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Cafe con cookie? Spanish city in a frap over lack of Starbucks
Mar 12th
Murcia residents start Facebook campaign to attract global coffee chain – possibly for the muffins, the wifi or the mugs!
Murcia is one of the fastest growing cities in Spain, the proud capital of the country’s south-eastern market garden region. But the coffee guzzling citizens of Murcia say it still lacks the one thing that would prove they have made it onto the global map of cities that count: the green, white and black sign of a local Starbucks.
Now the city’s cappuccino and mocha starved citizens have mounted a Facebook campaign to join the list of 16,000 places on the planet with a Starbucks.
“They have got it everywhere but here,” complains Alicia Delgado, a recent contributor to the Starbucks campaign wall. “It is about time we had one too.”
Enrique Marhuenda agrees: “The day we have a Starbucks, Murcia will be an important city.”
Although Spaniards have long had a variety of good quality coffee on hand at almost every street corner cafe, Starbucks has already established 76 outlets in Spain and continues to expand there while it shrinks elsewhere in the world.
But do the people of Murcia, who can get Spanish carajillos, cortados, cafes solo and cafes con leche at the dozens of cafes doted around each neighbourhood, really know what they would be getting?
Some who have had the Starbucks experience insist they would kill for a muffin and a frappuccino. Others admit that the coffee is often better (not to say cheaper) elsewhere – but say that is not why they want their Starbucks. “The coffee is not really up to much,” admits Maria Esther Ser. “But the muffins, the seats, the powdered chocolate and the cinammon are good – and the iced coffees too.”
The Murcia fans are also organising an email campaign, hoping the firm will pay attention to the severity of their Starbucks starvation when bombarded by mails. The owners of the Starbucks brand in Spain, Grupo VIPS, were not available for comment.
Some Facebook users are not convinced that their fellow campaigners are only interested in the wifi, sofas and cherry mocha. “Admit it, what you really want is to steal those mugs,” says Luis Vallejo.
Others believe Starbucks will destroy local cafe culture. “If I get back to Murcia this summer and find a Starbucks I will turn my back on my birthplace,” said Marcos Campillo Supongo.
“In the US the Starbucks coffee is awful and priced like gold. A lot of people only drink it because ‘it’s Starbucks and it makes me feel cool.’”
Meanwhile, teachers on the Murcia university marketing master’s course have already set their pupils the task of putting together a marketing plan for a local Starbucks.
For the moment, those who go to the Starbucks store locator screen and enter “Murcia” will continue getting the following message: “There are no stores matching your search parameters. Please try a different search.”
The nearest one the Guardian could find was 140 miles away in Valencia.
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An end to Eta terror | Gerry Adams
Feb 27th
Elements of the Irish process are echoed in a new Basque strategy with peace at its core
There is a long affinity between Irish republicans and the Basque people. Each year, large numbers of Basque activists travel to Ireland to meet republican activists and to discuss the situation here and in the Basque country. I have been there several times. In June 2006 I witnessed the huge sense of excitement and expectation that existed during the period of the Eta cessation. The collapse of the cessation in December 2006 after only nine months was a huge disappointment.
Since then there have been behind-the-scenes efforts to restore the opportunity and hope that the cessation had created. I and other senior Sinn Féin activists have engaged in an ongoing dialogue with Batasuna – the Basque political party which was banned seven years ago by the Spanish state because of its support for Eta – and others in an effort to help create new momentum in the stalled Basque peace process.
Rufino Etxeberria is a leader of Batasuna. He is currently out on bail. In recent months he has been engaged in a lengthy dialogue which I understand involved up to 7,000 activists. This is a remarkable achievement. It concluded last weekend in a conference of the Abertzale Left Regional Assemblies, which includes Batasuna. The conference agreed a new strategy for progress.
The impact of the peace process in Ireland is clearly evident in the language used. The resolution, Stand up for Euskal Herria, commits Abertzale Left to using “exclusively political and democratic means” to advance its objectives. It seeks to advance political change “in a complete absence of violence and without interference” and “conducted in accordance with the Mitchell principles“. Its goal is to achieve a “stable and lasting peace in the Basque country”.
