Spanish retail giant, Inditex - owner of Zara, Pull & Bear & Massimo Dutti chains posted impressive Q1 profits - proving that Spanish industry, innovation and manufacturing are possible, and profitable. Inditex posted a 17% rise in fourth-quarter profit on a 13% rise in revenue as the Spanish retailer saw strong growth in international markets and opened its fiscal year with rapid sales growth. For the quarter ended Jan. 31, the owner (ES:ITX 48.99, +2.08, +4.42%) of the Zara, Pull & Bear and Massimo Dutti chains posted profit of 483 million euros ($666 million), against 410 million euros in the year-earlier period. For 2009 as a whole, the company’s profit rose 5% to 1.31 billion euros, topping analyst estimates of 1.27 billion euros. Sales rose to 1.9 billion euros from 1.68 billion euros during the quarter, and grew 7% for the year to 11.08 billion euros, outstripping those of U.S. apparel giant Gap (GPS 23.30, +0.23, +1.00%) , on an annual basis. Sales outside its home market of Spain, currently enmeshed in a deep economic recession, accounted for 68% of total sales in 2009, versus 66% in 2008. Europe ex-Spain accounted for a 46% chunk of sales, against 45% in 2008, while Asian sales accounted for 12.2% of the total versus 10.5%. Pablo Isla, chief executive of Inditex, said in a conference call that 2009 was a year of stability for Spain, with levels of sales maintained, but space growth had not increased. Spanish sales accounted for a 31.8% portion of the overall total, down slightly from 34% in 2009. The company’s same-store sales in local currencies rose 14% from Feb. 1 to March 14. The spring and summer season will be influenced by the performance over the Easter period, owing to heavy sales volumes during the period. The company opened 343 stores in 2009. Inditex plans to open 365 to 425 new stores in 2010, with 95% of this new retail space to be located in international markets. Within these plans, 40% of the increase in stores will take place in Asia, with two stores to be opened in India starting in May. “Our priority is to focus growth in Europe and Asia,” said Isla. “We see significant opportunities in Eastern Europe [and] the Russian Federation, and there is a great potential to expand profitably in Europe for many years, as our market share is below 1% in most countries.” He said the main areas of growth for Asia are China, Japan and South Korea. “We see huge long-term potential for Inditex in Asia markets,” he said. Over the next three years, the company expects to see space growth of between 8% and 10%. Owing to strong cash-flow generation by the group, with funds from operations up 11% in 2009, Inditex’s said its board will propose a dividend of 1.20 euros per share, an increase of 14% on the previous year. Isla was asked by analysts why they aren’t paying out an even bigger portion of net income, given the group’s huge cash balance. “Our main priority is to invest in the future growth of the business. We always want a high level of flexibility … we always wanted more steady growth in the dividend, rather than big jumps,” he said. He also said that the company expected costs to grow along with its plans to open more stores. Inditex’s success has been a boon for founder and Chairman Amancio Ortega, who ranked the ninth richest man in the world in Forbes magazine’s annual list of billionaires, which was released last week. He moved up one spot from No. 10. Shares of Inditex rose nearly 3.3% to 48.49 euros in Madrid, as many analysts appeared pleased with the results, given the tough time retailers across the globe have been enduring owing to the recession. Analysts at Standard & Poor’s said good news for shareholders was the rise in the dividend and also the fact that Inditex is relying less on Spanish markets for revenue. Cost containment, they said, helped Inditex beat expectations. Gross-profit margin for Inditex in 2009 widened to 57.1% from 56.8%. In a note to investors, S&P raised its target price on Inditex to 50 euros from 42 euros, but kept its hold recommendation on the group. Analysts at Bank of America/Merrill Lynch rate the stock a buy. They see a 3% to 5% upward risk to consensus earnings estimates owing to “strong results and a good start to the first quarter.” They said shares are valued at 20 times 2010 price/earnings, which is reasonable given the “sustainable mid-teens growth in earnings per share.” “We are more relaxed than most on the Spanish consumer outlook and we think Inditex’s expansion into Asia and of its non-Zara formats should put upwards pressure on margins and returns over time,” they said in a note to investors. Story from Market Watch

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Inditex Profit Jumps 17% Q1 2010

