Spaniards pull out cash,flee Spain

Flight For Life: Spaniards are taking their euros,themselves and their families,out of the country

Written by New York Times | London | Published: September 5, 2012 12:52 am

LANDON THOMAS Jr.

It is,Julio Vildosola concedes,a very big bet. After working six years as a senior executive for a multinational payroll-processing company in Barcelona,Spain,Vildosola is cutting his professional and financial ties with his troubled homeland. He has moved his family to a village near Cambridge,England,where he will take the reins at a small software company,and he has transferred his savings from Spanish banks to British banks.

“The macro situation in Spain is getting worse and worse,” Vildosola,38,said last week just hours before boarding a plane to London with his wife and two small children. “There is just too much risk. Spain is going to be next after Greece,and I just don’t want to end up holding devalued pesetas.”

Vildosola is among many who worry that Spain’s economic tailspin could eventually force the country’s withdrawal from the euro and a return to its former currency,the peseta. That dire outcome is still considered a long shot,even if Spain might eventually require a Greek-style bailout. But there is no doubt that many of those in a position to do so are taking their money — and in some cases themselves — out of Spain. In July,Spaniards withdrew a record 75 billion euros,or $94 billion,from their banks — an amount equal to 7 per cent of the country’s overall economic output — as doubts grew about the durability of Spain’s financial system.

The deposit outflow in Spain reflects a broader capital flight problem that is by far the most serious in the euro zone. According to a recent research note from Nomura,capital departing the country equaled a startling 50 per cent of GDP over the past three months — driven largely by foreigners unloading stocks and bonds but also by Spaniards transferring their savings to foreign banks.

More disturbing for Spain is that the flight is starting to include members of its educated and entrepreneurial elite. According to official statistics,30,000 Spaniards registered to work in Britain in the last year,and analysts say that this figure would be many multiples higher if workers without documents were counted. That is a 25 per cent increase from a year earlier.

“No doubt there is a little bit of panic,” said José García Montalvo,an economist at Pompeu Fabra University in Barcelona. “The wealthy people have already taken their money out. Now it’s the professionals and midrange people who are moving their money to Germany and London. The mood is very,very bad.”

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