In an interview on Sunday in the Basque language paper, Berria, this new strategy was explained by Etxeberria. He said: “We consider that the process has to be done without violence, which means of course that it will have to happen without any armed activity by Eta.” He reaffirmed that the new political strategy seeks to advance Basque goals “without armed actions by Eta, and without violence or interference by the Spanish state”.
This is an important development that creates an opportunity for an end to conflict in the Basque country and for real political progress. It is also evidence of a determination on the part of Abertzale Left to resolve the conflict.
The political conclusions to emerge out of the weekend conference are an even more important and significant development. The next steps are crucial in terms of the strategies Abertzale Left develops and the response of the Spanish state.
Lessons need to be learned from the 2006 period. Dialogue is urgently required. All sides must be prepared to take risks. This is always very difficult. The Basque separatist groups have spent a lot of time internally agreeing a new way forward. The Socialist government of José Luis Rodriguez Zapatero now needs to demonstrate a willingness to examine closely the language, strategy and direction being taken by Abertzale Left – and to respond positively.
The US, the EU and others helped the Irish peace process. There is also an important role for the international community in encouraging a resurgent peace process. Sinn Féin will promote conflict resolution and assist in whatever way we can the emergence of a viable and effective peace process.
There is a real opportunity for a fundamental change in the relationship between the Basque country and the Spanish state. There is an onus on everyone to grasp this in good faith and to make every effort to bring an end to conflict in that region.
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The agonies of the eurozone reflect a far more significant hidden deficit | Timothy Garton Ash
Feb 24th
The spirit that once led Europeans into union has vanished, just as we now face the euro’s widely predicted flaws
So Antigone had a part in this tragedy too. That’s Antigone Loudiadis of Goldman Sachs, who arranged a complex currency swap deal that helped Greece to conceal the scale of its debt, in what the Financial Times delicately calls “an optical illusion“, as the country snuck into the eurozone. Pity Greece didn’t consult someone as wise as Socrates; and I don’t mean José Sócrates, the Portuguese prime minister, whose own country the gods – that is, the bond markets – are also eyeing leerily.
Joking apart, we need to recognise that this is not just the first great test of the eurozone but also a defining moment for the whole project of a European Union. Since this is Europe, not Apollo 13, failure is definitely an option. More likely, however, is an agonised muddling through, leaving our old and demographically ageing continent even more preoccupied with its own internal problems. And the world will not wait while we spend another decade navel-gazing. Call me Cassandra, if you will, but that’s how I see it.
No special gift of prophecy was needed to foresee the dilemmas that now face the eurozone. They were extensively debated before it was launched. I wrote in 1998 that monetary union was “an unprecedented, high-risk gamble”, and argued that it was the wrong priority for Europe at that time. Subsequently, I was lulled into a false sense of security by the euro’s apparent success, and by the practical and symbolic pleasures of travelling around the continent with just one currency in my pocket.
Now we have the predicted difficulties. As George Soros observes, a “fully fledged” currency needs not just a central bank but also a treasury. It requires a degree of fiscal as well as monetary discipline, linked with the capacity to make fiscal transfers to suffering areas (complemented by labour mobility from those areas), as you have in a country like the United States or the United Kingdom.
To survive and prosper, a European monetary union must develop at least a stronger element of economic union, and that in turn requires a stronger element of political union. Which, by the way, was one of the main motives for some of the chief political architects of what was then deliberately called “economic and monetary union”, including François Mitterrand and Helmut Kohl. This was not just, as is often said, Europe putting the (monetary) cart before the (political) horse. It was an attempt to use the cart to bring on the horse. It was the last big fling of the so-called ”functionalist” approach, by which you build a politically integrated Europe through economic integration. Broadly speaking, that worked for half a century, from the 1950s to the 1990s; but in this case, it has not. Not unless this crisis catalyses further steps of integration, as earlier crises sometimes have.