The Spanish property market is in too much of a mess for a real BMV market to exist, according to agents specialising in distressed property in the country. Struggling developers, desperate homeowners and banks stocked with repossessions are all setting their prices according to how badly they want to sell, meaning a benchmark price is virtually impossible in many of the tourist hotspots. And without a standard to measure against, agents are left to secure whatever price they can for each situation. “Something is worth what someone else is prepared to pay for it and that’s that,” says Inez Rix, owner of Direct Auctions. “You have an open market price (not value), a bank valuation (upon which they base their lending), the offer price and the declared price at notary! No wonder there is no benchmarking for Spanish property .” The problem is so severe that one unit might be on sale for 50% less than the identical unit next door, says Darren Carter, owner of distressed agent Goldberg & Partners. “It all depends on the seller, the buyer and even the weather or what week it is as to what price will be agreed. A developer or bank might have sold three units at one price last week and not want to sell at the same price this week.” The ability to sell at a below market value is also hampered by the banks’ mortgage regulations. In Portugal, developers are offering units with 100% LTV mortgages by fixing prices at 80% of the lending bank’s valuation, effectively removing the need for a deposit. “In Spain this isn’t legal as the Bank of Spain ensures their normal lending criteria is adhered to,” says Rix. “In order to achieve a percentage of borrowing against the higher bank valuation, one now has to obtain a doctored purchase contract.” Carter says there are now better finance deals for buying bank product in Spain, “even 90 or 100% LTV on the price of the property but not including closing costs”, but the mortgage market has become too dynamic. “It feels like banks will offer one LTV one week and a different one next week once they’ve got their quota for the month.” Story from OPP (subscription)

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The Myth of BMV Spanish Property

Sterling proved to be slightly less fireproof than it had been the previous week, losing the half- cent between €1.11 and €1.1050. The low came at €1.0950 on Wednesday and sterling was staring at that same level as things got under way in London this morning. In a dull week for hard data the British economy did not have a whole lot to say for itself and what it did manage to scrabble together was not particularly edifying. Two house price indices, one from the Royal Institute of Chartered Surveyors and the other from estate agents’ website Rightmove, damned the property market with faint praise. The RCIS house price balance, which compares the number of members reporting higher prices with those reporting lower ones, fell from 32% to 17%; still positive but more reservedly so. Rightmove’s index of asking prices went up by 0.1%; positive buy only by a technicality. UK industrial production figures were a bigger disappointment and took sterling to the lows of the week. Production (manufacturing, mining and energy lumped together) fell by -0.4% in January. Manufacturing alone was down by -0.9%. January’s trade deficit was £8 billion, the biggest since August 2008. Between August ‘08 and January ‘10 Sterling’s trade-weighted value became 23% weaker yet imports were up and exports were down. The significantly more competitive currency is still not having any positive effect on the balance of trade. Sterling also had to contend with unhelpful comments from several quarters. Credit ratings agency Fitch was ‘uncomfortable with the fiscal adjustment path set out by UK authorities’ and looked for ‘more credible and stronger fiscal consolidation plans during 2010. Credit Suisse anticipated that UK banks, collectively, would have to reduce their balance sheets by more than £500 billion over the next three or four years in order to meet new regulations. The prime minister reassured investors that Britain’s AAA credit rating was solid but not all of them were convinced, especially the researchers at UniCredit Bank who predicted that the government would have problems selling all the bonds they need to shift to finance the budget deficit. Euroland was just as starved as Britain when it came to useful statistical guidance. Investor confidence improved from -8.2 to -7.5 but the figure was still negative. It was only really euro zone industrial production that counted for anything. The +1.7% increase in January was way better than Britain’s anaemic performance, even if it did only represent a +1.7% improvement over the same month last year. More salutary than that were Germany’s trade figures. In the same month that the UK made an £8 billion loss, Germany turned a profit of almost the same amount. It did so despite what the authorities in Berlin and Paris describe as an overvalued euro. Underlying everything to do with the euro was still the co-ordinated (or not) bailout programme for Greece. Another week went by without any sign of final sign-off for the €25 billion (or thereabouts) mix of loans and guarantees that the Greek prime minister spent half the week travelling the world to engineer. As things presently stand there are several schools of thought. One believes that Greece will be able to work its own salvation, if only because it must. Another has it that Germany and France will eventually get off their high horse and put their hands in their pockets. Yet another argument is that, with or without Germany’s co-operation, Brussels cannot afford to see the economy of a euro member crumble for lack of cash. The market’s point of view, for the moment at least, is Micawberesque; ’something will turn up’. Investors are not sweating too much as long as nothing explodes. Sterling surprised many with another refusal to lie down last week despite a string of potentially damaging developments and data. However, as long as the opinion polls continue to indicate a hung parliament investors will continue to fear that even after a general election Britain’s government will be unable or unwilling to tackle the budget gap. Buyers of the euro should hedge 50% of what they will need. If the money is required in the near future they should consider covering the whole amount. Get the best foreign exchange rates with no bank fees or commission charges using your Moneycorp Privilege Card

