Bloomberg News

Spain Makes Progress on Repossessions Deal Amid Talks

November 13, 2012

Spain’s government and the opposition plan to meet for a third time today, after they made progress toward a deal to stem home repossessions while Prime Minister Mariano Rajoy prepared to face a general strike.

Talks between government and Socialist Party officials that began Nov. 12 will reconvene at 6:30 p.m. as the two sides work on “urgent measures” to limit evictions in cases of mortgage default, said a government spokesman, who asked not to be named in line with government policy. The government plans to pass a decree enforcing the measures at a cabinet meeting tomorrow, the spokesman said.

Rajoy, who faces a general strike today amid mounting social disquiet at spending cuts and Spain’s economic crisis, pledged measures to stem evictions on Nov. 9 after a woman committed suicide as officials tried to seize her home. Rajoy is trying to respond to outrage over foreclosures amid a taxpayer- funded bank bailout without inflicting further losses on a financial system crippled by the collapse of a debt-fueled housing boom.

“No family in good faith should end up homeless as a result of the crisis,” Economy Minister Luis de Guindos told the European Parliament in Brussels this week.

Amaia Egana became the second person in the past month to commit suicide in Spain over an eviction when she threw herself from her apartment in Baracaldo as officials arrived to change the locks on Nov. 9. Egana, a 53-year-old former city councilor, worked as a human-resources director for the public bus company in the northern region of Vizcaya, El Mundo reported.

‘Humanitarian’ Banks

Spain’s banking association pre-empted the bipartisan committee Nov. 12, announcing a two-year freeze on repossessions in cases of extreme need for “humanitarian reasons.” It didn’t give details on what that meant. The measures being discussed by the committee include grace periods, said Maria Dolores de Cospedal, the No. 2 official in Rajoy’s People’s Party.

Officials from the PP, which obtained a parliamentary majority in a landslide election win last year, have repeatedly said they want the Socialists’ support for any measures. The opposition party, which has called for a broad overhaul of mortgage laws, is still reeling from its worst electoral defeat.

Foreclosure Tally

Some 400,000 homes have been foreclosed in Spain since the collapse of the decade-long property boom five years ago. The number is set to increase without government action after unemployment reached a record 26 percent in September. Banks have more than 600 billion euros ($762 billion) of mortgage loans outstanding. They have a default rate of 3.1 percent, compared with 10.5 percent for lending as a whole, according to data from the Bank of Spain, which predicts further increases in bad loans.

Spanish banks, some of which are set to benefit from a European rescue package of as much as 100 billion euros and the creation of a so-called bad bank backed by taxpayers, have become the focus of public outrage over foreclosures.

In a Metroscopia poll published on Nov. 11, 91 percent of respondents said lenders exploit clients’ lack of legal knowledge to insert abusive clauses into mortgage contracts, while 31 percent said some banks have acted in good faith.

“If we bail out the banks, how can we not bail out families?” Elena Valenciano, the second-ranking Socialist Party official, said in a Nov. 7 interview on Telecinco.

To contact the reporters on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net; Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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