By its mendacious and self-harming profligacy, Greece has precipitated the crunch. Greece is unique, even among the Pigs (Portugal, Italy/Ireland, Greece, Spain), in its combination of massive deficit (an estimated 12.7% of GDP last year) and massive debt (some 125% of GDP and rising). It has not only lived beyond its means; it has used its years in the eurozone to become even less competitive, in starkest contrast to Germany. According to one calculation cited by the Financial Times’s Martin Wolf, between 2000 and 2009 Greek unit labour costs rose by 23% against Germany’s.
Yesterday, the country was hit by the second general strike in two weeks, and we ain’t seen nothing yet. Greece has promised its eurozone allies to get its deficit down from 12.7% to 8.7% this year. Oh yes, and pigs can fly. Or call on Goldman Sachs for some more optical illusions. Even if the Greeks let their government do the right thing, such deep cuts, as well as structural reforms, can make things worse before they get better. Meanwhile, it seems the Greek government needs to borrow some €55bn this year, up to half of it within the next three months. What if the gods (bond markets) grow angry, and decline to play?
Well, that third act has not been written. Anything could happen. But my guess is this: through gritted teeth, Germany will agree to some form of eurozone bailout. However, it will only support the minimum needed to placate the gods, and only with the most astringent, Creon-like conditions being imposed on Greece. It is an important but ultimately secondary question whether this help comes in the form of bilateral loans, loans from the European Investment Bank, purchases of Greek government debt, EU spending transfers, jointly issued eurobonds or any of the other mechanisms suggested. EU leaders will deny that this is a bailout and everyone will know that it is a bailout.
Both Greeks and Germans will then be furious. One well-placed diplomatic observer in Athens suggests to me that, as part of the European supervision of Greece’s fiscal discipline, “there’ll be a German under every desk”. Just don’t mention the war. Except that Greece’s deputy prime minister, Theodoros Pangalos, already has. Recalling the Nazi occupation, he said earlier this week: “They took away the gold that was in the Bank of Greece, they took away Greek money, and they never gave it back. This is an issue that has to be faced sometime in the future.”
To which furious Germans will reply: “They took away our d-mark, and nobody asked us if we wanted to give it up. We were assured, in solemn treaties and rulings of our constitutional court, that we’d never have to bail anyone out. We took 10 years of painful reform to make ourselves competitive again, while those Pigs lived high on the hog. Now we’re being asked to work till age 67 so the Greeks can retire at 63.” And so on.
Eurozone Europeans are big and grownup enough to get over this, but it will take a large toll of effort, anger and internal strains. In the long run, the crisis might even make the eurozone a little stronger, adding an element of what is carefully called “economic governance” (which means different things in French and German).
In the meantime, European economic growth is limping while Asians forge ahead. The always over-ambitious goal of the 2000 Lisbon agenda, to make Europe the world’s most competitive knowledge-based economy by 2010, looks ridiculous now, in 2010. And Europe’s economic and political weakness compound each other.
Behind the monetary lurks the fiscal; behind the fiscal, the economic; behind the economic, the political; and behind the political, the historical. The deepest reality underlying this crisis is that the personal experiences and memories that have pushed European integration ahead for 65 years, since 1945, are losing their force. The personal memory of war, occupation, humiliation, European barbarism; fear of Germany, including Germany’s fear of itself; the Soviet threat, the cold war, the “return to Europe” as a guarantee of hard-won freedom; the hope of restored European greatness.
These were massive biographical motivators, which drove people like Mitterrand and Kohl even unto the euro. Can Europeans go on building Europe without such profound motivators? Are there new ones in sight?
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Mervyn King: Quantitative easing may have to restart
Feb 23rd
• Bank of England governor tells MPs scheme could be extended if economy deteriorates
• Fears over the eurozone, the UK’s major trading partner, causing ‘particular concern’
Mervyn King, the governor of the Bank of England, has warned that the weakness of the eurozone is jeopardising the UK’s recovery, and insisted the emergency £200bn quantitative easing programme might have to be extended if the economy deteriorates.