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Sterling Rides Most of the Blows

In a bumper news week, there’s good and bad news for Spain. Let’s get the bad news out of the way first - and end on a high. Remember my soapbox rant last week about how public sector striking will only add to Spain’s woes? Well, the public won, and the government caved in over pension reforms . This is particularly bad news for Spain - who already have precious-few financial tools left to deal with their twin problems of mounting debt and growing unemployment. I have no doubt that whatever they next suggest as a solution will be opposed - and most likely defeated. Unsurprisingly, buying into Spanish government debt via bonds is now seen as a risky business . Advising investors, a Merrill Lynch spokesman said: It’s going to take a very long time - half a generation - for Spain to fix the structural issues they have. Rather than a spectacular short-term event, a more likely outcome is a death-by-a-thousand-cuts-type scenario. My prediction is that Mr Zapatero’s aversion to taking on the unions will cost him at election time. The incoming government will make drastic changes - and suffer temporary unpopularity by doing so - and Spain will eventually enjoy a more sustainable foundation for financial growth. Until then, it’s “death-by-a-thousand-cuts” for Mr Zapatero and the nation he’s supposed to be leading. And now for the good news - and there is a fair bit of it. Last week I boldly proclaimed that we had already passed the bottom of the Spanish property market . It seems that I’m not the only one who thinks so. In Spanish Property Recovery Begins , Mark Stucklin adds some data to that assertion but warns that the recovery is not happening uniformly throughout Spain, nor across all types of property. Mark’s summary is backed up by the latest TINSA house valuation trend too. No-one is predicting a spectacular U-turn in the fortunes of Spanish property - and you wouldn’t believe them if they did. Even so, any kind of a recovery is welcome news right now. There are also hints that Spain’s building societies are playing their part in the fragile recovery. An update on lending in Spain provides the cheery news that: Spanish Banks are slowly relaxing their lending criteria with one or two offering more attractive deals and higher LTV’s. And finally, in the fairly unlikely event that you’re a higher rate tax payer and employed by a Spanish company, you can now benefit from the same tax breaks as David Beckham. Martin Dell, Kyero.com

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Spanish Property: And Now for the Good News

A Foreign Office minister warned Spain on Sunday that knocking down British expatriates’ houses was hurting its economy. Chris Bryant, Minister for Europe, said that the country was undermining efforts to create a recovery in its beleaguered housing market. He was speaking yesterday during a visit to south-eastern Spain to meet British expatriates who have been told that their homes will be bulldozed after Spanish authorities declared their construction illegal. The authorities there have been waging a campaign against former officials accused of allowing overdevelopment of coastal regions. Local governments issued building licences for the properties, but these were later nullified following court action instigated by a higher regional government. Mr Bryant cautioned: “The Spanish property market is not going to recover quickly if pictures of bulldozers knocking down expats’ homes are appearing in British newspapers. Everyone I’ve spoken to in Spain says they want to find a solution but wanting a solution and getting one are two different things. He said: “Obviously it’s not for the British Government to tell the Spanish what to do. But I’m pushing the message hard at all government levels that I meet here that they have got to put political willpower into these problems, whether it’s an amnesty, whether it’s a change in the law, whatever the solution is that is needed. That is the point I am pushing. I have to say also that there is an enormous difference between the Britons who just make a cursory legal deal – that is always ill advised – and those who have done everything they should or could have done but still find themselves in deep trouble. Mr Bryant spent the weekend advising expatriates in Andalucia on issues ranging from property rights to health care. He visited Torrevieja, the fastest-growing town on the Costa Blanca, Malaga, the capital of the Costa del Sol, and the town of Albox, where eight British families are fighting demolition orders issued at the end of last year. John and Muriel Burns were among the first to receive the demolition orders in Albox. The pensioners emigrated to Spain in 2001. “They did everything to dot the ‘I’s and cross the ‘T’s that they possibly could have to obtain the permission they required” to build their dream house, Mr Bryant said. But it turns out that the permission should not have been given. That was no fault of theirs whatsoever – but now they face the prospect of having their home demolished. After hearing that his home would be bulldozed, Mr Burns declared that he and his wife would chain themselves to the house. “If this building comes down, then we will be underneath it,” he said. Mr Bryant said he was able to tell worried Britons that the Andalusian regional government was appointing a full-time official to deal with the concerns of British expatriates. The official will provide advice on property regulations, health care and residence requirements. Mr Bryant warned: People buying property anywhere abroad, not just in Spain, have to take at least twice as much trouble as they do at home to make sure everything is legal. It is so easy to go to a lawyer because he’s cheaper. Then later you find out that he wasn’t an independent lawyer at all, but was working all the time on behalf of the land developer and you are really stuffed. Story from The Telegraph

