Spanish Economy - 18.07.2008

As the British are ‘tightening their belts’ according to Gordon Brown, it doesn’t seem that Spain is basking in the sun either.

The Spanish Economy Minister Pedro Solbes has commented that the current world economy crisis is also impacted Spain and it’s the most complex crisis he has ever experienced. The reason for the complexity is due to the accumulation of different problems at the same time.

Solbes said that in addition to the housing market coming to a standstill along with a drop in private consumption - the main motors of domestic growth - Spain is also suffering from "imported" ills such as the global financial crisis, the surge in oil prices and weak growth in economic powerhouses such as the United States and Germany.

"For me, this is the most complex crisis we have ever experienced because of the number of factors that are on the table," Solbes said in a recent interview with Spanish media.

The government expects GDP growth this year of under 2 percent, down from 3.8 percent in 2007. Solbes said he expects activity to recover in the second half of 2009.

It is also considered that Spain risks slipping into recession in 2008. The last time it did so was in 1993 some 15 years ago.

One of the casualties of the current climate is property giant - Martinsa-Fadesa - last week the collapse of the Spanish property giant raised concern to thousands of families, who have made advanced payments to acquire homes in several countries, including Spain, Portugal, France, Morocco and eastern Europe.

However Martinsa-Fadesa pledge to “honour its contracts insofar as the financial conditions allowed for it.”

Within the construction industry it is the largest victim so far in the meltdown of Spain's construction sector, which has been hit by rising interest rates and the global credit crunch.

Spanish Press reports, Martinsa-Fadesa is preparing to sack 234 people, more than a quarter of its workforce, after running up debts of EUR 5.2 billion euros.

Economy Minister Pedro Solbes said that the government had an interest in guaranteeing that the company preserved the maximum amount of jobs and that houses under construction were finished.

Within the south of Tenerife Martinsa-Fadesa has only one development, in El Medano. According to the promotional literature, “a residential development with 124 apartments located in the south of the island of Tenerife, nearby El Medano beach. It is provided with all the necessary services (schools, banks, medical centre, notary public, malls) and the City Hall will provide sports pavilions and green spaces. A natural and quite surrounding, nearby the beach.”

Interestingly Canarian Weekly visited the site, which is only at ground clearance stage, and were told that the first phase of the apartments were still available of which out of the total of 40 apartments planned, 80 % were already sold!