Rajoy’s election win celebrations cut short by sobering tasks ahead

Markets greet PP leader’s sterling victory with massive sell-off; Valencia lender taken over by Bank of Spain as recession looms.
A. S. – Madrid – 21/11/2011
After the joy of a resounding victory in Sunday’s general elections, hours later Popular Party (PP) leader Mariano Rajoy was given a timely warning of the enormity of the task facing him in trying to turn the country’s ailing economy and finances around.
Investors rained on Rajoy’s victory parade by offloading Spanish shares and government bonds, while a leading think-tank predicted the economy would slip back into recession this year.

Also on Monday, the Bank of Spain was obliged to take over the country’s first commercial bank since the crisis broke.

The conservative, pro-business PP won 186 seats in the congressional poll for a comfortable absolute majority of 11. The ruling Socialists garnered 110 seats, while the party with the third highest representation in the lower house was the center-right Catalan nationalist group CiU, with 16 seats. The PP also won a majority in the Senate.

But there was no let-up from the markets. The spread between the benchmark 10-year government bond and the German equivalent was up 23 basis points at 464, while the blue-chip Ibex 35 index closed down 3.48 percent. The rest of the global markets also remained under pressure due to the sovereign debt crisis and concerns about the US economy.

On top of the pasting Spanish assets received in the market, the central bank on Monday decided to take over Banco de Valencia at the lender’s own request because of the delicate state of its solvency and liquidity positions. The management of the bank will be replaced by officials from the state Orderly Bank Restructuring Fund (FROB), which will inject one billion euros to shore up its capital and grant a credit line worth a further two billion euros.

“As from the publication of this decision in the Official State Gazette, the FROB will manage Banco de Valencia with the aim of stabilizing and recapitalizing the institution, thus enabling its subsequent disposal to another bank through a competitive process,” the Bank of Spain said in a statement.

The board of Banco de Valencia earlier Monday had informed the central bank that it was unable to provide a “solution for the future viability of the institution.”

Banco de Valencia, which is the unit of Banco Financiero y de Ahorros – an amalgam of seven savings banks formed earlier this year – accounts for only 0.74 percent of the Spanish banking system’s total assets.

It was the fourth lender to be intervened by the Bank of Spain since 2007 after the savings banks Caja Castilla-La Mancha, Cajasur and Caja de Ahorros del Mediterráneo.

But the key task facing the Rajoy government will be to come up with measures that convince investors that the country can service its debt.

“Rajoy will have no option but to announce a package of extraordinarily tough reforms to convince the markets and his European partners Spain is different from Italy and Greece,” Bloomberg quoted José Antonio Sanahuja, a professor of international relations at Madrid’s Complutense University, as saying.

The PP’s absolute majority will ensure the passage of unpopular measures in parliament. The party also controls most of the country’s regions, which will also enable it to lean on them further to rein in spending in order to meet the government’s deficit reduction targets, which call for the shortfall to be cut to six percent of GDP from 9.2 percent last year and to 4.4 percent in 2012 before bringing it back within the EU ceiling of three percent the following year.

The problem of yet more austerity, however, is the risk of pushing the economy back into recession at a time when over a fifth of the work force is already out of a job. FUNCAS, the think-tank of Spain’s association of savings bank on Monday predicted that is exactly what would happen.

FUNCAS estimated Spain’s GDP would contract by 0.5 percent in 2012, compared with an earlier forecast of growth of one percent. “The prospects with respect to the coming quarters have deteriorated as a result of the severe cuts in spending that will be necessary to carry out if the deficit targets are to be met,” the think-tank said.

FUNCAS also cited slowing global economic growth and the ongoing euro-zone debt crisis as reasons for slashing its growth forecast. It predicted the deficit for this year would come in at 7.5 percent of GDP.

Investors, however, are unlikely to give PP leader Mariano Rajoy much of a honeymoon. “If the markets are to regain confidence (slashing the country risk premium) the key will be how quickly Spain’s new government announces measures and structural reforms that please European authorities and the markets,” brokerage Banesto Bolsa said Monday.

Brokerage M&G Valores said support from the European Central Bank in the form of purchases of Spanish government debt in the secondary market should be enough to maintain bond yields at current levels in anticipation of a new batch of reforms by the incoming administration.

Rajoy has yet to name his Cabinet, particularly the economy minister who faces the challenge of guiding Spain away from that fate of Greece, Ireland and Portugal, the three euro-zone countries that have needed rescuing by the European Union and the IMF. According to Spanish law, the Cabinet cannot be sworn in until December 21.

Frontrunners for the economy portfolio include the PP’s spokesman on economic affairs Cristóbal Montoro, who served as finance minister in the government of former Prime Minister José María Aznar, and Luis de Guindos, who was Aznar’s secretary of state for the economy and is currently a director with consultant PwC.

One of the key tasks of the incoming government will be to draft the budget for 2012, which was not drawn up by the outgoing Socialist administration after the elections were brought forward from March.

