Chapter 18: Chapter 18
iam Clancy had grown tired of bars jammed with over-tanned, tattooed,
middle aged expat Brits, many sporting the latest fashions in sleeveless
muscle shirts and beach shorts, where conversation, as always, was focused
on beer, football and home prices. Given the chance, any one of them would recite
his oft told story of how he had got out of Blighty just in time, selling up at the top
of the market and then snapping up, in a once in a lifetime deal, a place
overlooking the sea/golf course/mountains at the right moment.
Clancy and his associates, Dolores Laborda Carvallo and Hugh Murray,
concentrated their attention on their new business as budding financial and
investment consultants. They had little difficulty in finding worried Brits in
financial difficulties ― out of their depth, as their homes, mortgages and
investments were threatened by the growing financial crisis. It was however, much
more difficult to find those willing to pay hard cash for advice.
Hugh Murray had made progress with holiday home rental business, convincing
home-owners to accept a more realistic view of the property market by renting out
their properties. As for his Dolores Laborda, Clancy’s his girlfriend, she took care
of the legal matters that often entangled expat owners, adding credibility to the
partners budding business.
Liam had taken time to catch up on the history of finance and after reading Niall
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Ferguson’s ‘Ascent of Money’, recognized sooner or later things would surely
improve. For those with sufficient cash reserves there was no point in panicking as
many had done in the crash of the 1929, even if the recession they were now
experiencing was the worst for sixty years.
Clancy, unlike many financial advisers who pushed their clients towards
investment strategies that were not always in their best interests, warned expats
against conmen and rip-off pension funds. He earned less by recommending fixed
term accounts with low interest rates, but could sleep with a clear conscience.
Reputable widows and orphans insurance companies offered financial advisers up
to fifteen percent commission on lump sum investments put their way. It was not
unusual to see certain insurance giants paying lucrative upfront commissions of
twenty percent. As for shady salesmen representing companies in Gibraltar and
Andorra their commissions could run as high as thirty percent and even more.
Clancy checked-out the status of insurance and investment firms, their directors
and their track records, avoiding all those with Gibraltar or offshore addresses. He
investigated agents and salesmen on behalf of his clients to prevent them from
falling into the hands of crooked brokers and conmen.
Spain was in deep trouble and he assumed things would get worse before they got
better. The trouble was property was not the only sector in difficulty. The whole
economy was in dire straits with the tourist industry especially hard hit as hotel
bookings fell to their lowest level in decades. UK reservations were down by thirty
percent and those who could still afford a couple of weeks in the sun had become
more demanding, seeking quality hotels at low all inclusive rates, others headed for
more exotic destinations where fine weather was guaranteed all year round. It was
not good for Spain where tourism accounted for ten percent of its economy.
The crisis had brought with it an uncertain future for a many people and difficult
adjustments would have to be made by those who had grown accustomed to a
certain style of life. As the weeks passed it was becoming obvious that the crisis
was much more serious than the government in Madrid had at first admitted,
unemployment shot-up and government ministers forced to acknowledge the
growing recession would certainly last much longer than they had anticipated.
Clancy realized the world was going to be a different place; there would be a
redistribution of the cards and trying to foresee who would be holding the winning
hand was easier said than done. His insight into the complexities of globalization
and free trade was hazy, but he knew it had been the driving force behind the
prosperity of Ireland and a great part of Western Europe.
In the beach front bars favoured by expat Brits there was less big talk and selfcongratulatory declarations. The tone had changed and after a few beers most were
forced to admit their doubts about the future. Few talked of having made the right
choice at the right time, their conversation turned to whinging about the falling
value of their pensions and the falling value of the pound against the euro. Another
couple of beers brought out the usual expat denigration of their hosts, backed by
anecdotes that sneered at everything Spanish in Kipplingesque terms.
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Of course, once an expat felt the slightest ache or pain he or she was on the next
Ryanair flight back to Blighty for a quick, free, check-up. Then, after the
appropriate treatment, they were on their way back to their Costa home loaded with
a six month supply of Tetley’s teabags, vacuum packed Cheddar cheese and a
stock of HP sauce. They were only too happy to escape the dismal damp British
weather and of course the ever growing flood of immigrants, who they complained,
forgetting their own lamentable Spanish, could not even speak proper English.
