The impact of Trumpenomics on Europe & what we know about Spain's Proposed Property Tax
Plus a guide to the UK and Europe's new travel rules in 2025
4 minutes to read
Trump
Tariffs are coming. The big question is how onerous these will be and whether they kick start a new inflationary cycle, something that Europe can ill afford given its weak economic outlook. The President-Elect's remarks about Greenland have further unsettled EU policymakers.
In terms of trade, Germany, Italy, Ireland, France and the Netherlands are the largest exporters to the US, while the Baltic and Central European States have comparatively less at stake.
Giorgia Meloni's strong ties with Trump and Musk, the United States’ new Head of the Department of Government Efficiency, might strengthen Italy's position, with some expecting Italy to act as a bridge between the EU and the US in the coming months.
The impact on European households remains uncertain. Many hope the European Central Bank (ECB) will quickly cut rates to reduce mortgage costs. However, higher tariffs might prompt the EU to adopt a more gradual approach, especially as inflation across the Eurozone reached its highest rate in five months in December due to rebounding energy prices. Despite this, most economists still expect a rate cut when the ECB’s Governing Board meets next on 30th January, with a 25 basis points cut being the most likely outcome.
Capital Economics envisages six more cuts from the ECB this year with the base rate ending the year at 1.5% markedly lower than the 3.5% expected in the UK and 3.8% in the US.
Spain
This week, Prime Minister Sanchez proposed a new 100% tax on non-EU residents purchasing homes in Spain. This follows the announcement that Spain’s Golden Visa program will end on 3rd April 2025, and news that there has been a 39% increase in the number of Americans living in Spain over the past decade.
Details of the proposal are sparse, but local commentators suggest it could involve either modifying the current stamp duty, which currently ranges from 6% to 13% across Spain's Autonomous Communities, or introducing a special tax.
Restrictions on foreign buyers are not new. Countries like Switzerland, Singapore, New Zealand, and Canada have implemented various measures, including higher taxes, outright bans, and limiting property purchases to new homes only.
According to Spain’s Housing Department and Council of Notaries, there are nearly 27 million homes in Spain. In the first half of 2024, non-residents purchased around 29,000 homes (including both EU and non-EU residents).
In 2023, Prime Minister Sanchez formed a left-leaning minority coalition, winning 179 of the 350-seat chamber, which means he may face opposition in getting the bill through the Spanish parliament.
Sanchez aims to improve housing affordability in markets where locals are currently priced out. However, the latest household survey data from Spain’s National Statistics Office (INE) shows there are 3.8 million vacant homes across Spain, representing about 14.4% of the country’s total housing stock, however 33% are located in rural locations with a population of less than 1,000 people.
Changes to travel rules
In last year’s Wealth Report, we discussed the increasing complexity of regulations. Post-Brexit, Brits are familiar with the 90 out of 180-day rule, which also applies to all non-EU residents. However, a flurry of new travel rules is set to impact those considering relocating to Europe or purchasing a holiday home, as well as tourists, here’s a quick summary:
The free movement of people, a founding principle of the European Union, is gradually being eroded. Established by the Treaty of Maastricht in 1992, the Schengen passport-free travel area now includes most of the 450 million citizens of the EU’s 27 countries, along with some neighbouring countries like Iceland, Norway, and Switzerland.
1. Temporary Border Checks: Several EU countries are reintroducing border checks as temporary measures, concerned that some of their EU counterparts are not policing their borders effectively. Germany initiated this in September 2024, followed by The Netherlands in December. Austria, Denmark, France, Germany, Italy, Norway, Slovenia, and Sweden are set to impose checks between March and June 2025.
2. ETIAS Travel Authorisation: Starting in summer 2025, a new ETIAS travel authorisation system will be implemented similar to the ESTA equivalent in the US. Travellers from 60 visa-exempt territories will need to obtain permission before visiting 30 European countries. With ETIAS authorisation, holders can stay for 90 out of every 180 days.
3. Entry/Exit System (EES): Concurrently with the ETIAS scheme, a new border security system, the Entry/Exit System (EES), will be introduced.
Additionally, the UK’s new ETA visa waiver is being rolled out in three stages:
1. It is already required for nationals of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
2. From 8th January 2025, an ETA will be required for nationals of all non-EU or non-EEA countries, including Americans, Canadians, Australians, and New Zealanders.
3. From 2nd April 2025, nationals from EU and EEA countries will also need an ETA, with applications opening from 5th March.
In other news…
EU policymakers are being asked not to water down ESG rules, Finland, France, Germany, Italy and Spain are the highest-ranking European countries in Henley & Partners new 2025 Passport Index, all sharing third place, France's new Prime Minister bids to break Budget impasse.