Asked by MPs on the cross-party Treasury select committee what would persuade him to sanction more asset purchases to inject money into the fragile economy, King said: “My particular concern at the moment derives from the health of the global economy, and in particular our major trading partner, the eurozone.”
Much of the 16-member single currency bounced out of recession by last summer, but recently released data for the final quarter of 2009 showed that Germany, the eurozone’s largest economy, stagnated, and several other countries, including Spain and Ireland, remain weak, while Greece is battling a fiscal crisis.
Charlie Bean, the Bank’s deputy governor, warned that he expects recovery in the eurozone, as in the UK, to be “sluggish”.
David Miles, an independent member of the Bank’s nine-member monetary policy committee, appearing with King, told the MPs he had found the decision about whether to extend the £200bn asset purchase programme at its latest meeting earlier this month, “finely balanced”.
“If the news is that the economic outlook seems even weaker, inflation pressure is lower and that moves down that profile, I think there is a strong case then for expanding further the asset purchases. If it goes the other direction, that would be a case for pushing in the other direction,” he said. The MPC will meet again next week.
King said the economy had “embarked on a process of healing,” which will take time, and warned that there was so far little sign of the necessary rebalancing in the international economy. He pointed out that at the recent gathering of G7 finance ministers and central bankers, every country seemed to be relying on a recovery in demand elsewhere to kick-start their domestic economies.
The governor also repeated his insistence that the government’s three-year special liquidity scheme, which allowed banks to exchange hard-to-sell assets such as mortgage-backed bonds for more liquid gilts, will not be extended, and urged banks to find other sources of funding before the scheme starts to expire early next year.
“There is nothing coming out of this financial crisis that would justify the taxpayer funding the existing structure of the financial sector,” he said, adding that some financial institutions might have to shrink their balance sheets if they cannot fill the gap left by the removal of government aid.
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Spain braced for general strike as Zapatero tries to force labour law reform
Feb 22nd
Trade unionists to take to streets as PM faces first rebellion over employment reforms designed to jump-start country out of recession
Spanish trade unionists will pour on to the streets tomorrow to protest against Socialist prime minister José Luis Rodríguez Zapatero’s attempts to reform a moribund economy that has left one in five Spaniards out of work.
Marches are due in Madrid, Barcelona and Valencia in a show of union muscle designed to head off reforms to both generous labour laws and a state pension programme that critics claim are strangling growth.
It is the first time in six years that the beleaguered Zapatero, whose party has slipped badly in opinion polls, has faced a trade union rebellion. Unions hope hundreds of thousands will join the marches, which look set to kick off a long-running battle for Spain’s future.
With the economy still in recession after almost two years, Zapatero is now running a country with 4 million unemployed. A million Spanish households have no bread-winner and predictions for the future are grim.
The government forecasts that the economy will continue to shrink this year and some believe unemployment could rise to 22%.
Economists led by the head of the Spanish central bank, Miguel Ángel Fernández Ordóñez, are demanding pension and labour market reforms in order to get Spaniards back to work.
But unions claim workers are being unfairly expected to shoulder the blame – and the pain – of recession and instead pin the responsibility on bankers and business leaders.
Some union leaders have already threatened a general strike if Zapatero tries to impose reforms.
“If it is done by decree, then the reply will be at that level,” warned Javier López of the Workers Commissions union.
López’s union is leading tomorrow’s protests with Spain’s other main trade union, the General Workers’ Union. They have called a series of marches in cities across the country over the next three weeks.
The marches were sparked by Zapatero’s proposal that Spaniards delay retirement from 65 to 67 in order to ensure the long-term stability of the country’s pensions.
His announcement, at last month’s World Economic Forum in Davos, was seen as an attempt to calm markets and stop Greece’s debt crisis from engulfing Spain as well. But it provoked a furious reaction from unions, who said they expected pension reform to be negotiated with them first.
“This pensions business is a first warning about where they are coming from,” López warned. “We will reply to each and every attack.”
Zapatero’s government has already withdrawn some pension reform proposals. But reform is needed to help bring down Spain’s bulging budget deficit, which hit 11.4% of GDP last year.