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Bulldozing Expat Homes is Hurting Spanish Economy

Pure investors from the UK have disappeared from a holiday home market now dominated by cash-rich lifestyle buyers, according to new research from Savills. The report from Savills International Research and holiday lettings company HomeAway.co.uk, revealed how far the overseas property market in the UK had fallen over the last year. Just 2% of the 430,000 foreign-home owners in the UK bought their property in 2009, compared to 70% who bought between 2003 and 2008. “By spring 2009 Savills International noted that interest in international holiday homes had returned, albeit at far lower levels than previous years,” said the report. “The market has now reverted back to traditional, end-user buyers (as opposed to investors), and mostly in traditional, established hotspots.” The high number of distressed sales that have contributed to oversupply and falling prices has helped keep pure investors out of the market, it added. “In contrast to previous years, investors solely seeking to capitalise on upward price movement are no longer active in the market place.” Savills’ head of international, Charles Weston-Baker, told OPP that mid-market buyers had also started to return to the market. “We have started to see more grassroots sales coming through,” he said. “The very top of the market has largely been unaffected, but now end-users who are looking for lower-priced but quality property are buying to enjoy the product. “We’ve also noticed how important sport has become to buyers, especially for baby boomers and those retiring. There’s a new enthusiasm for experiential holidays and buyers need a reason to be somewhere, such as golf or horseriding. We seem to have jumped 20 years in aging, where people are slowing down at 80 rather than 60.” The report predicts another quiet year for the UK holiday home market, with most sales taking place to high-income lifestyle buyers in traditional locations, with little activity in the speculative or off-plan markets. In 2009, although property in France, Portugal and Spanish property remained the most popular destinations for Savills’ buyers, the proportion of people buying in western Europe overall decreased, as the popularity of central and southeastern Europe (particularly Cyprus, Greece and Turkey) and the Caribbean grew. However, the sample base for 2009’s results was much smaller than in previous years. The proportion of people buying in major cities and in villages grew substantially at the expense of smaller towns and isolated rural locations. The popularity of purpose-built resorts also increased. “This reflects not only the growth in preference for such developments but also the rise in quality and quantity of such communities,” said the report. Interest in buying property to renovate or improve also fell, mirroring the rise in resorts where ready-to-go homes maximise letting potential. Savills’ market has become skewed towards mid-to-top end buyers, and properties worth more than £200,000 now form the majority of purchases, with a particular fall in popularity of homes worth less than £100,000. Story from OPP (registration)

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Spain Sees Return of International Lifestyle Buyer

Spanish Banks are slowly relaxing their lending criteria with one or two offering more attractive deals and higher LTV’s. However, banks are still being cautious when it comes to assessing a client’s affordability. Most banks use a debt / income ratio of either 35% or 40%, although we work with one bank that uses 50%. This really helps those clients who struggle to get mortgages elsewhere due to having a higher ratio of regular outgoings on mortgages, loans, credit cards etc. to net disposable income (the “debt / income ratio”). The eurozone base rate has remained at 1% for some time now, meaning that borrowing in Spain is still cheap. With the recovery in Germany faltering and ongoing problems in the so-called PIIGS group of countries (Portugal, Italy, Ireland, Greece and Spain), it is very unlikely that there will be a sudden hike in rates. With regards to the exchange rate, this is more or less the same as last month. Dual-currency mortgages are available, which allows clients to pay the mortgage in pounds sterling and avoid any currency fluctuations. If you are buying a property for your main residence, we can offer 80% of the bank valuation. This means that if the valuation is higher than the purchase price, it is possible to borrow up to 100% of the purchase price, which is something that has been impossible during the recession. The interest rate is as low as Euribor (annual) + 0,66% (the lowest we have come across to date), with 0,5% bank opening commission and 0% redemption penalty for partial redemption. Another attractive option is that you can have up to 2 years’ interest-only. This bank also offers remortgage products. Terms are available up to age 75 with a maximum 45-year duration. The only disadvantages with this product appear to be the compulsory insurances and that the client’s income needs to be paid into an account with the bank. More information from Mortgage Direct

