A good time for writing-down Spanish property

I've remarked on here before on the phenomenon of the Open Market Value (OMV) of mortgaged Spanish property being somewhere around half the bank asset valuation. Some of those still seeking a home in the Sun are confused by the same thing; 

I am wondering if anyone here has any ideas on the current situation of spanish banks valuing property sales at pre-2007 levels for their accounts but - at the same time - permitting sales with vendors at a far lower price. I have been looking at two separate properties in N. Costa Blanca. I can settle either in cash but in both cases the vendors are underwater after the sale by around 50%. So the sale can occur - though not for cash, only via 100% mortgage - but then I am informed that the 'bank valuation' is nearly 50% higher. Is this a common practice in Spain?

Part of the reason is that Spanish banks are restricted by law to lending not more than 80% of the asset value (the 'valor tasacion') and that should the asset fall in value after the loan is made, at any time during the term of the mortgage, the bank can require the borrower to pay the difference. In the case above, it looks like the bank is trying to 'lock in' a wealthy buyer at an artificially high valuation that would allow it to re-value subsequently and require the buyer to pay the difference. Wholly immoral and akin to legalised thievery, but since when in recent years have the banks been otherwise? 

With Spanish 10-year bond yields down this week low enough to allow a breathing space, there is huge pressure to take advantage of this honeymoon with the markets to recapitalise Spanish banks; it's also the best opportunity they'll have to correct the banks' asset valuations. From 1st September all Spanish banks have been regulated and controlled with absolute authority by the government and the Bank of Spain. Part of the rescue plan being overseen by the FROB or Orderly Bank Restructuring Fund is to buy the negative assets of struggling banks and transfer ownership to a newly created 'bad bank'. But how to value them? Too low a valuation will still leave the banks struggling, too high will increase public debt. Spain has therefore agreed with the EU to use a set of valuations derived by US-owned consultancy Oliver Wyman. 

Oliver Wyman is due to present the valuation set on 24th September to the Economic Ministry, Bank of Spain, European Commission, ECB and IMF. If all goes well, the valuation basis will be made public by the end of the month. When adopted it is hoped it will help get the Spanish property market moving again.

Am I being unduly cynical in predicting that the result will be to value Spanish property asset transfer price at exactly 125% of outstanding debt? Hmmmm.

Eurocarts overturned

It was perhaps easy for Snr. Barroso to be so confident in his call for a new federal Europe; he's not facing election. Appointed by the Council, he will stay as President until September 2014 - a period of the most profound change in Europe. For national political parties and governments across Europe, support for Federalism could be political suicide. The UK's disillusionment with the traditional parties in power is not unique; across Europe voters are dissatisfied with an established political system that has failed them badly. The spectre of the 'No' votes to Lisbon from French and Dutch referenda in 2005 hangs heavily over Brussels, and the prospect of paying for a third bailout for Greece, which has only met 22% of its austerity targets, will only polarise more national voters against the obligations of Federalism. 

Der Spiegel carries two unlinked pieces; one is a continuing series of articles on the impoverishment of Germany's younger generation, unable to accumulate wealth even with that nation's current economic advantages. The other is a candid admission from economist Thomas Straubhaar that ESM is explicitly redistributionist; "In general, it means that we will have to accept the idea of more redistribution -- and, of course, that means redistribution from the top down. Germany is a very prosperous economy in Europe, and a share of that prosperity will be redistributed to comparatively poorer European regions." Barrose assumes that Germany, already a well-established redistributive federation, will go happily into a larger Federation. Perhaps he should not be so sure. 

The prospect that our next election in 2015 will be dominated by Europe is growing, to the great discomfort of both Cameron and Miliband. Both will be asking how a pro-Europe or Eurosceptic stance will affect their electoral prospects, and both will be united in wanting to avoid a referendum before the election, for which they must show their hands fully, but Europe's timetable may not permit them this convenience. Again, if a third Greek bailout means an additional UK contribution to the IMF, at a time when our own austerity measures really start to bite, British voters will be driven more firmly into the anti camp.

Centre-right French daily Le Figaro predicts what we already suspect; that "Europeans turn up their noses at the institutions of the EU, responsible for all the ills of the debt crisis and the Euro. For most of them, there is no question of transferring more powers to Brussels. But behind their backs, almost surreptitiously, their leaders are quietly moving to implement Federalism."

So far Brussels has moved rapidly towards Federal union by effectively ignoring Europe's 500m voters. Whether it can take this next, giant, step while continuing to do so is the crunch question. As Richard North says, there's now everything to play for - and much will depend on how the media, mainstream and social, keep European issues in the public mind, contrary to the policy of a Parliament and establishment who would seek to banish it from popular thought. 

Hillsborough - shocking and damning

There is a scene in 'Life on Mars', in which the character played by John Simm wakes to find himself back in 1973, that involves the attendance of an emergency ambulance at the scene of a shooting. The ambulance is just a sort of clean fruiterer's van with a blue light, and the ambulancemen are dressed in tunics and peaked caps, looking rather like RAF national servicemen. The gunshot victim is placed on a stretcher, covered in a red blanket and bundled into the back of the van to be rushed to hospital. No attempt is made to administer any treatment. 