The PM is having increasing trouble meeting his twin aims of keeping both unions and debt markets happy. “My government is characterised by its defence of social programmes and for maintaining and extending workers’ rights in good times and bad, and that is how I will continue,” Zapatero said today.
On a visit to London last week Zapatero announced an austerity drive to bring debt down and attacked the hedge funds and bankers he blames for Spain’s problems.
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Britain, Greece, Spain and Norway tell markets: growth, not cuts
Feb 19th
• Centre-left leaders defy mutinous global investors
• ‘We won’t fall into the trap’ says Spanish PM Zapatero
The prime ministers of Britain, Greece, Spain and Norway have warned the financial community that they will prioritise growth over deficit cuts, and have asked speculators to change their short-term view for one that is more favourable to society as a whole.
The message from Gordon Brown, Spain’s José Luis Rodríguez Zapatero, George Papandreou of Greece and Norway’s Jens Stoltenberg is likely to infuriate some investors, who are pushing governments with high deficits to cut their ballooning debts on concerns about their ability to repay the money they owe.
“The agenda for the European Union this year should be growth and jobs,” Brown said during a conference organised by the Policy Network, a centre-left thinktank, in London.
“We won’t fall in the trap of those who provoked the credit crunch,” Zapatero said. “We will cut the deficit when economic recovery is active, but not at the expense of social cohesion.”
Over the past few weeks, the four left-wing leaders have suffered the attacks of speculators who do not believe politicians have their economies under control: in Britain and Spain, investors’ sales have pushed bond yields higher, making the countries’ borrowings more expensive – as well as the long-term interest rates that citizens pay in contracts such as mortgages. Speculators have also pushed up the price of protection against potential defaults on Greek, Portuguese and Spanish state debt, exacerbating negative sentiment towards the countries.
Papandreou reassured investors of his country’s ability to improve its ailing public finances – including a draconian budget deficit cut to 3% of gross domestic product by 2013, from 12% now. “Greece is our problem – we’re not looking for bailouts or money from other countries. We have a programme and the support for this programme and we’ll do what’s necessary to reach the targets. We want to borrow on the same terms as the others,” Papandreou said.
He was supported by European Union competition commissioner Joaquín Almunia, who defended the EU’s guarded approach towards the Greek crisis, saying that “you can’t promise a party everything they’re asking for”.
In an interview during the conference, Almunia said that the EU’s response to the Greek crisis, which has been much criticised by investors for its lack of detail, is “serious and responsible”.
However, with local strikes and popular opposition to the cuts, few investors believe the country will meet its targets. As he spoke, protection against a potential default of his country was trading at twice as much that of other European countries. “We have the power, if we have the will, to deal with some kinds of speculation,” Papandreou said. Financial instruments should be “tools” to help citizens lead a better life, whereas “they are God for the conservatives,” he said.
Greece may find help from Spain, as during his six-month EU presidency Zapatero will try to toughen regulation of credit default swaps – the instruments traded as sovereign credit protection, the Spanish prime minister told the Guardian on the sidelines of the conference.
“We have to tell the markets that they should have a more medium and long-term perspective,” the Spanish leader said during the summit. “They are also interested in an economic recovery that brings stability and tranquility for all.”
But investors claim there is still huge distance between the two sides – governments and markets – that are now battling to find the best way out of the worst recession in 60 years. While politicians “talk the talk” – instead of offering a more specific plan on how to help Greece – financial investors will keep looking only at the numbers, Evolution Securities analyst Gary Jenkins recently said.
“The market is now only interested in liquidity. We have to be focused on the short term: if you’re concerned about funding, you have to look short-term,” Jenkins said.
Brown called for more action and further global change on financial regulation over the next G20 meetings this year. A renewed global approach is needed as the “internationalism spirit of the G20 summit in London last year has somehow melted away,” Lord Mandelson, the business secretary, said at the conference.
“We can’t leave things as they were – we won’t withdraw from speculation beyond borders, from tax heavens,” Zapatero said.
