Nine Million International Tourists Hit Spain in Q1

Spain received 9 million international tourists in the first three months of the year, according to figures drawn up by the Ministry of Industry, Tourism and Trade and published by the Frontur opinion poll. This represents an increase of 2.9% over the same period last year.
This increase is nearly ten times higher than the 0.3% registered in the first quarter of 2010. Particularly noticeable, were the increases in tourists from the Netherlands (22.3%), Belgium (20%), Switzerland (14.8%), Scandinavia (11.7%) and Italy (10.9%).

However, the UK remained Spain’s number one market, with 1.8 million tourists (albeit a decrease of 4.8% from 2010), followed by Germany with 1.47 million (3.7% less), and France with 1.2 million (2.7% more than last year).

In March, international tourist arrivals rose 0.6% to 3.5 million passengers, the Ministry said, recalling that last year’s Easter Week (Semana Santa) began in this month.


Canary Islands Most Popular

The Canary Islands was the main destination for 30.6%, or 2.7 million of all international tourists in the first quarter, representing an increase of 15.2% over the same period last year.
This was followed by Catalonia, with just over two million tourists, or 22.9% of all arrivals, but still a decrease of 1.1% over the first quarter of 2010.

Andalusia, in third place, accounted for 13.6% of arrivals, or 1.23 million passengers, and 0.9% less than last year.

The autonomous region of Madrid received 894,628 tourists, a 0.1% increase, while Valencia recorded an increase of 3%, to 825,403 tourists.
In contrast, the Balearic Islands, with 511,112 tourists, registered a decrease of 11.8%.


Getting to Spain

Most travellers (79.9%) chose to fly to Spain, which was 3.4% more than in the first quarter from the same period of 2010, while tourists travelling by road increased by 1.3% to 17.4%. Tourists choosing other modes of transport, e.g. train or boat, fell by 0.6%.
In choosing accommodation, 63% of tourists opted for staying in hotels, which represented an increase of 2.3%. The hotel trade registered an increase of 4.9% in reservations, and the use of privately owned or family homes fell by 0.5%.

Finally, when organising their trip, 69.9% of tourists chose to come to Spain without booking a package tour, a 3.8% increase on last year, and the remainder who did book a package tour, translates to an increase of 1.7% over the same period of 2010.

Spain Ups Efforts to Address Unemployment

Spain is redoubling its efforts to lower the country’s chronically high unemployment rate and labor costs this month, under intense pressure from the European Union and international investors.

The reform received new impetus from an EU agreement last week on measures to boost employment, competitiveness and budget discipline among euro-zone countries. Germany had demanded the measures—which it sees as a way to address some of the root causes of the euro zone’s sovereign-debt crisis—in exchange for its support to expand the size and scope of the region’s bailout facility.

Spanish Prime Minister José Luis Rodriguez Zapatero, who presides over the euro zone’s largest troubled economy, has promised to overhaul a wage bargaining system that makes it easier to lay off workers than adjust their wages in an economic downturn. The government has given unions and business leaders until Friday to agree on changes, though it has indicated it could give them a bit more time before it legislates without them. The overhaul is the second part of a reform of labor laws that last year lowered Spain’s high dismissal costs, which economists viewed as a powerful disincentive for hiring.

“We have done a labor-market reform, which was positive, but insufficient,” said Salvador del Rey, partner at law firm Cuatrecasas, Goncalves Pereira. “If there are no changes, the reform will not be too useful.”

At more than 20% and rising, Spain’s unemployment rate is far and away the highest in the developed world. In addition, economists say, the country’s rigid wage bargaining system has contributed to one of Europe’s highest labor-costs growth rates, undermining the competitiveness of Spanish industry.

Collective wage bargaining agreements, many of them indexed to inflation, locked Spanish companies into healthy salary increases even during the depths of the economic crisis. In 2009, Spanish gross domestic product contracted by 3.7% and the economy shed 1.4 million jobs. But wages negotiated by collective wage bargaining agreements— which cover about half of the work force and influence the other half— rose by 2.3%.

“The lack of sensitivity to labor-market conditions is one of the reasons why in Spain the adjustment in the use of labor during the recession has occurred mainly via job cuts,” said Citigroup economist Giadi Giani.

To address this problem, unions and business leaders are discussing ways to limit the automatic renewal of existing wage deals if the two parties fail to reach agreement on a new one, thus avoiding situations in which wages are governed by agreements that originated in a period of very different economic circumstances. One solution could be to call in third-party arbitration to help hammer out a new deal when talks break down.

Similarly, talks are exploring new ways to adapt wage deals to changes in inflation, economic growth or a company’s individual prospects. Last week’s EU agreement calls on countries to “review” the practice of indexing salaries to inflation, which critics say boost inflationary pressures and undermine the competitiveness of economies where they are used. Spanish government officials have said Spain’s reform won’t likely eliminate the inflation indexation but will look for ways to improve links between salaries and company profitability. One way could be greater use of variable compensation schemes.