In reading the evidence relating to the failures of the South Yorkshire Metropolitan Ambulance Service at Hillsborough I tried to recall how ambulances operated in 1989; were they crewed by paramedics, as now, skilled in resuscitation and re-starting stopped hearts? Did they rig intravenous drips, administer opiates? Were they equipped with oxygen and skilled in tracheal intubation? I can't recall, but I suspect the reality lies somewhere between 1973 and the highly skilled and well equipped response of today. That some of the 41 who may have lived were actually killed by being positioned on their backs, allowing them to choke, is shocking enough. That ambulance service bosses distorted, omitted, misrepresented and suppressed compelling evidence against the service by their own staff is damning. The Coroner's foolish finding also protected the service. And if the evidence against the ambulance service reveals the stench of an unprecedented official whitewash, that against the police is greater by a force of magnitude. 

I don't need the help of a TV series to remember the condition of South Yorkshire Police in 1989. I'd been working close to Doncaster during the miners' strike, and know well the bitter and lasting fissures in trust and attitude that were the legacy of that time. In 1989 the wounds were still raw. The police were still in thug-mode, regarding crowds as things to be bludgeoned and clubbed into obedience, defenders of Thatcher's revolution. The Poll Tax riots were just on the horizon. The State was under threat. That the most senior local police officers lied, lied and lied again to cover up their failings is hardly astonishing, and neither is the extent to which the establishment and the State connived in the whitewash;

• Local Tory MP Irvine Patrick, who spread poisonous lies 
• Thatcher, who played down the Taylor Report
• Blair, who blocked a new investigation in 1997
• Lord Justice Stuart-Smith, who ruled that there were no grounds for a new inquest 

Add to these public names the faceless bureaucrats at the Home Office, the mandarins who were also closely involved in supporting and maintaining the cover up, the lies and the whitewash. Note also the careful way in which public anger is being channelled against the local culprits - leaving Whitehall and Westminster with clean hands. This is the whitewashing of the whitewash. 

And this, I think, is why saccharine Dave at his most Blairite, a man most remote from the families of the victims, was picked to pour his oil on the findings, rather than the locally trusted and respected Bishop of Liverpool, who headed the enquiry. The establishment will now control the fallout, and a few retired Yorkshire coppers will go to jail. Job done. 

NB For a challengingly different perspective, I recommend Anna Raccoon's piece on this - it's truly excellent 

ESM is here. Almost.

Like anything to do with the EU, the coming into force of the ESM pact is not exactly simple. Each nation must first ratify the pact to the point of assent from its Head of State, and then each nation must formally notify the Council of the European Union of this ratification. So there may be some confusion between my statement below that 3 nations have yet to sign-up (Germany, Italy and Estonia) and the statement in today's Der Spiegel report on the Constitutional Court's decision that only Germany is left. 

The official record of the Council HERE quite rightly shows three gaps for the missing nations. Italy granted Presidential assent on 23rd July and Estonia yesterday - but neither has yet notified the Council formally. Germany of course has yet to grant Presidential consent - but this is now a formality. As soon as both Italy and Germany notify, the pact can come into force. ESM is here.

Is 'bigot' the new 'racist'?

You will recall the time, just recently passed, when even the mildest, most inoffensively and neutrally phrased criticism of immigration on the web would earn the hostility of a spitefully hissed 'racist!' . It was impossible at one time to engage in sensible debate on the subject. An accusation of racism, so easy and casually made against so many, was the scoundrel's means of avoiding arguing the facts. It was only when Labour party HQ realised that 80% of their own party members would have to be labelled as 'racists' that the first senior figures in the party started to admit in public that they'd got it wrong on immigration. And as I've said before, Gordon Brown put the lid on it when he spat the word 'bigot' at Gillian Duffy. He would have preferred the conventional 'racist' I'm certain, but she'd carefully phrased her question to be about East European immigrants.

And so to young Clegg, a politician so emotionally immature that he claimed in an interview with GQ magazine to have had intercourse with up to thirty different women and described his sexual prowess with the false modesty of the cad: "I don't think I am particularly brilliant or particularly bad," he said. The interview was important; it revealed Clegg as a moral relativist, a man who regarded sexual intercourse as an aerobic activity without deeper meaning or impact, to be engaged in casually and at will and even with relative strangers. The emotional immaturity of the young on moral issues is hardly unusual; many of us will have passed through such a stage in our youth, but to seek to play a part in national politics and still to cling to these puerile and jejune misjudgements is to expose oneself to the sort of public contempt and ridicule of which Clegg is now justly in receipt.

