Non Spanish Population Resident in Spain January 2008

The National Statistics Institute has just published the latest data from the Padron Municipal (valid as of 1 January 2008). 5,220,577 foreign born residents in Spain at that point. This was an increase of 701,023 over 1 January 2007. The evolution of the foreign born population can be seen in the chart below.



To give us some idea where we are here, Spain's population increased by 862,774 people during 2007. Natural increase in the Spanish population accounted for 161,751and the rest of the increase was a result of net inward migration.

Residents by country

Basically I would argue that the whole future evolution of the Spanish economy depends on what now happens to all these immigrants (who have basically compensated for the "missing births" in Spain which have been produced by the presence of lowest-low fertility for such a long time.

Here is a chart showing the principal migrant source countries outside of Western Europe. In Western Europe the UK is far and away the largest origin point, with 352,000 residents at the end of 2007. It is also interesting to note how the increase in the numbers of new residents from Western Europe has now slowed considerably. Now that the housing boom has fully burst it is unlikely the inflows from these sources will pick up very much in the near future.

Outside Western Europe the big news this year is that Romania has jumped into the number one slot, with 728,961 residents, overtaking the previous number one, Morocco (who now have 644,688 residents). The number of Ecuadorians actually dropped by 6,989 in 2007 and now stands at 427,099. It is hard to say anything conclusive about this, but at face value it does seem to suggest that the idea that East Europeans would be transient migrants and Latin Americans more permanent may be a large over-simplification. The Romanian community in Spain (as well as in Italy I suspect) seems now to be well established, and it may well be that many of these migrants have now decided to change their country permanently, we will see. If that is the case the implications of this (with 700,000 people largely of working age in Spain and a similar number in Italy) are enormous for the future of a country with a working population of only just over 10 million, and a population which due to its own low fertility would soon be contracting naturally. Unfortunately few people are thinking about this problem at this point.




Romania




Morocco




Ecuador




Columbia




Bolivia



Bulgaria



Peru

The Spanish Treasury No Longer Accepts Italian Government Bonds

The Spain Treasury announced last Friday that it was no longer willing to accept Italian government paper as collateral for short term loans. In part the move is a reflection of the deteriorating liquidity situation inside the Spanish banking system, and in part it reflects the rather negative outlook on Italian government debt as continuing lowest-low economic growth makes it difficult to see how Italy can possibly hope to balance its budget by 2011, thus making holding Italian government debt a progressively more risky decision as that deadline approaches.

Spain's Treasury has said it is nopw only willing to accept the highest-rated government debt as collateral for short-term loans, a move that will exclude Italian government bonds. As of July, Spain will only take AAA rated bonds registered with the Spanish clearing house Iberclear as collateral for overnight repurchase agreements, or repos, according to Enrique Ezquerra, deputy director of public debt at the Spanish Treasury. Since Italian debt has been systematically downgraded in recent years, and Standard & Poor's now rates Italy's debt at only A+, while Moody's Investors Service has it at Aa2 this clearly means that Italian paper no longer qualifies. Italy's debt rating was lowered by both Standard & Poor's and Fitch Ratings in October 2006 on concern that problems in containing the deficit would lead to further increases in what is already the EU's biggest debt by volume over the coming years.


Basically the Spanish Treasury lends surplus cash to broker-dealers to boost income from financial holdings and in return receives collateral. Following the sub prime crisis in the United States last August the Spanish government expanded the range of securities it would accept as collateral to include foreign government bonds and AAA rated private debt since the strong budget surplus Spain was running at the time meant in had plenty of cash on hand.

Now Spain's budget surplus is rapidly disappearing as government spending rises in the face of the rapid economic slowdown while income is decreasing. Also, the Spanish banks, for whom this measure was really intended are finding themselves in an increasingly difficult liquidity gridlock, hence whatever help, no matter how small, they can receive from the government is more than welcome. Thus this move needs to be seen more in a Spanish than an Italian context. It is however a warning shot for Italy, since Italian paper (after its Greek equivalent) is the most difficult to place of any European government (and particularly given its volume), thus the Spanish decision can also be seen as a desire for the little window they have opened to become a repository for unwanted Italian debt.

In a Bloomberg interview Enrique Ezquerra described the move as "a partial step back....We will continue accepting AAA corporate bonds listed in the Spanish fixed-income market. This includes asset-backed securities and covered bonds.'' Perhaps I would say rather than a step back it is an attempt to close a loophole and focus attention on the real problem which is how to fund the Spanish cedula hipotecarias (the local version of mortgage-related covered bonds).

I would also say that this relatively small and seemingly trivial decision is just one more symptom of the sort of strains the eurozone's "twin deficts" (Italy's public debt - circa 103% GDP 2007 - and Spain's current account deficit - 12% GDP Q1 2008) are likely to place on the smooth working of the eurosystem ten years after it was originally set in motion.

Spain Construction Output April 2008

According to data released by Eurostat today, construction activity, when seasonally adjusted, fell by 0.8% in the euro area (EA15) and by 0.4% in the EU27 in April 2008, compared with March. In March, production decreased by 2.8% and 2.7% respectively. Compared with April 2007, output in April 2008 dropped by 2.4% in the euro area and by 0.3% in the EU27.

Among the Member States for which data are available for April 2008, construction output rose in ten and fell in three. The situation in Eurozone countries like Spain and Ireland contrasts sharply with the large increases in activity being recorded in some of the East European emerging economies, with Romania (+30.0%), Slovenia (+23.3%), Poland (+22.8%) and Bulgaria (+21.0%) leading the field. Spain had the highest annual decrease for any reporting country (-21.8%).