“It’s a paradox that the markets that we saved are now demanding and putting difficulties, as those budget deficits are those that we incurred to save those who now demand budget cuts. What a paradox.”
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Goldman Sachs faces scrutiny over Greek debt swap
Feb 18th
Greek currency deal with Goldman helped to disguise scale of debts
European leaders have criticised Goldman Sachs and other investment banks following allegations that they helped Greece to disguise the true scale of its debts over several years.
“It’s a scandal if it turned out that the same banks that brought us to the brink of the abyss helped to fake the statistics,” Germany’s chancellor Angela Merkel said in a speech at a conference in Germany last night, according to Bloomberg.
Eurostat, the European Union’s statistical office, has already asked Greece to clarify the use of some derivatives contracts set up since 2001 with banks including Goldman Sachs. Greek officials and banking sources claim those contracts were legal – until Eurostat stopped accepting them a few years later.
Countries that borrow money in foreign markets, such as Japan or the US, usually sign derivatives contracts to fix the value of an exchange rate at a point in the future to avoid losing money if the currency of the country where the money is borrowed strengthens.
But in this case, bankers have claimed that Greece used an artificially low exchange rate, which meant the amount of debt it was taking on appeared lower. Goldman would hand Greece the difference upfront, to compensate for the loss. This money, which resembled a loan rather than a bond, would therefore not count as public debt.
Goldman Sachs has declined to comment on this issue. Today Yesterday Christine Lagarde, France’s finance minister, said Eurostat should examine the issue closely.
“First of all, you have to know whether it was doctoring the accounts and if this was legal at the time it was done – and if it was legal, it will be necessary to find out whether it was favourable for stability. Probably not. And, in that case, how can we avoid a repat, if those measures were already taken?” she told French radio station Inter.
The European Parliament’s economic and monetary affairs committee has also urged EU commissioner Olli Rehn to explain the banks’ role, and to specify what action he plans to take “to stop banks assisting European governments in hiding public debt”, Arlene McCarthy, the committee’s vice-president said recently.
Concerns about Greece’s public finances have damaged the country’s credit rating and credibility in the markets. The Greek government now has to pay higher interest to attract buyers for its bonds at the same time as it it faces implementing drastic measures at home to cut its budget deficit.
The crisis has spread towards other European countries with a high public deficit, including Spain, Italy and Portugal.
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Pain in Spain could fall on British companies
Feb 17th
• Exposure to European crisis greater than thought
• Leading UK brands suffer as Spanish economy reels
Britain’s exposure to the financial turmoil sweeping through southern European economies could be far greater than previously thought, according to data seen by the Guardian.
Despite relief that Britain’s decision to stay out of the euro has avoided the kind of budgetary crisis brewing in Mediterranean nations, figures showing that UK sales to Spain, Britain’s seventh-largest trading partner, plunged by 31% to £7.74bn (€8.92bn) in 2009, reveal how exposed are the balance sheets of some of the UK’s biggest companies.
Top-selling brands such as Vodafone, Burberry and British Airways are suffering from Spain’s shrinking economy – which accounts for twice as many UK exports than China.
Barclays is also suffering from low savings and lack of investments. In a rare piece of bad news from the bank yesterday, it said that its impairment charges in global retail and commercial banking across western Europe rose £370m to £667m, largely driven by losses in Spanish commercial property, construction and small business loans.
With four million – almost 20% of the workforce – unemployed, Spaniards are cutting down on their spending. This trend includes those who have a job and who fear that they may lose it.
Consumers are leaving bills unpaid, forcing companies such as Vodafone to sell lists of unpaid accounts to businesses that specialise in recovering cash. The phone giant recently reported a 6.8% sales decline in Spain, where it generates an annual £1.3bn of service revenues – the third-largest market after Germany and Italy.
The business of recovering money has grown so popular in Spain that it advertises in top venues such as FC Barcelona’s football stadium, grabbing millions of TV viewers. Even Barcelona football club is tightening its belt. It has put on hold a multimillion-pound redevelopment project of its 100,000-capacity Camp Nou stadium, a project assigned to British architect Norman Foster.
