The Spanish government’s recent decree on labour reform is thought to be just a prelude to a far lengthier process of overhauls for the Spanish parliamentary and labour system.

The decree is due to be ratified by parliament on June 22 and even though there is a distinct lack of political backing for the reform, analysts believe that its safe passage through the system is relatively assured, even if it comes about via an abstention of some parties.

Those opposed to Zapatero’s sweeping budgetary cuts are likely to offer only muted resistance, knowing full well that the unpopular proposals – which includes cutting severance pay for public sector workers – are the best course of action for the Spaniards to take.

Spain’s crippling recession doubled the country’s unemployment figures to twenty percent in just two years, with a total of four million out of work. The cuts proposed in the decree include reforming the cost of firing – which is currently one of the highest in the world – simplifying workers’ contracts and promoting youth employment.

Such cuts would reduce the government’s spending on benefits, thus boosting tax revenue and cutting through the country’s hefty budget deficit.

A euro is now worth as little as eighty three pence sterling as the eurozone’s troubles continue to destabilise the currency, leading to a number of property observers to suggest that such exchange rates could kickstart a new surge in Brits buying property in Spain.

The current rate of the euro’s decline stands between 15 and 20 percent compared to last year, and if the currency’s value continues to decrease Britons could soon swoop for Spanish property, taking advantage of the favourable exchange rates for those buying in sterling.

Speculation is rife that a number of estate agents in Spain will seek to secure foreign exchange rates sooner rather than later in order to entice buyers from Britain, where the economy has stabilised in recent months.

“The Spanish property market has not yet bottomed out,” suggested property analyst Marc Da-Silva. “There is still some way to go in my opinion and it needs to look at the economic housing market downturn.” With Rightmove Overseas revealing that Spain’s most popular property locations make up five of the top ten global locations growing in popularity – topped by the Costa del Sol and Marbella – the signs are looking more and more positive for Brits hoping to buy a property in Spain.

Non-Spaniards purchased just 513 coastal properties in the first three months of 2010, according to official figures released by Spain’s Ministry of Housing, which is a slight increase (6% to be exact) on the same period last year, when a mere 484 holiday homes were purchased by non-domiciled buyers.

This rate of sale, which is less than 200 a month nationwide, will do little to alleviate the widespread fears that Spain’s glut of housing will remain a problematic and costly burden for the country for many years to come. The implications in the short term are positive; sales of coastal properties have picked up as the market has bottomed out and the depths of the recession have been plunged already, but longer-term fears remain. Where will the confidence come from? Where will the credit come from? And, perhaps most pertinently, where will the buyers come from?

Although property sales to foreign residents in Spain for this first quarter was up 33% on last year (6,712 homes were bought by non-Spaniards), most of these properties were snapped up by economic migrants in the centres and suburbs of Spain’s largest cities; such input and investment will do little to clear through the oversupply of coastal properties waiting to be sold.

The picture is a little brighter when attentions are turned to the resale market, which is traditionally dominated by residential sales, ie, resale properties are largely bought by Spaniards. Sales of resale properties were up by 31% for the first quarter of the year, which is in stark contrast to new build properties, where the market collapsed by a massive 22%, according to the official figures released by the government.

Home sales in Spain are up by seven percent in the first quarter of 2010 when compared to the same period last year, according to official figures released by the country’s Property Registrar.

Transaction deeds inscribed in the official property registry were used as the bellweather for these figures and as such are immutable. The seven percent rise is the first time in a number of years that annualised sales have risen in the first quarter of the year.

Compared to 2009, actual registered sales were up by 16.3 percent, which is a healthy increase in anybody’s books, with the first quarter of 2010 displaying the highest volume of transactions in the past 18 months. This trend indicates that, as first estimated earlier in the year, the property market in Spain has indeed bottomed-out, with an increase in property sales now expected from here on in.

Over the entire 12 month period, however, sales were down by 15 percent to 430,871, so it is not all good news. Then again, figures at the end of December 2009 pointed to a sales drop of 25 percent, so the market has been able to claw back ten percent in 2010’s first quarter.

