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Well-heeled Spaniards have been moving money to Switzerland and the U.S. for months amid mounting worries about Spain and the safety of the eurozone, said Bruce Goslin, managing director for Europe, the Middle East and Africa for K2 Intelligence consulting group. "We're not money managers but we deal a lot with clients who are looking for intelligence," Goslin said. "As we are circulating and talking to people, some things are becoming clear. Everyone says `There is nothing going on in Spain, the economy is contracting so fast we're going to have to go out of Spain.'" Spain's banking problems come from the collapse of a real estate boom. Banks that made reckless loans are not being paid back and are seeing the value of the properties they invested in tumbling. This is making the country's banking system increasingly financially insecure
-- heightening savers' fears that their money is not safe. Fernando Encinar, head of research at real estate website Idealista.com, said some wealthy people who didn't have money to buy during the boom were now taking advantage of prices that have fallen 26 percent in four years, he said. "Someone who has (EURO)200,000 in the bank is looking for property to buy because they prefer property than having it in the bank," he said. "This was happening before Bankia but Bankia and all the trouble in Spain has accelerated it." Many Spaniards can't move money abroad because times are so tough, said Vincent Forest at the Economist Intelligence Unit. With unemployment now at nearly 25 percent, Spaniards with jobs and savings are increasingly helping out less fortunate relatives. "Most Spaniards have huge savings, but they have someone in the family who needs money and isn't earning anything. They won't just say I've got a few thousand euros and I will put it in Germany: They can't," Forest said. Many Italians -- some of Europe's most devoted savers -- are also moving money. They are worried that their government will be the next to fall victim to the crisis through its heavy debt load. That's even though Italy's banks, government finances and economy are in better shape than Spain's. Some 60,000 to 70,000 small investors have bought property abroad, mostly in Germany but also on the Spanish islands, in the last three months, for a total investment of (EURO)400 million on an annual basis, said Paolo Righi, president of the Italian Federation of Real Estate Professionals. `'They are looking for certain investments," Righi said. Ruth Stirati, who runs a business helping Italians buy property in Berlin, said she gets about 10 emails a day asking about properties. "Over the last two or three weeks, there has been a new panic," she said. "They have a thousand fears: That the banks won't
have money, that the euro will fail. It is without substance, their doubts.
But they worry there will be one strong euro in Germany, and one that is
weak.' Wealthy Germans aren't worried about seeing their money disappear due to collapsing banks but they are concerned that their savings will be eaten away through inflation. As a result, they are putting money into real estate
-- at home. Even though inflation currently is moderate at 2.2 percent in May, there has been a lot of talk about the risk of rising prices in Germany's media. There is speculation that inflation could jump if the European Central Bank has to take drastic measures to keep the eurozone from breaking up
-- such as printing large amounts of money to buy government bonds and cover bankrupt governments' financing needs. The current EU treaty bars that. But that hasn't stopped German newspaper headlines warning about possible inflation to come. According to the Europace real estate financing platform, German home prices rose 5.46 percent in the first quarter over a year ago.
[Associated Press; By DAVID McHUGH, NICHOLAS PAPHITIS and COLLEEN BARRY]
Paphitis contributed from Athens, McHugh from Frankfurt, and Barry from Milan. Also contributing were Harold Heckle in Madrid and Robert Barr and Cassandra Vinograd in London.
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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