London-based Diageo, maker of brands such as Smirnoff and Baileys which are popular in Spain, is suffering from the new habits in a country that has traditionally entertained more outside the home than inside. Now this has changed, people are going out less, and while at home, local and cheaper beer is replacing spirits and wine.
“The challenging macro-economic environment continued to shape Diageo’s performance in Iberia with reduced on-trade consumption [in bars and pubs] and down-trading to value brands in the off-trade [supermarkets, shops],” the company said recently.
Spain and Portugal account for only about 4.5% of Diageo’s net sales, although the company blamed the falls in Spain, as well as Ireland and eastern Europe, for being the main reason for its overall sales decline in Europe.
Spain is one of Diageo’s strongest markets for products such as Baileys, which is often served along with dessert at weddings. Sales of famous names such as J&B fell in shops and supermarkets as consumers moved to cheaper brands. The company is now aiming to sell to customers at home, offering ready-to-serve cocktails such as the Cacique Mojito.
As many as 700 British companies operate in Spain, employing about 100,000 people. Top exporters include British Petroleum, which has a network of more than 300 petrol stations around the country.
The energy sector has been severely affected by the recession: UK energy sales to Spain more than halved to £575m (€663m) in 2009 from £1.2bn in 2008, mostly driven by a plunge in oil exports, according to the data from the Spanish government.
“Spain’s recession implies a big adjustment in the country’s imports, despite the strength of the euro,” said José Antonio Zamora, economic and trade councillor at the Spanish embassy in London. “Energy products and capital goods have been particularly hit because of the fall in investment.”
Tourism companies have also suffered as the number of British visitors to Spain has plummeted to about 11 million from 17 million, due to the UK recession and the stronger euro, which makes trips to the Costas more expensive.
Other big export names include British Imperial Tobacco – which bought Spain’s cigarette maker Altadis – and Bupa, owner of the Sanitas private health insurance brand.
UK-Spanish mergers have flourished over the past few years as the two economies opened up to competition in Europe. Spain’s Iberdrola took over Scottish Power, while British Airways is now planning a tie-up with Spain’s flagship carrier, Iberia.
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Burberry restructures Spanish operations
Feb 17th
• Cost of refashioning Spanish business may reach £61m
• Spanish sales in first six months this financial year down 37%
Burberry is to close its loss-making Spanish business which produces a cheaper clothing line sold in department stores such as El Corte Engles.
The luxury fashion company said sales had collapsed by almost 40% as consumers cut back spending in the recession ravaged country. As a result Burberry said it was “no longer viable” to make a separate collection for Spain. The company has begun talks with 300 staff at the head office in Barcelona, which is to close.
Spain is unusual within Burberry’s presence in 25 countries with the business a hangover from its days as a franchise operation. The company bought it back ten years ago and had slowly been moving it into line with other European markets such as France. Burberry chief executive Angela Ahrendts said the deterioration in sales meant decisive action was called for.
Burberry said its Spanish business had a turnover of £145m in the year to March 2009 but six months into this financial year, sales were down 37%.
The company will now meet Spanish clients such as El Corte Engles to discuss options as the winter collection is already in production.
Ahrendts’ predecessor Rose Marie Bravo reinvented the dowdy British trenchcoat maker as an international luxury brand whose glamorous campaigns are now fronted by Harry Potter actress Emma Watson. Bravo began buying out licence-holders so the group could regain control of the brand’s image.
The luxury label said it would launch its main collection, which is designed by Christopher Bailey, in Spain next year. The change may put off some retailers as it is more expensive – and fashionable – than the Spanish diffusion line. The designer collection is only sold in three Spanish stores at present.
Burberry said the restructuring costs could run to €70m (£61m) and it would explain how next year’s profits would be affected at full-year results in May.
Shore Capital analyst Kate Calvert said Spain had been Burberry’s “achilles heel” for some time: “Spain was run under licence and the brand became over-exposed. We believe this is the right decision even though there may well be some short-term financial pain.”
