Viva Espana? International investors not so sure

Spain has become the latest country caught up in the government debt crisis crippling Europe, sparking fears that it'll join Greece, Portugal and Ireland and go asking for an international bailout.

Over the past week, investors have grown increasingly wary of buying Spain's debt on the international bond markets, sending the country's cost of borrowing to highs not seen in nearly four months and its stock markets plummeting.

In reality, worries about Spain have always been there. Bond market pressure on Spain began seriously to mount in 2011 as the country's deficit and unemployment rocketed. But late last year, two factors helped ease this pressure. First, Mariano Rajoy's right-wing and pro-austerity Popular Party took over the reins after winning general elections in November. But of much greater impact was the European Central Bank's decision to flood the region's financial system with more than (EURO)1 trillion ($1.3 trillion) in bargain loans to banks. The injection spurred lenders to snap up battered government debt, driving Spanish borrowing costs down. However, the effects of the cheap loans across Europe have since dissipated and Spain is taking the brunt of market distrust.

Rajoy's administration is faced with two big tasks: resurrect an economy with 23 percent unemployment through job creation while trying to reduce its deficit to satisfy EU overseers and international investors via austerity measures. To help them achieve these, the government has already imposed draconian spending cuts as well as introducing labor market and banking sector reforms.

Real Estate and Mortgage Market Update

U.S. interest rates are better this morning with the U.S. stock markets opening lower on reports out of China showing its economy is slowing more than thought. China’s GDP rose 8.1% in the first quarter from a year earlier following an 8.9% increase in the fourth quarter, the National Bureau of Statistics in Beijing said today. That was less than the 8.4% growth predicted. China’s economy is slowing as exports decline to Europe and the U.S. The latest data shows imports are also slowing.

Europe’s debt problems are back as we noted previously. Average net borrowings by Spanish banks climbed to 227.6 billion euros last month from 152.4 billion euros in February, the Bank of Spain said. lender s in the whole euro system took 361.7 billion euros, the data showed. Spanish government bonds are headed for a second weekly decline, a sign the respite in the region’s debt crisis created by the ECB’s three-year loan program may be coming to an end. 17 of 22 economists surveyed this week predicted the ECB will be forced to resume its so-called Securities Markets Program to contain bond yields. In Italy there are protests by labor unions against the austerity plans being implemented. Prime Minister Monti’s pension plan was part of a $26 billion austerity package passed in January to fight the sovereign crisis by putting Italy’s debt, the second highest in Europe after Greece, on a downward trajectory from next year.

Returns on Italian property fall

The income generated by commercial property in Italy fell in 2011, compared to the previous year.

In its Italy Annual Property Index, IPD revealed returns for investors on such real estate assets came in at 4.3 per cent last year, down from the 5.1 per cent recorded in 2010.

The organisation noted income return - which stood at 5.8 per cent - was the main driver behind the industry, as capital values dropped by 1.5 per cent in the same period.

Retail was the strongest commercial property sector in the country, posting overall gains of 5.5 per cent, followed by industrial assets and offices.

Neil Turner, head of fund management at Schroders, told Financial News last month that retail assets in the north of the nation should be on investors' radar this year.

However, Luigi Pischedda, country manager Italy at IPD, urged caution, noting that despite the performance of Italian commercial real estate being "encouraging", the figures need to be "read carefully in the context of recent years".

He highlighted the "further and faster capital declines" experienced in 2011 as an example of this, adding conditions in the Italian property market weakened towards the end of the year.

Italy seizes Gaddafi assets worth $1.4 bn

Rome : Assets worth $1.1 billion euros (about $1.4 billion) belonging to Libya's Gaddafi family were seized by the Italian police.

The assets included stocks, real estate, a share of the Juventus soccer team and a Harley Davidson motorcycle, police said late Wednesday.

Then Libyan leader Muammar Gaddafi had cozied up to the Italian government and business leaders and in the process Libya was permitted to invest petroleum profits in oil company Eni, arms maker Finmeccancia, and automobile manufacturer Fiat.

The country built up a 7.5 stake in Unicredit, sparking outrage that a North African rogue tyrant could have a powerful voice in Italy's largest bank. It cost Unicredit chief executive Alessandro Profumo his job.

All deals were off when Italy joined its NATO allies in bombing Gaddafi's military in support of a rebel movement. Italy froze 3.6 billion euros worth of property belonging to Libya.

Eventually, Gaddafi and his three sons were killed. The assets, authorities believe belong directly to the Gaddafis, were impounded at the behest of the court.

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