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Spanish Mortgage News

German magazine Bild (equivalent to The Sun in the UK) has ruffled Greek diplomatic feathers this week. In an open letter to the Greek PM during his trip to Germany, Bild pointed out some of the differences between the two countries: “Here, people work until they are 67 and there is no 14th-month salary for civil servants. Farmers don’t swindle EU subsidies with millions of non-existent olive trees.” Bild makes its point with characteristic Sun subtlety, but news of protests in Spain , Portugal and Greece against raising the retirement age to 67 reminded me how some citizens of those countries have yet to accept responsibility for their own futures. Spanish civil servants enjoy employment for life - it’s virtually impossible to get fired. They also enjoy a 13th month extra salary - (not performance-related) . Meanwhile, tax evasion is a national pastime and the tax-office (staffed by civil-servants, remember) only go after the easy targets - individuals and businesses who are already paying tax. Spain needs pension reform, employment reform and tax reform - but I doubt whether Zapatero has the stomach or backbone for very much of that. (Steps down from soapbox) Mark Stucklin reports on how the Spanish property market grew at the end of 2009 . It’s not a massive uptick, but it’s better than a further decline. Looking at the number of estate agents advertising on Kyero.com, we reached ‘bottom’ during September last year. Since then the number of advertisers has steadily increased - and we’re now back to the same number as this time last year. Regarding traffic to Kyero.com, we’re now over 50% up - a doubling of traffic in January and February this year compared to the same period last year. If what’s happening with Kyero is an early indicator of what’s happening in the Spanish property market (and I think it is), we can expect Q4 2009 to have marked the bottom of the Spanish property market - in terms of volume of transactions at least. The rest of this week’s news centred around the fragility of the Spanish economy and I’ve included the most enlightening articles this week. The best, I think is from the NY Times - a well reasoned and comprehensive explanation of the challenges facing Mr Zapatero. Martin Dell, Kyero.com

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We’re Past the Bottom of the Spanish Property Market

There was a small uptick in Spanish housing sales during the fourth quarter of last year, according to data released today by the Ministry of Housing. Small, maybe, but enough for the Government to get excited about. “The transactions in the fourth quarter represent a rise of 4.1% with respect to the same period last year, this being the first year-on-year rise since the fourth quarter of 2006,” goes the first sentence, in bold, of the Ministry’s press release. In fact, if you just look at the ordinary housing market, the uptick was even better. Excluding social housing there were 116,664 house sales in Q4, a rise of 5.5%. Regrettably, that’s where the good news ends. Take the year as a whole, there 413,112 transactions last year, a fall of 19% compared to the previous year, and a whopping 46% down on 2007. Even the Q4 was down 33% compared to 2 years ago. Some regions did better than others. Looking at a selection of regions popular with holiday home buyers, the inland province of Teruel suffered the most in 2009, down 36%, followed by Las Palmas in The Canaries, down 32%. At the other end of the scale, Spain’s two big cities did the best, down just 1.7% in Madrid and 3.9% in Barcelona. The small national uptick in Q4 that got the Ministry excited was almost entirely driven by big increases in Catalonia and Madrid (Barcelona +35%, Madrid +41%). Why the big surge in home sales in those two cities in the last quarter of 2009? I don’t know. But I wouldn’t be surprised if it had more to do with banks shifting Spanish property around their balance sheets than families buying homes to live in. Story from Mark Stucklin

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Spanish Property Market Grew Q4 2009

