Monthly Archives: January 2012

Some Sun Through Europe’s Financial Clouds

Driving along an elevated stretch of the A-7 toll way that runs between Malaga and Algeciras in Spain’s southern Costa del Sol, one does not have to look hard to find evidence of the country’s financial burden. Built up and across the hillsides that rise sharply from the coastline, communities of summer and retirement homes sit empty, waiting for promised buyers who have long since lost their ability to keep up with payments. If complete, many properties lack the basic amenities promised by developers before the wave of bankruptcies left the coast’s real estate market gasping for air under the weight of oversupply and a sharp drop in demand brought on by the country and continent’s broader economic slowdown. Now left empty or occupied far below capacity, these properties have become not only a glaring reminder of the region’s rush to cash in on the explosion of profit and development of the early 2000s, but also a paralyzing force on the country’s banks, now weighed down by toxic assets and real estate prices that show little sign of rebounding in the near future. This latter pressure is made all the worse as Spanish banks’ books have become the focal point for both foreign investors and EU analysts wary of the country’s immediate fiscal stability and ability to withstand the stress of the coming year. According to a recent Wall Street Journal report, these empty properties could number as high as 1.5 million in a marketplace that is near stagnate. Still, combined with the countless other toxic assets crowding the books of La Caixa and Banco Santander could prove to be a boon for some investors.

Desperate to clear their books before stricter EU monitoring rules come into play or the force of anxiety about Southern Europe becomes too much to bare, banks across Europe are moving to unload assets at reduced rates, creating a buyer’s market for US and UK investors. “European financial institutions will unload up to $3 trillion in assets over the next 18 months,” according to a New York Times report released in the final week of 2011, adding that many will be let go at reduced costs either because they are seeking out ways to reduce their balance sheets or are under strict orders to do so by increasingly impatient EU regulators.

In addition to seeking a renewed level of confidence from foreign investors, the book clearing is also part of an effort to meet a “June deadline imposed by the European Banking Authority to raise more than 114 billion euros in fresh capital.” For many, the clock is ticking.

For local banks, the impact of off-loading their assets means more cash on hand and less dead weight to scare off investors and a restructured EU treaty that could mean far greater oversight in the coming months. For investors, the offerings mean a chance to snatch up properties and stakes in European firms at cut-rate prices, as long as there are willing to look past the risk of further fiscal collapse in the region. If recent activity is any indication, many are finding ways to look past the risk.

In November, according to the Times report,

“Wells Fargo bought the $3.3 billion in real estate loans, which are backed by commercial properties in the United States, that had been owned by the former Anglo Irish Bank. Wells has also bought $2.4 billion in loans and other assets from the private Bank of Ireland, which is trying to raise 10 billion euros ($13 billion) after a bailout by the European Union and the International Monetary Fund. Even with opposition from consumer advocates, Capital One Financial could soon win final approval from the Federal Reserve for its $9 billion acquisition of ING Direct in the United States, one of the year’s biggest banking deals. Based in the Netherlands, ING has been forced by European authorities to divest ING Direct, an online bank, after ING required a $14 billion bailout following the 2008 financial crisis.”

While hardly a relief to a general public increasingly at odds with the actions of both their governments and banks, this fire-sale environment could at least provide some breathing room for economies facing a new year of little to no growth and even less confidence.

Image: Spain’s Costa del Sol, Christopher Coats

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Spanish Energy Faces Dark Days Ahead

Worse than expected financial reporting for 2012 has put many in Spain on edge as they struggle to deal with already harsh rounds of spending cuts aimed at getting the country’s deficit under control.

As the incoming conservative government announced a far-reaching batch of cuts on December 31, 2011, it was forced to revise earlier deficit predictions from 6% to 8% of the country’s output, making the path ahead ever more difficult for the energy sector. The Rajoy-led Partido Popular (PP) government has signalled a sharp approach to deficit reduction through spending cuts and freezes on all government wages and hiring in its stated effort to reduce the public deficit to 4.4% of GDP over the next 12 months. In practice, this will see 8.9 billion euros (US$11.38 billion) worth of cuts, with a promised 7.6 billion euros (US$9.72 billion) to come before 2012 draws to a close.

While still early, the cuts are likely to effect the country’s energy sector in terms of support for alternative energy resources, including continued reductions in subsidies for solar and wind efforts and potential obstacles to planned government support for renewing Spain’s dwindling nuclear industry. Rajoy and the PP have previously stated that they will support reversing nuclear power reductions instituted by the outgoing PSOE party, though the high cost of plant construction and infrastructure investment will be difficult to justify in the face of widespread spending cuts for public services and wages. In addition, the Rajoy government’s planned appeal to EU leaders for financial aid for expanding pipeline projects to increase Spain’s accessibility to Europe’s natural gas grid will be unlikely to find much support as the region looks ahead to months of stagnant growth. The country’s largest energy firm, Repsol YPF, is unlikely to experience too many challenges in 2012 thanks to its heavy presence in Latin America. The company’s investment in Brazil’s Santos Basin and Argentina’s shale gas sector provide great promise.

Still, one possible silver lining for companies in all sectors could come with a fresh round of interest from foreign investors from the US and UK, intent on making the most of the region’s need for fresh capital. As reported in The New York Times last week, many are eyeing regional properties and companies as Spanish banks seek to clear their books of precarious holdings and meet an EU instituted deadline of producing 114 billion euros (US$146 billion) in fresh capital by June, providing for lower prices and greater opportunities for foreign investment.