Finally, the talks will explore ways of better adapting wage deals to the needs of individual companies, by, for example, making it easier for them to opt out of industry- or province-level agreements. “We need to adapt our regulations to the needs of those who best know [market] conditions and are best able to respond to them,” said Pedro Ramirez, head of legal and labor issues for Spanish car manufacturer Seat SA, a unit of Germany’s Volkswagen AG.

Lost city of Atlantis, swamped by tsunami, may be found in Southern Spain

Lost City of Atlantis Found on Google Earth

A U.S.-led research team may have finally located the lost city of Atlantis, the legendary metropolis believed swamped by a tsunami thousands of years ago in mud flats in southern Spain.

"This is the power of tsunamis," head researcher Richard Freund told Reuters.

"It is just so hard to understand that it can wipe out 60 miles inland, and that's pretty much what we're talking about," said Freund, a University of Hartford, Connecticut, professor who lead an international team searching for the true site of Atlantis.

To solve the age-old mystery, the team used a satellite photo of a suspected submerged city to find the site just north of Cadiz, Spain. There, buried in the vast marshlands of the Dona Ana Park, they believe that they pinpointed the ancient, multi-ringed dominion known as Atlantis.

The team of archeologists and geologists in 2009 and 2010 used a combination of deep-ground radar, digital mapping, and underwater technology to survey the site.

Freund's discovery in central Spain of a strange series of "memorial cities," built in Atlantis' image by its refugees after the city's likely destruction by a tsunami, gave researchers added proof and confidence, he said.

Atlantis residents who did not perish in the tsunami fled inland and built new cities there, he added.

The team's findings will be unveiled on Sunday in "Finding Atlantis," a new National Geographic Channel special.

While it is hard to know with certainty that the site in Spain in Atlantis, Freund said the "twist" of finding the memorial cities makes him confident Atlantis was buried in the mud flats on Spain's southern coast.

"We found something that no one else has ever seen before, which gives it a layer of credibility, especially for archeology, that makes a lot more sense," Freund said.

Greek philosopher Plato wrote about Atlantis some 2,600 years ago, describing it as "an island situated in front of the straits which are by you called the Pillars of Hercules," as the Straits of Gibraltar were known in antiquity. Using Plato's detailed account of Atlantis as a map, searches have focused on the Mediterranean and Atlantic as the best possible sites for the city.

Tsunamis in the region have been documented for centuries, Freund says. One of the largest was a reported 10-story tidal wave that slammed Lisbon in November, 1755.

Debate about whether Atlantis truly existed has lasted for thousands of years. Plato's "dialogues" from around 360 B.C. are the only known historical sources of information about the iconic city. Plato said the island he called Atlantis "in a single day and night... disappeared into the depths of the sea."

Experts plan further excavations are planned at the site where they believe Atlantis is located and at the mysterious "cities" in central Spain 150 miles away to more closely study geological formations and to date artifacts

Spain airport unions close to calling off strike

Spanish airport operator AENA and unions reached a preliminary agreement to call off 22 days of strike action between April and August, AENA said on Wednesday, averting disruption during peak holiday season.

The agreement takes on board unions' concerns over labour conditions and job security for the state airport operator's nearly 13,000 staff in the face of a planned government privatisation, union representatives told national radio.

"The agreement was reached after nearly 20 hours of talks," AENA said in a press release, noting the accord still had to be voted on by workers.

Prime Minister Jose Luis Rodriguez Zapatero said the agreement meant airports would work at normal capacity during the Easter and summer holiday periods.

Around 77 percent of tourists arrive in Spain via air travel, bringing more than 190 million passengers through Spanish airports every year, he said.

However, one analyst expressed caution on the provisional agreement.

"We welcome this announcement, albeit we stress that it is a pre-agreement that needs to be confirmed by workers in a poll," said Eduardo Coelho, analyst at broker BPI.

Spain said in December it wanted to partially privatise the state airport operator, which it says could be worth up to 30 billion euros, alongside its state lottery as part of plans to reduce the national debt.

Air traffic controller strikes in early December stranded thousands of passengers and caused chaos at Spanish airports.

TINSA March House Prices Report

TINSA has a new Spanish house price report available today. 

The accompanying TINSA press release summarises this report as House prices barely change between January and February, softening the year-on-year variation.

Following the strong correction at the start of the year, the General IMIE figures remained similar to January, softening the year-on-year decline to 4.5%. The accumulated decline since the peak continues to be around 19.5%.

Following 2010, which was subject to major changes in taxation that have significantly affected the performance of the market, new factors have emerged that will dominate the market in the coming months, such as the rise in inflation and the increase in mortgage interest rates.
The former could produce a marked fall in house prices in real terms, following a period of static or a modest decreases in the nominal values of properties. On the other hand, an increase in interest rates will make it harder for families to buy a home or simply to continue paying their mortgage taken out at the time of initial purchase.

Returning to the year-on-year declines by area, the evolution was once again divergent. The municipalities on the Mediterranean Coast continue to have the highest falls with 6.7%, although this figure was higher in January at 8.4%.

However the level of the coastal index, in line with the general index, hardly changed compared to the previous month maintaining its level at 1885 points. This region was followed by Metropolitan Areas with a fall of 5.4% and Capital and Major Cities with a figure of 5.2%.

