Spain once enjoyed a booming and flourishing economy with foreigners flocking in from around the globe to get a piece of the action, buying up property like there was no tomorrow. But with the global economic crisis taking its toll on nations around the world, the real estate boom in Spain has come to a grinding halt. Over 1 million homes unsold and sellers desperate to sell dropping prices, with some luxury villa owners even knocking off a million euros from their asking price. Reuters reports: “Spain house prices unlikely to find floor before 2011“, claiming that prices will drop by up to 50 per cent.
With an unemployment rate already around 15 per cent and in some areas around 25 per cent, the downward spiral is set to continue. Spanish newspaper Qué reports that unemployment will reach 22% by 2010. As people lose their job or fear losing their job, spending gets reigned in, resulting in less money circulating through the economy.
With all this unfolding, one has to question the ability and interests of the Spanish government which up to now has yet to come up with a plan for its people. The Spanish prime minister Jose Luis Rodriguez Zapatero has been quick to run to the rescue of the failing auto industry, offering billions of euros in loans and guarantees as well as incentives to consumers who buy cars. But where is the help for Spain’s citizens?
In Catalunya, recent headlines read: “50% of all films must be in Catalan” citing local politician, Joan Manuel Tresserras who wants to promote local culture and language. But how will this help Catalunya’s economy as a whole? Expats already find it hard enough to integrate with the constant nationalistic attitudes they come across. Another Catalan politician has been quoted saying that “prices in the tourism industry should not be decreased, but instead quality levels should be raised”, effectively dwelling on the city’s continued efforts to move from mass tourism to luxury tourism. Is this wishful thinking or arrogance? How can the tourism industry survive with the current prices? The resistance against economy’s natural tendency to balance the market goes on, but the reality on the street is that prices are and will fall as Spain’s financial paper Cinco Dias recently reported: tourism business owners have been forced to lower their prices by 15% in order to boost activity.
The big storm is yet to arrive though, says Greg Schellhammer, author of the best-selling ebook: Survive the Crisis in Spain: “A huge chunk of the Spanish economy relies on tourism, so as hundreds of thousands of businesses are currently struggling to survive in current market conditions, they all eagerly wait for the summer, hoping to get a break from the current misery… The big question is though, if tourism is already slowing and the global economic crisis is worsening by the day, will those much needed tourists still come? Time will tell, but I think not. Several reports predict a 50% decline this summer from 2008 figures [which were already worse than in previous years].”
Mr. Schellhammer is not the only expat to raise concern over developments in Spain, local expat-oriented media has reported extensively on these issues. A recent article in the Costa News reports on a plea to Gordon Brown to “intercede on expat homeowners’ behalf with Spanish PM Rodriguez Zapatero” over the growing concern of abusive laws in Spain. Another recent article in the same newspaper exposes the discriminatory practices of local authorities in Benidorm against expat-run-businesses: “Killing the Golden Geese” unveils how expat-owned-businesses are getting a sour taste of Spain’s bureaucracy.
These are just a few examples of the current situation in Spain and undoubtedly it raises the question: Is the Spanish economy doomed to collapse?