Originally Posted in NewsBase, EurOil

Image: Modern Designer Interior

Italy’s Energy Looks Beyond Monti Cuts

As newly appointed prime minister, Mario Monti introduces a far-reaching plan to get Italy’s spending and deficit under control in the face of worse than expected growth predictions for the new year, Italy’s energy actors are struggling to find a stable path forward.

Already left weakened by a year of instability and reduced production thanks to the political shifts across North Africa, one of the country’s largest providers of oil and natural gas, Italy’s energy actors now face a year of little domestic support thanks to a dire financial outlook for 2012.

Likely to have entered a fourth recession since 2001 in the final months of 2011, according to Bloomberg, Italy’s economy faces an uphill battle in the new year. Monti and his technocrat government have been charged with finding a way to meet significant debt demands in the first months of the year while trying to elicit new infrastructure investment from the European Union as a part of his “Grow Italy” plan. However, as the entire region struggles to stave off potential recessions, it is unclear how much EU money will be available and how much will make it to the country’s energy sector.

Despite Italy’s current economic pressure, the country’s two largest energy actors have sought to expand their international presence in the New Year, including ensuring greater partnerships with the new governments of the Southern Mediterranean. After some worry that they would be left out of a post-Gadaffi Libya thanks to their past efforts with the long-standing government, Eni have established a significant presence in the North African nation by actively supporting the transitional government. These efforts include financial support for both oil and gas production and infrastructure investment that extends beyond the energy sector.

Italy’s Enel have also sought to pursue a greater presence in the region with the long-delayed purchase of a 18 percent stake in a southern Algerian field controlled by Ireland’s Petroceltic and the country’s state-backed firm, Sonatrach. While Italian support for a second pipeline linking Algeria and the island of Sardinia has grown in the last few months, it is unclear where the necessary funding will come from, given the cuts planned by the Monti government.

Outside of domestic economic factors, Italy’s energy sector could face further challenges from the increased likelihood of expanded sanctions and diplomatic isolation towards Iran. In addition to exporting substantial amounts of crude to the country’s refining sector, Iran also owes a significant debt to Italy’s largest energy actor, Eni leading to calls from Monti for the EU to review or readjust sanction plans for address these relationships.

Image: USA Today

Barcelona’s Roots Cuisine

Nearly two years ago, the Epicurious food and dining web site declared that Barcelona had, in their words, “jumped the shark”. Long known as a culinary leader for its regional chef’s efforts at the forefront of the tapas movement and more widely acclaimed for advances in molecular gastronomy, the city and wider region had lost its creative juice, slowing under over-indulgence and over-exposure.

However, as the New Year arrives and the region struggles to figure out a path forward without the aid of their flagship leader of culinary innovation, Ferran Adrià’s El Bulli, the local menu is showing new signs of life with a return to traditional staples – delicious simplicity. Though, this being Catalonia, even the most traditional dishes cannot be served without a bit of a twist.

At the heart of this Catalan movement is the same renewed emphasis on local and seasonally appropriate ingredients that has spurred “locavore” movements from Brooklyn to Sydney. This is not to suggest that the local markets that are scattered throughout every town and city in Spain have ever really faded from the gastronomical landscape. Nor is it to suggest that Catalonians have ever faltered in their appreciation for local, seasonal favorites, from Christmas sopa de galets and early spring calçots to later spring snails and coca de San Juan in June. Instead, chefs and store owners are rediscovering the value of the past in how they create their menus and stock their shelves.

In a product sense, this has meant a fresh spate of small, localized food stores opening across Barcelona, emphasizing locally produced items, from cheeses to preservative-free beer. Sure, many are simply delicatessens in a hipster guise or carnercerias made glamorous with the addition of marble counter tops, but far more are casting a spotlight on the value of recipes and simple products originating no more than a few miles from where they are sold. Cutting that distance still further are a wave of new delivery agreements with regional farms, delivering small and large crates of local vegetables and fruits to city-dwellers, promising a far fresher alternative to the local super markets.

Still, the region’s emphasis on finding something new in the tried and true can best be found in local eateries, including Albert Adrià new pair of locales on Barcelona’s Parallel. Having left the world of world-renowned molecular gastronomy behind after his El Bulli shuttered in favor of creating a culinary think tank, the younger Adrià brother has taken a step away from his traditionally progressive approach. Intent on creating what he called a “Bulli de Barrio,” Adrià predicted a natural shift away a scientific approach in favor of tradition.

“In ten years we’ve done more than in one hundred,” he told Eater.com’s Gabe Ulla in an interview about the opening of his new tapas, cocktails and tasting menu establishments, Tickets and 41 Degrees last year. “We need to return to the essence, which is something I’m keeping in mind as I develop this and new projects. In cooking there are a million truths. There’s the one who does vegetarian food, the other that does seafood, and the one you’ve described is just another. At the end of the day, it comes down to what’s good and what’s bad, which the public decides.”

In practice, this has meant more support for the region’s local producers and 0km movement, promoting the idea of localized ingredients over non-seasonal items just because they can. Established locales like Origins promote their Catalan roots in full color magazine menus, complete with maps describing each dish, piece by piece and modernized takes on traditional recipes. Mam i Teca and Allium both boast of working arrangements with regional farms to provide menus full of local products and craft wines and beers.

Taking the region’s local focus on the basics back in time, Raimon Olivella has created an approach that lets two near ancient texts to guide his menu choices at U. Using Libre de Sent Soví (1324) and the Libre del Coch (1520) as foundational texts, Olivella has created ancient Catalan tasting menus.

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