Rajoy on Monday chose the former PP congressional spokesperson Soraya Sáenz de Santamaría to head the transition team that will coordinate the handover of power with the Socialists. That raised speculation that she is in line to be named deputy prime minister.

The PP leader said he had had a “very satisfying” conversation with outgoing Prime Minister José Luis Rodríguez Zapatero on the transition and pledged to have a new government in place before Christmas. “In the handover, we’re all going to be very busy,” Rajoy said. “Things are very complicated.”

In the morning the PP leader talked to German Chancellor Angela Merkel on “Spain’s big problems,” German government spokesman Steffen Seibert said.

Via: Rajoy’s election win celebrations cut short by sobering tasks ahead · ELPAÍS.com in English.

The Castor Underground Gas Storage project nearing final stages.

The Castor project consists of the conversion of the Amposta oil field into underground gas storage. The Amposta field lies at a depth of 1,800 m approximately 22 km off the coast of Vinaros. It involves two offshore platforms for 13 wells and processing facilities, the drilling and completion of 13 new wells, an onshore compression and processing plant in Vinaros, with 30 km long pipeline joining the two.
The top side of the marine platform for the project, built in Texas, has now reached the coast of Vinaròs. This large structure of about 9,000 tons sailed several weeks ago from the port of Corpus Christi in Texas where it was built by the multinational Kiewit.
The legs that will support the platform were manufactured by Dragados Offshore in Cadiz, have already been put in place. This base arrived last week in two ships and consists of six legs, anchored to the ground, about 90 metres deep by twelve piles of about 100 meters long, 2 metres in diameter and weighing 300 tons.
The semi-submersible vessel SSCV Thialf, from Rotterdam, the largest floating crane in the world, capable of lifting 14,200 tons (7,100 tons each pulley) performed the installation work on this. Now the work is to place the top side, on the base in a very delicate and precise operation. The work of the Thialf then ends with the placement of the 250 ton bridge linking the two platforms. This work will last about two weeks, so the forecast is that it will all be completed by the 24 th of this month. After this it will remain to connect the pipes. The first tests are planned for early March 2012 and the project is expected to be operational in May.

Ryanair announces agreement with the Catalan government for operations at Girona and Reus

Ryanair announced on Wednesday that, ‘after months of difficult negotiations’, it has reached a pre-agreement with the Generalitat of Cataluña for increased flight operations at Girona and Reus. The airline spoke of ‘new aircraft, traffic and jobs at Girona from April 2012,’ and said it expects to increase traffic there from the current 2 million passengers annually up to 3 million within the space of 12 months. For Reus, routes, traffic and jobs will be reinstated, also from April 2012, with traffic expected to increase up to 500,000 passengers a year. Both agreements are however dependent on confirmation from AENA Spanish Airports of the cost of airport taxes at the two airports for next year. The low cost airline said in a statement that, ‘If AENA increases its already high taxes at Girona and Reus, these pre-agreements will be cancelled and the aircraft and routes will be transferred to other airports with lower operating costs.’El País indicates that Ryanair is set to receive 5.8 million € in annual public subsidies for the Girona agreement, plus land to build a hotel. The amount agreed for Reus is 3.2 million € a year.

via Ryanair announces agreement with the Catalan government for operations at Girona and Reus.

Russian tour operator shows interest in Castellón.

The local press report that the Tourist board has made further progress in attracting visitors to the province of Castellón and that the airport could receive in excess of 100,000 passengers next year.
Members of the Castellón Tourist Board, along with representatives from the airport attended the World Travel Market (WTM) recently held in London.  With 200 countries and 6,000 exhibiting companies represented, WTM is one of the world’s leading events for the tourism industry.  Andrés Martinez, second vice president of the Diputación de Castellón and deputy for tourism pointed out that we’ve had the opportunity to meet and network with almost all countries that are part of our tourism market.  Martinez said the excellent prospects that have opened in the Russian and English markets with the launch of the airport and possible routes to those countries . An opportunity that will allow us to position the Castellón brand in these markets and also two other priorities, the German and Belgian, along with the French market, that remains the largest.
Martinez, stressed that the Russian market is booming and shows great interest in the fate of Spain.  President of Marina d’Or, Jesús Ger, negotiated with the tour operator Natalie Tours for the arrival of about 55,000 Russians between next year and 2013.  The tour operator has expressed interest in selling more than 20 hotels across the coast of Castellón once the airport is operational.  One of the main meetings was with the directors of the Jet2.com airline that operates mainly from cities in the north of England and that has its own tour operator showing great interest in the province of Castellón and the airport once it is open.
Castellón Airport is now thought to be close to achieving the arrival of one third of the passengers planned for 2012. The final feasibility study calculated the arrival of 309,140 passengers for the inaugural year, 2012,.  Based on agreements so far with tour operators and negotiations with several airlines, next year could already bring about 100,000 visitors to Castellón.  In addition to the 55,000 Russians can be added the already announced arrival of the Austrian tourists visiting the province in spring in the Senior Program Reisen, plus an undetermined amount of FIB music fans.
These travellers will arrive on charter flights, to which could be added more than 70,000 who would arrive in the dozen flights whose negotiations are advanced.  This figure was derived by multiplying the number of flights carrying an average of 114 passengers.  Pedro Gimeno, the vice president of the company managing the site, Concessiones Aeropuerto, said that we are in negotiations with many companies and many tour operators.  They are working for the number of flights and passengers, but are still are unable to confirm how many.  However, recognizing  that negotiations are well advanced with four companies, among which are Ryanair, Wizzair and Jet2.com, whose flights may arrive in the summer of 2013.