Analysts estimate that El Corte Engles accounted for 50% of Spanish sales and its decision would be key to determining the future size and shape of the business.
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Pushing Greece into recession | Adrian Pabst
Mar 6th
Posted by Adrian Pabst in Business
No comments
The crisis in Greece needs sound EU economic judgment and political leadership, not Germany’s fiscal austerity
The Greek prime minister George Papandreou is embarking on a whirlwind tour of western capitals to drum up support for his crisis-stricken country. Beginning today in Berlin, where he will meet the German chancellor Angela Merkel, before travelling on to Paris and Washington DC for talks with presidents Sarkozy and Obama, Papandreou’s diplomatic offensive will determine whether Greece can secure help from its fellow eurozone members or whether the IMF will eventually be called in. What’s at stake is no longer just Greece’s creditworthiness, but also Europe’s credibility.
The next fortnight is critical for the future of Greece and the fate of the eurozone. If Athens can raise about €22bn (£20bn) to pay off maturing debt in April and May, then the risk of a sovereign debt default spreading to other heavily indebted euro countries will subside. If not, then in the absence of a rescue operation from euroland, the Greek government would have no other option but to beg the IMF for help – further undermining the status of the euro as a credible alternative to the dollar.
Papandreou’s mission comes about a month after a special EU summit in Brussels pledged collective European solidarity in exchange for tough Greek action. By announcing a third round of spending cuts and tax increases to reign in its budget deficit, Athens is fulfilling its part of the agreement. Now it’s the turn of the eurozone to help Greece bring down the cost of borrowing – otherwise the economic reforms could lead to social unrest and bring down the Greek government.
This week’s Greek bond issue was oversubscribed (bids worth €15bn for the available €5bn bond issue), but came at a high price. At 6.37%, Greece is paying more than twice as much in interest as Germany on a comparable 10-year bond. That is pushing up the cost of servicing existing debt – never mind new borrowing requirements in the second half of 2010 estimated at about €30bn.
By refusing to provide financial guarantees to state-owned banks buying Greek bonds which would help reduce the interest rate on Greek debt, Berlin is forcing Athens to devote more money to servicing debt and make even deeper cuts to public spending. This lethal mix is pushing Greece back into economic recession, reducing tax revenues, increasing the real value of its debt and requiring yet more savage cuts – a vicious spiral of debt-deflation that could plunge the country into an unprecedented social recession.
Afflicted by soaring youth unemployment and mass public sector lay-offs, not just in Greece but also in Spain, Portugal and Italy, the future of Europe’s “Club Med” is dire. With hindsight, the Brussels agreement looks increasingly like a Faustian pact with the debt devil concluded by the German iron chancellor.
Throughout this crisis (and the entire economic turmoil since 2008), Angela Merkel has distinguished herself by a spectacular lack of leadership. Her sterile appeal to respect the rules of the eurozone rings increasingly hollow, not least because Germany itself has in reality flouted the strict fiscal criteria at the point of entry (through an opportunistic sale of government shares in Deutsche Telekom) and during the ongoing recession. Moreover, she has failed to stand up to a groundswell of ugly political populism, with members of her ruling coalition (especially the market-fundamentalists in the Free Democratic party) demanding the sale of Greek islands, historical buildings and art works in exchange for German financial help.
Paradoxically, the sale of national assets is almost exactly the advice given by Goldman Sachs to the Greek government to “pay” for euro membership back in 1999. After the collapse of neoliberalism, it is worrying that the current German government prefers fiscal austerity and the pressure of global finance over sound economic judgment and political leadership. But the latter is exactly what the operation of markets requires, otherwise there will be more speculative attacks and irrational herd-like movements against Greece and other vulnerable euro members.
By contrast, France is leading the way in arguing for a rescue operation now to avoid a fully fledged eurozone bailout or an IMF-orchestrated structural adjustment programme and thereby to mitigate Europe’s social recession. With strike action and protest movements spreading across euroland, Merkel’s hardline stance is unnecessarily exacerbating a crisis that could bring down the European common currency – Germany’s main contribution to Europe since reunification.