European Union: 2013 - Just Another New Year?

In recent years, I have used my January article to try to make some sense of the year that has just passed and to posit some suggestions – which of course stop short of being precise predictions that I may have cause to regret – for the 12 months ahead.

So where are we now? Demand throughout the economy is sluggish because the banks are not lending nearly enough; property prices in many European countries remain in the doldrums and the euro is in crisis. Hang on, that's pretty much what I wrote in January 2012 ... and 2011 ... and 2010. Well you get the picture. The reality is that five years into the downturn or crisis, not much seems to have changed.

In trying to make sense of the present economic situation, I thought it best to focus on areas that impact our lives here in Gibraltar. I have concentrated on growth rates in world economies and the continuing upheaval in Europe – especially how it impacts on the euro zone and the currency itself, the oft-criticised euro. And, as this is a finance column, you may be glad that it will not be another review of the Diamond Jubilee and the London Olympics. True, Gibraltar got into the spirit with our giant posters of HM The Queen – and even a re-painted post box – but the jury is still out on their economic impact.

On the financial markets, 2012 saw pitifully low or negative growth rates in many of the developed economies, particularly in Europe where virtually the whole continent remained in recession during 2012. However there were some notable exceptions elsewhere. As I reported in a pair of back-to-back articles – on the BRIC countries (Brazil, Russia, India and China) and Africa – annual GDP growth levels in some places are still 5% or more. All countries in Arica reported positive GDP growth for 2012, so in hindsight perhaps it was indeed rash for the Spanish prime minister to state "Spain is not Uganda". One can understand that this caused some consternation in Kampala – at least judging by the scathing riposte that followed – particularly as its annual GDP growth rate is 5.2%. Uganda that is, not Spain!

In Europe, low or negative growth combined with reined-in government expenditure and hikes in personal taxation have led to a swathe of "austerity" budgets being announced during the year. And the people don't like it. Several heads of governments paid the price at the ballot box – although Barack Obama bucked the trend and was re-elected by what turned out to be a surprisingly healthy margin.

Turning to the euro itself, the currency proved surprisingly resilient to external market forces during most of 2012. Across the EU bloc, difficulties continued to mount as the year went on. The 17 nations that use the euro are bound together in the unforgiving, inflexible straitjacket that is required for membership. They have learned the hard way that old fashioned economics simply don't work when you are battling with a common currency that is not backed by a greater degree of fiscal, still less political, union. Such arrangements have generally not worked in recent history.

Any student of economic theory will know that the best way to deal with soaring debt and low demand leading to negative growth is to simply devalue your currency, manage interest rates whilst controlling inflation and allow the market to take care of its own recovery. True, the local burghers don't care to see their assets shrunk but the strategy can be very effective. Consider the impressive progress Iceland has made since its near complete and unprecedented economic collapse in 2008.

But countries such as Spain, Portugal or Greece simply don't have this option for as long as they remain part of the euro bloc. Faced with an over-valued currency and interest rates at historically low levels, they have very little room for manoeuvre. Hence the focus on austerity – lower government spending and higher taxes – which has caused so much unrest. In Germany, the opposite applies as German industry finds it increasingly difficult to sell high value manufactured goods abroad.

I recently read the most thought provoking analysis on the euro crisis written by a man who should know – George Soros, the man who famously netted a billion when sterling fell out of the ill-fated ERM mechanism in 1992. He advocates a simple choice for sorting out the mess. Either Germany must become a "benevolent hegemon" – which is another way of saying that she must support the other countries as they battle to make the books balance – or, and this is the fascinating part, that Germany itself should consider exiting the euro zone. I very much doubt we will see that in the next year but some serious re-arrangement of what was considered an inviolable currency union may become inevitable.

All of this affects us in Gibraltar given our geographical position and reliance on tourists from Spain and other euro zone states. Anyone importing goods from the EU into Gibraltar will be similarly affected by any changes in the currency's value so this will certainly be something to watch in 2013.

Not that the effects make themselves felt only within the euro zone countries. I have written many times about the effect on the UK but 2012 was also a difficult one for Switzerland, itself one of the wealthiest countries in the world. Investors around the world piled into the Swiss franc, which resulted in an unsustainable rise in its value against other currencies. Anyone who has visited Switzerland recently will know that an already expensive country has in recent years become even less affordable. The Swiss government responded by pegging the Swiss franc against the euro in an attempt to protect its economy – at huge financial cost.

So let's finish closer to home in Gibraltar as we turn the year. Some of my retailer friends with shops in Main Street tell me that 2012 may have seen more tourists than ever before, largely as a result of the higher number of cruise ship visits – on occasion three ships visited on the same day – but question whether this has actually increased total spending. Austerity affects the mind-set of everyone, including the well-heeled.

For others in Gibraltar, the global downturn continues to mean serious hardship in some sectors but new opportunities are also emerging. In my case, I am confident that Gibraltar's attractiveness as a pension (QROPS) jurisdiction should result in further growth in that area. This should lead to new employment. One could cite several other examples including insurance, funds and the like and future columns in the Gibraltar Magazine will deal with these exciting areas.

So what will happen in 2013? If I could predict the future, I probably wouldn't be here running a trust company and writing articles for you to enjoy, dear reader. Don't get me wrong, I enjoy the work – although the idea of simply lazing on a beach somewhere hot at this time of year does have a certain appeal. But, without putting my career on the line, there are some finance-related matters that I feel relatively safe predicting for the 12 months ahead

Demand throughout the economy will be sluggish because the banks are not lending nearly enough; property prices in many European countries will remain in the doldrums and the euro will be in crisis. Oh dear, that's how I started this piece. Let's see how true these comments remain at the turn of 2014. And one last prediction - Chelsea will get another new manager!

For me, leaving 2012 at least means I can move on from the significantieth birthday that befell me last June. Let's hope that 2013 will see some improvement in the overall global economic position and that any green shoots we are seeing are allowed to flourish and develop.

I wish you and your loved ones a very happy, prosperous new year 2013 from all of us at Sovereign

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.