Pain in Spain could spell trouble for expats

It was Black Monday for Spain with official data showing the economy had plunged into recession while ratings agency Standard & Poor’s downgraded some of its biggest banks. Among those affected was Spain’s biggest bank Santander. The downgrade applies to its Spanish business called Banco Santander, so will be a concern for British expats with accounts taken out in Spain. But Santander’s British arm, which has more than 25 million customers, is unaffected. Some of the other banks downgraded include Banco Bilbao Vizcaya Argentaria, BBVA and the Spanish unit of Barclays. Bankia, Spain’s third-biggest bank, was placed on “creditwatch with negative implications". Spain is one of the most vulnerable economies within the eurozone and is under huge pressure to reduce its government debts with severe austerity measures. It has an unemployment rate of almost 25 per cent.  Pain in Spain is continuing to rain down on its citizens 27 Apr 2012 Spain slides back into recession 30 Apr 2012 Savers with money in British banks are covered for the first £85,000 per investor, or £170,000 for a joint account, if the bank goes bust. This is guaranteed under the Financial Services Compensation Scheme. Financial planner Richard Alexander said: “In Spain, the deposit guarantee scheme covers up to €100,000 euros [about £81,000] which, like the UK, applies to each person if it is a joint account but these are generally lower limits than the UK compensation scheme." “In the UK, there is the Financial Services Compensation Scheme to step in if all else fails, but even if you are an expat Brit with UK investments, unless you were UK resident at the time you set up the investments with a UK institution, the compensation scheme will not help you.” Therefore, for British expats living on the Continent it is essential to review the compensation scheme covering your assets, given the poor financial health of the eurozone and its banks. Mr Alexander added: “With all financial decisions never have all your eggs in one basket and research the financial strength of the organisation you are invested with.” Spain’s central bank is considering setting up a holding company to take toxic property debt from the balance sheets of the country’s banks. Spain’s banks were hit by billions of euros of losses after a decade-long property bubble burst during the global financial crisis.

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