They were the lucky ones. Others were caught in a vicious trap; their dream
homes in the sun had become next to worthless, and those who had invested in
holiday BTLs saw their rental revenue plunge, leaving them with mortgages to be
paid off in euros from their ever dwindling pensions.
Thanks to Sky television, expats in southern Spain eagerly watched politicians
back home making electoral promises, promises they had no chance of keeping.
The same expats were begged by Britain’s leading parties to register for postal
votes, but once the politicians were safely ensconced in their privileged positions
their overseas electorate would be quickly forgotten.
Iñaki Parales was one of the giant Banco Santander’s many small shareholders,
living on the dividends from the shares he had inherited. He was a man of
independent, though relatively modest, means. His life turning around three almost
passionate pastimes: tennis, horse racing and classical music. Almost every day he
could be seen in the bar of the Real Club de Tenis de San Sebastián pouring over
Agalopar, a national horse racing magazine, or Inversión y Finanzas, a financial
weekly, in which he followed the now jagged ups and downs of Banco Santander’s
shares. The crisis had seen their value plunge from a peak of fifteen euros in
October 2007, to under five in February 2009, luckily for him dividends remained
fairly constant, little different from the previous year, a surprising accomplishment
in comparison to most other major international banks.
Iñaki, a likeable individual, whose well-mannered nature could have been taken
for timidity, reacted angrily to the regret of those who dared criticise Santander. He
played a good game of tennis and was regularly participant in the club’s
tournaments and social events where he was appreciated for his good humour.
When the crisis first loomed he made a spirited defence of the bank declaring it as
being rock solid. But as the months passed this confidence was transformed into
denial through his belief in the Spanish giant’s invulnerability. When the Bank’s
shares hit 4.90 euros his shock was profound; his capital was almost entirely tied
up in those shares whose dividends he counted on for the major part of his income.
The problems at Santander ran deep. There was the Latin American debt risk, and
above all exposure through its UK holdings: Abbey and the Alliance & Leicester,
whose shares had plunged in 2008. Santander had paid top of the market prices for
its British holdings, and with the acquisition Bradford & Bingley they controlled
ten percent of the UK savings market.
Just a little over a year earlier, Spanish government ministers and economists had
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talked of a soft landing, rejecting any idea of a recession. Hard landings had been
reserved for Baltic and Eastern European countries. Then, after the bluster, came
the long predicted collapse of Spain’s proud construction industry. Spain had crash
landed; leaving home-owners, businesses and job seekers confusedly staggering
through the wreckage of its economy.
Clancy heard endless stories of buyers caught up in the debacle of once ambitious
construction firms and the plight of those whose newly built homes were left
without electricity and running water. During the fifteen years up to 2008, Spanish
growth, powered by the construction boom, had risen vertiginously. When the
crash came it was not surprising that companies like Martínez Construcciones were
amongst the first to run into difficulties, their portfolios stuffed with what was now
parched worthless land for never to be realized residential developments.
With the collapse, thousands of British home buyers who had made advance
payments stood the risk of losing their money, whilst others who had paid in full
would never see their dream homes. New buyers and existing owners arrived from
the UK to be greeted by grim scenes of semi-abandoned construction sites: jagged
scars on the landscape, a depressing contrast to the bright images portrayed in the
promoters’ glossy brochures advertising dream homes. Golf course developments
were little more than vast expanses of broken ochre coloured earth. Abandoned
cranes, half built homes and the skeletal structures of what were to have been
hotels and apartments stood forlornly on rubble strewn construction sites.
Penthouse terraces that should have overlooked well-tended golf greens were
surrounded by weed covered earthworks and construction debris. Shopping centres
designed to house luxury boutiques and restaurants were empty hulks encircled by
roads that led nowhere, abandoned by construction firms that had been swallowed
by the crisis.