Clegg's use of the 'bigot' word is demonstrative of an unsophisticated credulity typical of some callow lad still fascinated with his own membrum virile. He can martial no more sophisticated argument against those who seek to preserve a moral framework in our society. Like the hissing juveniles with their 'racist!' spits, it is a response of desperation, not of mature political dialogue.

Sturm und Drang

So far only 3 of the 17 Eurozone nations haven't signed the ESM pact; Germany, Italy and Estonia. Germany's constitutional court is set to deliver it's ruling tomorrow on the legality of such a move. Will it block it?
Unlikely. It will probably make some minor restrictions that Merkel's government can overcome

Isn't the ESM just the ECB in another guise?
Yes. It's the evil Edward Hyde to the ECB's good Docter Jekyll, able to do stuff the ECB isn't allowed to under the treaties, like buy government bonds directly, lend to national governments without limit, and to bail out bust banks. When its 'own' €700bn runs out it can borrow more from, er, the ECB and other banks and capital markets

Where would the ECB get the money from? It's already holding an undisclosed liability of junk bonds (some say in contravention of article 123) and iffy Southern government securities against loans
Print it, silly. That's how the ECB's paying for the junk bonds anyway.

What if the ESM's national borrowers can't repay their loans? Who's liable?
All 17 members of the ESM are jointly and severally liable for losses. If some of the 17 are bankrupt, the others pick up the tab with additional contributions

Isn't this just a formula for moving wealth from Germany and the sound Northern nations to the bankrupt and improvident South?
Of course. German workers will be paying for Spanish social security payments; that's what economic union means, silly

Won't it be inflationary?
Yup. Particularly if the ECB prints more money. And the Euro will fall in value, making exports more competitive but making imports such as oil and gas much more expensive. So the poor Germans may end up shivering in Winter to keep the Algarve going.  

Don't the German voters have a say in this?
Now you're being really silly.

If Cameron is unprincipled, what's Boris?

Cameron has quite rightly been castigated for his lack of a defining vision, a core idea that drives the policy of government. He wanted to become Prime Minister, we are told, not to leave a legacy of change, not to improve the lot of Britons, not with the passion to correct social and economic wrongs, but because he thought he would be rather good at it. Don Porter, quoted in the Mail, writes "There has been an almost evangelical focus on the “modernisation” or “detoxification” of the Conservative brand. The result is a growing disconnect between the party leadership and the grassroots, and a loss of clarity, principle and policy direction." and Carswell says much the same: "They can reshuffle the personnel all they want, but it is a lack of ideas that is the problem.". If Margaret Thatcher was the Captain Mainwaring of British politics then Cameron is the Sergeant Wilson. 

If given the choice of a boozy lunch with Cameron or Boris, the stampede would be for BoJo's table. Affable, self-deprecating, with a stock of unpublishable anecdotes and brighter by far than the Witney boy, a move is being mooted to allow Boris to challenge Cameron for the leadership in advance of the 2015 election. But if Cameron is unprincipled, what's Boris? His mayoral campaigns were founded on either 'Vote for me - I'm not Ken' or 'Vote for me - I'm a good bloke'. A serial adulterer, women voters nevertheless seem more tolerant of a fumbled grope from Boris than Cameron's cold chaste reptilian fingers on their bustier, and even Labour supporters are prepared to vote for a Mayor with five-star charisma and Big Hair. But this isn't enough to make a Prime Ministerial candidate worth supporting. In London, Boris' big ideas have been as absent as Cameron's - notwithstanding Boris Island. Farage's simple political agenda, in contrast, pursued with utter conviction, is more persuasive by far than either Cameron's gentility or Boris' affability.

An Elizabethan Summer

For many of us, the Olympic closing ceremony was held last night at the Royal Albert Hall. My first televised Proms was Malcolm Sargent's final valedictory appearance in 1967, and last night still owes much to Sargent's remodelling of the Proms. So we had the sea shanties, 'Britannia', Land of Hope and Glory and Jerusalem as usual leavened with displays of crowd enjoyment and banter that must have been familiar to the first Elizabethans at the Globe and the Rose. And everyone knew the words.

What a sad little thing is the 'Ode to Joy' when placed alongside the last night repertoire. And no-one knows the words, which are more suited to the squeak of the parish organ and the Sunday service than popular celebration. You can't goose-step to the music of Vaughan Williams, or Butterworth, or William Walton. Peter Ackroyd wrote 'If that Englishness in music can be encapsulated in words at all, those words would probably be: ostensibly familiar and commonplace, yet deep and mystical as well as lyrical, melodic, melancholic, and nostalgic yet timeless.' The best work of Vaughan Williams and his colleagues has no words, but those sung on the last night serve as some sort of proxy.

And now when the last of the priapic IOC members is swept back to LHR in his BMW limo and the last Lithuanian tart packs her bags for a winter in Tallinn, when the last inflatable nurse and orange HIV costume has been removed from the stadium we can get back to finishing-off Jubilee year. Oh, and I offer, in the spirit of the paralibrettos, that master of paralibrettics Michael Flanders, with Donald Swann of course;