Coastal areas – such as the Costa del Sol – are experiencing the smallest sales decline, indicating that, although these regions were hardest hit at the depths of the recession, they are the ones that are most likely to recover sooner, which bodes well for anybody looking to buy or sell a property on the Costa del Sol.

No, not me. Edward Hugh is a semi-retired English teacher who resides in a small village in Catalonia. His daily duties – aside from teaching English to a small clutch of youngsters keen to learn Ingles – are largely taken up by his blog, where he, as a self-taught economist, waxes lyrical on issues regarding the eurozone, particularly the folly of a number of European nations so different to one another existing under a single currency.

His well-worded missives have been sent out into the great wilderness of cyberspace for the past few years, yet his last few musings have caught the attention of banks, the International Monetary Fund and even policy makers in the White House. The New York Times has been calling, and a number of economy experts have now courted Hugh for his advice on a number of matters.

Hugh’s latest stance is nothing if not passionate. While his writings are not exactly revolutionary, his tell-it-like-it-is style has raised some eyebrows. Hugh questions how countries such as Spain, Greece, Portugal, Italy and Ireland are suffering under the euro; these smaller economies pegged to the same currency as behemoths such as Germany and France suffer when things turn bad, as they have recently, and are unable to devalue their currency at a rate they would like. Cue austerity cuts and financial misery.

Utilising such colourful phrases as ‘borrowing binges’ when attacking the carefree lifestyles of the Greeks and the Spanish, Hugh has merely voiced what a lot of politicians and economists may have been thinking but were too afraid to state for fear of accusations of xenophobia and racism. The feeling is that northern Europeans – the Germans in particular – are more sober, more frugal and responsible than southern Europeans, and the (largely) Mediterranean countries should not be sharing the same currency as their less promiscuous northern neighbours.

Hugh is now fending off media attention from around the globe. What began as one man’s frustrated yet insightful rants about the state of the global economy has turned into a free-for-all as decision makers around the globe seek the opinion of this verbose Englishman.

So, a British expat in Spain is attracting global attention via his blog…who said the Brits were bad for Spain’s image?

High prices of Spanish property are likely to be brought down by new measures posed by the Bank of Spain that will force banks to recognise greater losses on their current debt-for-property swaps.

As bad debts sweep the Spanish banking sector, many banks have begun offering debt-for-property deals, allowing a number of banks to build sizeable property portfolios as they look to reclaim their debts. However, banks are currently making very few provisions for these properties that they acquire, a practise that has helped to keep property prices in Andalucia and a number of other Spanish regions higher than they should be.

Proposals by the Bank of Spain will implement a procedure whereby banks are required to make provisions of up to 30 percent of propery values after a period of two years. The Bank of Spain estimates that this step will reduce pre-tax incomes of banks by up to 10 percent, diluting the power and strength of banks throughout Spain.

The knock-on effect, of course, means that, if banks are forced to accept larger write downs on property prices, then property prices throughout Spain will fall to more acceptable levels. Banks will then, in turn, be able to offer better deals and discounts for property buyers.

This is the theory anyway. Hopefully the Bank of Spain’s innovative actions will work in practise, too.

Spain’s economic malaise was further condemned over the weekend when credit ratings agency Fitch becamse the second agency to downgrade Spain’s credit rating from the coveted AAA to AA+.

This single notch cut from Fitch came on the back of the approval of austerity measures being pushed through Spanish Parliament late last week as the country battles to reduce its 15 billion euro national deficit. This move from Fitch, which comes a mere four weeks after Standard & Poors were the first agency to downgrade Spain’s credit rating, has fueled fears that contagion could spread throughout the eurozone, with both Portugal and Ireland monitoring Spain’s situation carefully.

The chief analyst for Fitch, Brian Coulton, remarked that Spain’s decision to adopt an austerity strategy in its attempts to stave off further economic woes was the reason behind the credit downgrade. “Despite government debt and associated interest costs remaining within the AAA range, Fitch anticipates the economic adjustment process will be more difficult and prolonged for Spain than for other economies with AAA-rated sovereign governments,” he said.