The year-on-year decline increased in the case of the former but slowed in the latter.
As usual, Other Municipalities was below the average with a fall of 3.3% while the Balearic and Canary Islands index recorded a modest decline of 0.8%, substantially less than the year-on-year figure for January. However in both areas the monthly variation barely moved, remaining at similar levels to the previous month.

With regard to the accumulated declines since the peak, the Mediterranean Coast continues to be record the highest falls, stabilising at 27.2%. It is followed by Metropolitan Areas with an overall decline of 20.7%, followed very closely by Capitals and Major Cities with 20.6%.
The Balearic and Canary Islands were well below 20% with a figure of 17.5% and Other Municipalities not included in the previous section ended the month with 16.1%.

Barclays Announce Closure of 100 Spanish Branches

Barclays is poised to cut its Spanish retail banking network by a fifth in the first concrete sign of the rationalisation of the group’s operations announced last month by Bob Diamond, its new chief executive.

According to people briefed on the exercise, the project is being driven by Jaime Echegoyen, the new head of Barclays Spain, poached last month from local rival Bankinter , where he was chief executive.

The plan, which is said to be well advanced, would see Barclays close more than 100 of its 600 branches. The bank’s Spanish operations represent one of its biggest networks outside the UK.

Mr Diamond said last month, when announcing Barclays’ annual results, that a third of the group was not pulling its weight, and would be restructured.

The biggest problem areas are the retail and corporate businesses in western Europe. Corporate loan impairments in Spain more than trebled to £900m last year, due largely to soured lending to property developers in the troubled real estate market.

But the news on the Spanish restructuring is still somewhat surprising, given Mr Diamond’s suggestion that Spain could be an attractive growth market.
It was “not a time to exit Spain”, he said, adding that the bank could pursue consolidation opportunities there, perhaps by buying up some of the distressed regional savings banks, known as cajas.

A Barclays insider said: “This doesn’t change the fact that we are committed to Spain and we have a strong franchise there.”

Among Mr Diamond’s other restructuring priorities is a drive to make more of the bank’s presence in Africa. He embarked recently on a two-week tour of the continent.

Moody's Cuts Spain's Rating to Aa2 with a Negative Outlook

Spain’s credit rating was cut to Aa2 by Moody’s Investors Service, which said the cost of shoring up the banking industry will eclipse government estimates. The euro fell and Spanish bond yields rose

Spain, which used to hold top-notch triple A ratings from all the main rating agencies, saw its ratings cut one grade to Aa2 by Moody’s Investor Service. The agency warned that the eventual cost of restructuring the banks will exceed the government’s current assumptions of €20bn. Moody’s said the costs could rise to as high as €50bn.

Moody’s said: “There is a meaningful risk that the eventual cost of the recapitalisation effort could considerably exceed the government’s current projections.

Spain will spend as much as 50 billion euros ($69 billion) shoring up savings banks, Moody’s forecast, more than double the 20 billion-euro price set by the government. The risks to government finances remain “skewed to the downside,” the company said in a statement today. The outlook is “negative,” suggesting more rating cuts are under consideration. As Spain tries to convince investors that struggling savings banks won’t overburden its public finances, European leaders have set a March 25 deadline to approve a package of measures to end the sovereign debt crisis. The Bank of Spain is due to announce today the capital shortfalls of lenders.

“The crisis in the euro region is going to take a long time to resolve, and the rating downgrade of Spain is a reflection of that,” said John Stopford, head of fixed income at Investec Asset Management in London, which manages about $80 billion. “Any expectation that meetings in March are going to lead to a quick solution is a bit naïve.”

The gap between Spanish and German borrowing costs widened 9 basis points today to 231 basis points, the highest in five weeks as the yield on 10-year notes rose 3 basis points to 5.50 percent. The euro slid 0.6 percent to $1.3825 as of 7:18 a.m. in London. Moody’s had put Spain’s rating on review on Dec. 15, after lowering its credit grade to Aa1 from Aaa in September. Fitch Ratings, which calls Spain AA+, changed the outlook to “negative” on March 4. Standard & Poor’s rates the nation AA, after stripping it of its top AAA grade in January 2009.

Moody's Downgrades Ratings of four regions in Spain

Moody’s Investors Services on Friday downgraded the credit ratings of the Spanish regions Castilla-La Mancha, Catalonia, Valencia and Murcia after they failed to meet the target set by the central government for reducing their budget deficits last year. The move comes a day after the agency downgraded Spain’s sovereign ratings by a notch, citing the costs of the recapitalization of the banking sector and the problems the country’s regions face in reducing the shortfall in their finances.

Castilla-La Mancha’s longterm issuer and debt ratings were cut to A2 from A1, Catalonia’s to A3 from A2, Murcia’s to A1 from Aa3 and Valencia’s to A2 from A1. The agency said the downgrades reflect the “wide deviations registered by these regions from the deficit limits set for 2010 and the subsequent difficulties Moody’s anticipates they will encounter in controlling their deficit and debt projections in 2011-12.” It said the budget forecasts of the four regions over the past few years had also been “unreliable.”