Santander has announced that it will compensate people who lost money in the Madoff fraud. Private individuals will receive their original investment back but with no gain. It will be paid in Santander preference shares. These shares will cost the bank €500m but will have a value of €1,380m. All banks seem to be able to invent money whenever they want! Institutional investors will receive nothing on the grounds that they should have known what they were doing. This indirectly admits that this was not the right investment for small clients, but the bank states that it acted with due diligence. Santander has announced a profit for 2008 of €8.876bn, down 2.03% on last year. The €500m compensation is charged to the 2008 accounts. Its shares rose 13% on the news.
BBVA, another Spanish bank has made €5.020bn profit. That is down 18% and it is paying its dividends in shares (of which it has quite a lot going spare).
Meanwhile, Spain is now officially in a recession. Unemployment is rising, but there is evidence that the black economy is growing. Normally the number of people who tell an anonymous official survey that they are employed corresponds very closely with the number of people affiliated to the Social Security (health and pensions). Now there is a gap of about 80,000 people who say that they are employed but who are not paying their Social Security. This means that they are being paid out of a black fund (B account, as they say here) so that the employer can save cash. The problem is that people don’t always know this – employers have a habit of taking the employee’s contribution and pocketing it instead of paying it to the SS*. Also, VAT revenue is falling faster than consumption – another indicator that the black economy is taking off.
Immigrants who wish to return to their home countries can take their six months’ maximum unemployment benefit as a lump sum – and that would go quite a long way in Ecuador, I imagine – with a guarantee to return to Spain in three years (I think).
*When I arrived in Spain, this practice was common among language school owners, who are (with some honourable exceptions) crooks, charlatans and downright thieves.
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