Election campaign enters final stretch

Rajoy and Rubalcaba hold big rallies in Valencia, Zaragoza

With less than a week until Spain elects a new government, the two major candidates for prime minister held dueling rallies in Valencia and Zaragoza on Sunday, while the leaders of the minor parties continued to focus on trying to capture the undecided vote.

Socialist Alfredo Pérez Rubalcaba warned supporters in Zaragoza that new governments – especially those of the center-right – do not bring an end to crises. “Changes of government are not the solution,” he said, adding that the country’s economic policies “need to be revised because they are not giving us the results we need right now.”

“We need to formulate our next policies, we need to jump-start the economy. I will go to Brussels to fight and argue, not take notes like Mariano Rajoy will,” he said.

In Valencia, Rajoy was given a rousing welcome at a Popular Party (PP) rally held at the city’s bullring. For the first time, the PP leader expressed his confidence that he will win Sunday’s elections.

“I think that we are going to win the elections. In fact, I believe it and I know it,” he said.

Polls show that the PP may win by as much as 15 percent over the Socialists.

In Madrid, leaders from the Union Progress and Democracy (UPyD) platform called on undecided voters to give them a chance. “These elections are the last opportunity we have to change things in Spain. If we don’t act now, they will come from outside of Spain to change the policies for us,” said Carlos Martínez Gorriarán, the number two on the UPyD slate.

via Election campaign enters final stretch · ELPAÍS.com in English.

Calatrava paid 15 million euros for non-existent Valencia towers

Regional government insists scheme is a useful investment; prosecutors say there is no proof of wrongdoing.

The Valencia government, then presided by the Popular Party’s (PP) Francisco Camps, who later resigned and awaits trial for his part in the Gürtel corruption scandal, paid architect Santiago Calatrava over 15 million euros for three skyscrapers near the Ciudad de las Artes y las Ciencias that will likely never be built, the provincial court has found.

The payment was confirmed by regional government spokeswoman Lola Johnson, who justified the payments for the project as a “property asset” that can be used or sold. Prosecutors will not pursue the case, brought by deputies of Esquerra Unida, because there is no evidence of misappropriation of public funds. Johnson noted that work has been halted on the project but that “at any moment the economic situation could bring us to a point where we decide to move ahead or to sell.”

Calatrava’s office declined to comment. The court report states that the architect received an advance payment of 2.6 million euros on September 30, 2005, 137,000 euros on August 30, 2006 for models and plans of the towers, and two later payments of 6.2 million euros each for pre-project and drafting work, a total of 15.2 million. The Socialist regional spokeswoman for infrastructure, Eva Martínez, asked current PP regional premier Alberto Fabra to begin legal proceedings to recover the money from Calatrava.

JOAQUÍN FERRANDIS – Valencia – 09/11/2011

via Calatrava was paid 15 million euros for non-existent Valencia towers · ELPAÍS.com in English.

Castellón Airport steps up efforts to bring in airlines.

Aerocas, the public company that manages Castellón Airport, has been intensifying efforts to have flights when it expects to open in April 2012.  According to company sources, contacts have been made with half a dozen of firms with the aim of launching flights in April. Efforts were especially intense at the World Routes Fair in Berlin, which promoted 800 airports and 300 airlines around the world. The provincial Tourism office has also negotiated with international tour operators to bring charter flights to the airport. Furthermore, it points to the arrival by air of 25,000 Austrian pensioners, next spring, through the agency Senioren Reisen. It was intended to do so this campaign, but  the delay in opening forced them to divert flights to Reus and Manises. The provincial government had to bear the costs of the transfer by road to Castellón.
With the current crisis it is not an easy task.  Existing airports such as Lleida, Huesca and Ciudad Real, with little traffic, can attest to that. Reus will also become an airport without flights in the new year until operators renew their summer flight schedules.
Aerocas maintains its forecast of 600,000 passengers for the first year of operation but the  Ministry of Tourism recently  halved this expected  figure to 300,000 passengers.
In the meantime the company will see it’s budget for 2012 reduced by 58% as the provincial government starts its austerity programme. It will receive 34.9 million euros, 38 million less than in 2011 despite its launch scheduled for the first half of 2012. The airport plans to start flights in the first half of 2012 and reach full activity in 2013. Their objective, as stated in the budget, is to strengthen rural tourism.