUR.

    May take the stings out of our housing driven recovery

        • I work remotely mate – as long as I can log into a computer somewhere I am fine. In fact Australia is at the least fine option end of the spectrum. Sometimes I need to fly somewhere, but nobody really gives a toss where they have to fly me from. Anywhere but Australia would be cheaper for clients too.

          • 🙂 You r the lucky one.. if you are working remotely all the time then I guess the world is your oyster.. why go to Spain, you could possible buy up in some nice small island.. you will be good to go! (albeit initial investment for setting up a proper dish/satellite based internet)

  5. Its 0230 and I’m in Barcelona, will be here for another 2 weeks. Last week I was in the French Riviera and I flew into Milan (driving).

    Whilst it is an awesome place and places visited, there is a volcano that is going to erupt. You can feel it.

    I do like 29Eur for a bottle of Macallan 12yo though and 80c a San Miguel and 3 Tapas plates, plus Paella and Sangria bucket for 12Eur. Bought a divine leather jacket today for 70Eur. Its deflating and there is trouble brewing.

    Hot Tip: DO NOT drive an Italian registered Mercedes into a big city with 50% youth unemployment. The grief I’ve had as a ‘target’ will require megabytes.

    • Local bar owner is an ex Goldman’s floor supe at the LIFFE. Gave up her job to have kids etc. Its all gone to shit. Rajoy is after the business owners, she paid 70c on the Eur in various taxes in the last 6 months. She is off to London today to beg for a job at GS. She is Swiss and speaks 6 languages and even had a trading desk in Sydney in the early decade gone.

      The local police are brutal to quell any insurrection. Interesting times. Gorgeous architecture, art, food etc.

      • I took a hol from MB anyway mate. I love reading your stuff – just don’t post. Can’t say I’m a fan of HnH’s pro currency interventions etc ala the mongeese at ANU etc but c’est la vie.

        The far right moron luvvy hijack club was (is) forcing every post into a government attack (not that I am a Jules fan).

        Even Turnbull is too ‘left’ for them. Its tedious reading.

        Anyway bars are still open at 0250 Au Revoir (my Catalan/Spanish c’est merde)!

      • TP, for you bucket list:

        You need to get onto a proper Autostrada/bahn/route etc and sit on 160kph (no limit in D’land, 140Italy, 130France, 120Spain) and see stuff just flash by. Unlike QLD people stay right (left in QLD)a lot of driving etiquette keeps it running.

        I was overtaken by a Vito van in early France and I was on cruise at 150kph. Near Perpignon I was on 190kph and a Golf went passed (Ferrari, Aston etc is a gimme).

        There are cameras in France but the trucks obscure them and the GPS tells you anyway.

        You have to do it. 1048km from Milan to Barcelona and lots of nice places to stop between.

        NO BOGAN UTES!!!

        • Good to see you enjoying Europe and its wonderful infrastructure. I always took our freeways for granted, never again.

          Shame about the crisis, I hope there’s still that “joie de vivre” for you to enjoy (Can’t imagine Europe giving up on that, even in times of crisis).

          It’s quite hard to explain the different take on life in Europe and Australia. Very bluntly put I found it comes down to Europeans gaining status by showing how much they enjoy life by going out, be social etc vs Australians gaining status by being seen as a battler and being hard working people, which is shown by accumulation of the property, the boat, etc. It’s more subtle than how I put it but the impact is quite striking.

          • Yeah AnonNL, someone once said to me 20 years ago that you could live in a rented one room apartment in Paris and if you could discuss the arts etc you would be held in high enough regard whilst in Sydney you needed to live somewhere with a harbour view and know about real estate to be popular at “dinner parties”,
            BTW what kind of tossers hold dinner parties now anyway…maybe Tinkler did but the party seems to be over now.
            Nothing wrong with a nice backyard gathering of friends and family with an Aldi inspired menu over the coming chrissy break.

        • The Utes I could live with.

          The boganisation of society is the issue.

          But just being able to have a decent and interesting discussion with people able to discuss things, and bring cultural issues up, chew politics over, without having the boganisation of the discussion would be an incentive.

          But Spain isnt far off blowing – and the Catalonia election could provide a nice catalyst.

  6. Yeah I was in Barcelona and Madrid in June this year.
    Whilst I loved the European experience..I will just dwell on some negative experiences I saw with my own eyes.
    When booking into Barcelona Hotel right there and then an American lady had a bag stolen. Then in Starbucks on La Rambla a young well dressed Spanish looking guy just picked up a tourists iphone from beside her coffee (she got it back). Later saw other attempted bag snatches on people by well dressed black guys. Lady who had her bag stolen went to police but not much english spoken and they could not help..they see it all the time. I did not like this vibe about Barcelona at all so spent a lot of time on the Red Bus tours.
    On the train from Barcelona to Madrid quite a few abandoned property developments. Shocked to see in Madrid so many young women that looked and dressed like office workers with flashy mobile phones but was informed that they are probably working as call girls etc.
    Yeah totally agree with Velociraptor that “Whilst it is an awesome place and places visited, there is a volcano that is going to erupt. You can feel it.” and yes there was a heavy riot police presence at any whiff of a demonstration, of which we saw a few small gatherings.
    Have a good one Velociraptor and stay safe.

    • Yeah the amount of robbery perpetrated against tourists in Europe is shocking. Australia is a relatively much safer place for tourists to walk around.

      • > Australia is a relatively much safer place for tourists to walk around.

        For now… When the going gets tough – the tough gets robberin’.

        I hope we’ll never have to use the concept of “mugger’s cash” … but we’ll see.

    • Shocked to see in Madrid so many young women that looked and dressed like office workers with flashy mobile phones but was informed that they are probably working as call girls etc.

      There’s a story that did the rounds in Canberra a few years ago about a foreign dignitary who was being driven in from the airport in the days just after smoking was banned in Commonwealth offices. He noticed all the addicts standing around outside the offices smoking, and asked the driver why we had so many prostitutes in Canberra.


    “So there we have it. What we have is a country where not only are people of working age leaving in growing numbers, whole regions may want to go. A country where deficit numbers have been flouted time and again while bank interventions have been consistently implemented using the principle of always try to do too little too late. The country suffers from what the ECB calls deep competitiveness problems, yet there is not a single proposal on the table at present which would do anything substantial to correct this.

    The pension system is spiraling quickly into a substantial structural imbalance, yet the government will hear nothing of any deep long-lasting pension reform.”

  8. Having been born in Scotland and have lived and worked in most European countries (Scandinavia excepted) I can say that the cultural diversity is second to none. I moved to Munich in 99 and the lifestyle beats pretty much anything. I wouldnt ever dream of living in UK again as its just not a safe or nice place any more.

    I have been in Syd now since Sep 2010 and my time is coming to an end, 6 months to be exact, its been an experience and I have seen a decent amount of the country, but its sad when you think that there isnt really anything that you would want to come back for. certainly not at the prices charged here!!!

    Europe is a disaster and I dont know what my chances will be of finding employment, but I have never had to look longer than 2 weeks to find a job in my area so I am optimistic.

    Am looking forward to get back to my house in the Bavarian mountains… looks a little like this one but with better view

    what does 550k get you in Sydney…

    • SMc you are leaving too soon, there is going to be a heap of stuff coming on the market next year, all of Tinkles goods and chattels, bogan 4×4 utes, bogan jetskis , a stack of stuff that the Obeid family need to sell to fund legals. Sydney is going to be like a big Bazaar next year.