Zapatero’s austerity measures squeezed through Parliament by a single vote last week, and include sweeping budget cuts, such as a 5% reduction in pay for civil servants. The move sparked strike threats from unions, yet was seen in some quarters as the sensible option to take in order to steady Spain’s economy ahead of expected recovery.

“Spain is the 800-pound gorilla in the room,” remarked New York currency strategist for Brown Brothers Harriman Win Thin, in a somewhat veiled remark of praise for Spain’s standing in the eurozone. “Greece and Portugal are small countries, but Spain is about five times their size with regards to GDP.” In the middle of a housing slump and with unemployment standing at 20%, Spain’s current woes may well reverberate throughout the continent, yet if the country can somehow re-energise itself in the same manner it did at the turn of the Millennium, Spain could return to the forefront of Europe’s upwardly-mobile nations within the next few years.

Hopefully the austerity measures, greater thriftness and a few years of living within one’s means will see Spain back on the straight and narrow before we know it.

Spain’s controversial austerity measures squeezed through parliament by a single vote today, illustrating just how unpopular Zapatero’s budget cuts are within the cabinet.

Just 169 members of the lower chamber voted in favour of the cuts, with 168 voting against as Zapatero’s back-benchers voiced their displeasure at the 5 percent pay cuts coming their way, not to mention a number of public spending freezes and other austerity measures.

Despite internal grumblings, the European Union has welcomed the measures, which are intended to wipe 15 billion euros from Spain’s budget deficit by 2012. In Spain, the government has faced heavy criticism for what millions view as ‘right wing’ policies that are at odds with Zapatero’s traditionally left-leaning measures.

Before the vote was cast, Spain’s Finance Minister, Elena Salgado, urged politicians to vote in favour of these ‘painful but inevitable’ measures in an effort to cut its large deficit and stave off a Greece-style crisis.

In two years, Spain has gone from being Europe’s top job creator to the country with the highest levels of unemployment in the EU, which currently stands at 20 percent of the available workforce.

The president of Spain’s leading appraisal company – Sociedad de Tasacion – has stated that the Spanish property market will only pull itself out of trouble once people start believing in it once more.

Speaking last weekend at a property forum launch, Juan Fernandez-Aceytuno said: “What the sector really needs is to regain trust and credibility.” His comments came on the back of information released by the society that revealed Spanish property prices may have been some 20 percent overpriced during the boom years. Today, prices are as much as 20 percent down on average, leaving some homeowners facing negative equity of 40 percent or more.

“Nobody has a crystal ball when it comes to prices,” he continued, “but at times when disposable incomes and credits have risen, prices have risen; on the other hand, when credit is harder to come by and incomes fall, so too do property prices.” With four million unemployed in Spain, and harsh austerity measures being implemented by Zapatero’s government, immediate recovery still appears to be quite a way off.

However, once trust starts to trickle back into the market – and there are signs at least that most observers believe that the property market in Spain has bottomed out – then a recovery will inevitably follow. It is approximately four years since prices in Spain peaked, and the fall from grace has been dramatic and traumatic for many thousands of property owners and those related to the industry. “We are at an impasse,” concluded Fernandez-Aceytuno.

And so the shockwaves continue. Last weekend saw the bank of Spain step in with a rescue fund of 550 million euros after a proposed merger between Unicaja and Cajasur broke down, forcing the latter to rely on government assistance in order to finance its restructuring.

Cajasur, a Cordoba-based bank, has been granted permission to draw funds from The Bank of Spain’s Fund for Orderly Bank Restructuring. “This will guarantee that it can continue to operate and fulfill its obligations,” read a statement released by the central bank.

These troubled times for Cajasur are likely to spark fears concerning the overall health of Spain’s banks, which are extricably linked to the strength of local property markets, particularly in the Costa del Sol where Cajasur is heavily exposed to the plunging property prices. Figures revealed by Goldman Sachs show that Spain’s property companies have a total of 445 billion euros in debts, which equates to 45 percent of the country’s GDP. The number of unsold homes currently stands at 926,000.

“Banks may not be able to recoup large parts of these loans. These losses will have to be recognised eventually, bringing down many institutions,” said Goldman Sachs’ report, which did add that both Santander and BBVA – the country’s two largest banks – were in good health.