Corvera / Paramount - bad news / good news ??

Bad News 1st??

I read reports that an "anonymous" source at the Ministry of Public works has confirmed that all developments at Corvera International Airport are currently "on hold".

The opening of the airport, privately owned by Aeromur and to be managed and operated by state-owned AENA, is believed to have been blocked for "military reasons".  The unnamed source went on to say how, aside from economic reasons, the operation of the airport has been suspended at the eleventh hour due to the importance that the Murcia area, has in offering security for Spain, Western Europe and NATO in the event of a nuclear threat.  Although this has still to be officially confirmed by government sources, if done so it will bring questions as to why this issue has only been addressed at this late stage in the proceedings and after millions of euros in private and public investment.

I thought this sounded totally mad and bizarre...but it seems that Spain does have a worrying history when it comes to building "ghost" airports,  only 400 kms north of us is the airport at Castellon, newly built and close to Valencia (hmm sounds similar to San Javier / Corvera ?) Castellon airport cost 150M Euros but has never seen a passenger !

Castellon airport was inaugurated in March 2011 but almost a year later, and having failed to secure a license to operate, the virgin airstrip is to be torn up. The State Agency for Air Security has found that its main strip is too narrow for airplanes to turn around, and will have to be widened to meet regulations.

It is the latest revelation in an ongoing saga of an airport that has come to symbolise the reckless public spending of ill-thought out projects across Spain that has left the country crippled with debt. Regional officials were aware of the narrow-runway problems within weeks of the airport opening but kept it under wraps, Spain's daily newspaper El Pais revealed on Wednesday.  Last month it emerged that 30 million euros had been spent on publicity for Castellon airport despite the fact that it had failed to secure permits to receive air traffic. The private contractor hired to run the airport for 50 years is demanding that the regional government of Valencia reimburse 80 million euros for cancelling its contract. It was hoped that the new airport would open up a new area of Spain's eastern coast to tourism but airlines have so far failed to be persuaded to add the destination to their routes. 

The region is already well served by busy international airports of Valencia and Alicante to the south and Barcelona to the north, a recent study showed that of the 48 regional commercial airports built in Spain over the last 20 years, only 11 make a profit. 

Ghost Terminal at Castellon

Good News 2nd !

A lot of reports running on the forums currently about the initial signs of life over at the Paramount Park the construction of access roads and drainage.

The Minister of Culture for the region of Murcia, Pedro Alberto Cruz, confirmed that the ceremony to lay the first stone of the Paramount Pictures theme park will commence on site at Alhama de Murcia, at 1.00 pm on Thursday the 31st of May with 200 specially invited dignitaries in attendance.

The event will mark the start of works to install the required infrastructure on the 1'000'000 sq mt site, with works expected to be complete in time for the park to be fully open for the 2015 season. Interesting to see that the site is also now visible from Condado !

Press release details to follow with pictures after the opening ceremony - if you are going let me know !

You get the idea of the proximity behind Naranjos 6

Golf Clubhouse under Construction

Its been a while but I am pleased to report  that the long awaited golf clubhouse site is finally under construction. I grant you it's not exactly the premises that we may have all hoped to see, but its a start and another amenity that will bring golfers onto the resort to play the challenging course.

Many thanks to Onno Weg for the pictures taken this week !!

Bankia Euro Bailout

May 2012 a new month...and with the current election upheavals in Greece and France, I read with interest today in the London City AM business news about the plight of Bankia. This is of personal interest as I hold account and mortgage with this re-named group who took over Bancaja recently .

ANOTHER day, another U-turn in the Eurozone – although this time it may mark the Spanish government’s acceptance of the huge problems in the country’s banking system.

 

The Spanish government announced on Monday that it will be injecting Bankia, the country’s third largest bank, with up to €10bn (£8bn) in capital, using the state-backed FROB bank restructuring fund, despite previously dismissing the possibility of doing so. Given the timing of the announcement – on the same day that Greece went through political upheaval – one can’t help but think that the Spanish government harboured some hope that the declaration might fly under the radar.

Given the size of Bankia and the implications of the bailout such hopes were misplaced. Bankia has one of the largest exposures to the country’s bust real estate and construction sector at €38bn, of which €18bn is considered problematic. It was also the poster child for what now looks to be the laudable but ultimately doomed structural reform of Spanish banks that took place last year. It is the largest of the consolidated cajas (Spanish regional banks) and the problems on its balance sheet highlights how little the banking consolidation solved.

Taxpayer-backed bank bailouts are never ideal, but if Spain goes down this road, getting the correct mix of support and strong conditions is vital.  The most likely form of any future intervention is the widely mooted “bad bank” plan and the first question, as always, is where will the money come from? Currently Spanish banks have €54bn in provisions against €136bn in doubtful loans. The latter number looks set to increase as conditions worsen, particularly with much larger falls in real estate prices expected – we predict that provisions will need to be at least doubled. Bankia is likely to be only the tip of the iceberg, both in terms of problems in Spanish banks and the use of public funds.

Securing private funding will be near impossible, leaving two sources of public funds: the Spanish FROB bank restructuring fund and the EFSF/ESM Eurozone bailout funds. The FROB in theory has a lending capacity of €99bn, but most of the cash must be raised by issuing debt, with only €18bn directly guaranteed by the state. There are questions over whether the fund could borrow cheaply if it backed a “bad bank”, potentially leaving the majority of the gap to be filled by Eurozone bailout funds.

Given the growing political opposition to both the bailouts themselves and the austerity conditions which they come with, such a large transfer of European funds could be political dynamite in Europe.

The main concern is the huge moral hazard associated with bailing out banks – this was a trend which many in Europe hoped had been bucked, and opening it up again would damage Eurozone credibility. The aim is to encourage banks to start lending and aiding economic growth again but this is notoriously difficult – who’s to say they won’t keep hoarding funds over wider fears of a Eurozone break-up? 

The most important part of the process will be an honest external valuation of these doubtful loans, something which Spain and the Eurozone have shied away from before.  Any funds must therefore come with clear conditions. The key to enforcing these will be allowing some banks to fail or be wound down. In the end, many of these banks have unworkable balance sheets in the aftermath of the housing bust. This will be the clearest signal to show that public funds are not being used to solely prop up banks, that only viable businesses will survive and that the Spanish government is committed to reform.

In many ways the use of public funds to help Bankia could be a turning point for the crisis in Spain. The good news is that the Spanish government finally accepts the need to tackle the wider problems with its banks, presenting an opportunity to flush out the sector once and for all. On the other hand, it significantly increases the likelihood of taxpayer-backed Spanish and Eurozone funds being used to bail out banks once again. What’s clear is that, until the problems are fully addressed, the Spanish banking sector malaise will still threaten to engulf the whole economy and potentially drive the country into a full bailout programme.