The idea that Spain could become a target of the world’s markets, an economic basket case weighing down the euro, is a preposterous notion, but not an unthinkable one. It’s preposterous in the sense that this is a great, energetic, creative and competent nation that in about 25 years shed a dismissive label as a cheap place for two weeks in the sun to become Europe’s fifth economy, Latin America’s biggest foreign investor, and an all-points, high/low cultural turbine producing terrific films, clothes people want to wear, exceptional food, and great soccer and basketball. In 2010, that’s a reasonable, widespread perception. Still, according to Fernando Fernandez, a former chief economist at Banco Santander and former official at the International Monetary Fund in Washington, “an attack by markets on Spain would be based on some rationality.” Now a professor at IE University here, he said, “An 11.4 percent deficit like ours is huge.” Last week, José Manuel Barroso, president of the European Commission, and Angel Gurría, secretary general of Organization of Economic Cooperation and Development, were in town on separate missions to insist, as decorously and elliptically as possible, that Greece (whose 12.7 percent deficit and substandard accounting methods have shaken the euro), and Spain (having the confidence of its lenders and much lower debt) were chalk and cheese. Still, Spain’s facts are scary: 18.8 percent unemployment; about half the age group under 25 out of work; €600 billion, or $820 billion, in mortgages outstanding after the end of a construction boom two years ago; and a real effective exchange rate that the E.U. Commission says is overvalued by 10 percent. Spanish structural realities run a along a similar track: Productivity and competitiveness are low. The job market’s rigidities mean that two-thirds of the labor force are permanent hires, blocking a potential fall in real wages after a rise in labor costs of 4 percent a year over the last nine. To boot, the central government controls only about 25 percent to 30 percent of discretionary spending, with the rest of state revenue devolving to regional and local governments with their own notions of savings and expenditures. What to do? The governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, says that failing “urgent” and “ambitious” reforms in the labor market, the Spanish economy will enter a “tough and complicated period.” Which is a gently phrased complement to the insistent market noises saying Spain stays an attractive speculative target even if the European Union rescues Greece. Mr. Ordóñez, who also sits on the governing committee of the European Central Bank, stressed the need for an immediate, convincing response. The startling thing in Madrid is its seeming absence. There’s a kind of lethargy instead. No crash program with specific goals to change the Spanish economy over the next weeks and months is coming from right-wing opposition. And the Socialist government of Prime Minister José Luis Rodríguez Zapatero appears to bumble ahead confusedly, casting proposed cutbacks into the air, then reeling them back. Mr. Zapatero himself informed an international audience of his plan to push back Spain’s retirement age to 67 from 65, which, days later, was put it into the conditional tense. The possibility of a public sector wage freeze, discussed in the press by an official last Wednesday, got buried on Thursday by Finance Minister Elena Salgado. The government’s effort seemed as feeble as an initiative announced by the Fundación Confianza, a group backed by big Spanish firms like Telefónica, Santander and BBVA, seeking to buck up national confidence with a Web site called estoloarreglamosentretodos.org. Roughly translated, that’s togetherwecanstraightenthingsout. I tried to get onto the site on Monday morning and was shunted to one having to do with sustainable transport. Spanish politics, frankly, does not currently seem up to the intensity of action that the country’s economic and financial circumstances would suggest — and appears barely conscious of the implications for the world’s view of Europe if Spain were to fall to its knees. The opposition Popular Party, which the polls indicate would run up to seven points ahead of the Socialists if national elections scheduled for 2012 were held now, gives the impression of not wanting to do anything — proposing a cutback in social security levels, for instance — that might spook a single prospective voter. Mr. Zapatero, in turn, it is said, just might relish some kind of eventual E.U. involvement, guidance or assistance in enacting the tough austerity measures his constituency, notably the trade unions, would otherwise resist. In the Spanish context, where the electorate holds the E.U. in ongoing reverence, accepting what could be euphemized as a European austerity checklist could be a politically manageable way out for the prime minister. But the game may be moving quickly outside of Spain’s grip. On Friday, the ratings agency Standard & Poor’s, far from endorsing the credibility of the government’s pledge to the E.U. to reduce its deficit to 3 percent of gross domestic product by 2013, said it thought it was likely to remain above 5 percent. It said it expected “much weaker economic performance” than the government expects, with unemployment remaining above 15 percent over the period. The agency also renewed its negative outlook on Spain’s sovereign ratings “in the absence of more aggressive and tangible actions by the authorities.” As if in response, Ms. Salgado, the finance minister, asserted that the country, which remains in recession, would grow in every quarter this year. And — Let the good times roll! — sounding like someone who thought they had assurances that Spain was Too Big to Fail, she insisted that members of the euro zone “will not stand idle if one of the member countries is in trouble.” That was late Friday. On Monday, Mr. Zapatero doubled up on Ms. Salgado’s statement of confidence, telling the Frankfurter Allgemeine Zeitung in an interview, “You can have absolute confidence in us. Our plan to reduce the deficit will be fulfilled.” Then, almost in the next sentence, he added a new turn to the government’s pattern of confusion, and cut the legs off the finance minister’s timetable for Spain’s emergence from recession by as much as half. “I am convinced,” Mr. Zapatero said, “that our economy will be growing again by the fourth quarter, at the latest.” Story from NY Times

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Spanish Economy on the Edge