Strategies: The Greater the Turmoil, the Stronger the Dollar. Again.

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Tourists Wary of Turmoil in the Middle East Are a Boon to Southern Europe

Call it an alternative financial bailout.

As Europe’s peak holiday season draws to a close, Spain and the other countries of Southern Europe hit hardest by the euro debt crisis are reaping the benefits of increased tourism.

Anita Bürgler, a 43-year-old Swiss kite-surfing fanatic, chose this resort town on the Strait of Gibraltar to spend her first-ever Spanish holiday. She heard it has some of the strongest winds in Europe.

In Tarifa, she found the wind-swept coastline that she expected. It might have been just a bit crowded for her taste. The shore is, she said last week, “just very busy, with too many other surfers to really enjoy myself.”

So she and her 45-year-old partner, Urs Baur, who also had never vacationed in Spain, spent much of their two-week holiday enjoying other activities that included whale watching, hiking and a day trip to the picturesque town of Ronda.

But Tarifa has not necessarily seen the last of Ms. Bürgler this year. She said she was almost certain to cancel her annual kite-surfing winter holiday to Egypt’s Red Sea, booked for November, because of security concerns. Instead, she will consider another visit to Tarifa, whose waters will be colder but far less crowded than in August.

Indeed, political turmoil elsewhere around the Mediterranean has benefited Europe’s southern coast. Last week, an association of entrepreneurs in the Canary Islands, the Spanish archipelago off West Africa, forecast that before the end of the year, their region would welcome an additional quarter-million people who had initially planned to escape Europe’s winter cold by vacationing in Egypt but now planned to go elsewhere in response to the military takeover and rioting.

Spain has perhaps been the main tourism beneficiary of the repercussions of events in the Arab world and Turkey, according to travel experts and early estimates. Tourists visiting Spain spent 32 billion euros, about $42 billion, in the first seven months of the year, up 6 percent from 2012 (including spending on transportation), according to data released last Tuesday by Spain’s tourism ministry.

Tourist spending is a small fraction of the $1.3 trillion Spanish economy, but it is a financial bright spot for a country that has not had many in recent years. In the first seven months of 2013, Spain welcomed a record 34 million foreigners, a rise of 4 percent from a year earlier.

British visitors accounted for almost a quarter of the total. But the strongest percentage rises came from tourists from Russia, up more than 30 percent, to 840,000, and the Nordic countries, increasing 18 percent to 2.9 million.

Many analysts now expect the number of foreign tourists visiting Spain in 2013 to breach 60 million for the first time, besting the record of 59.2 million visitors in 2007.

Demand has been strong enough that in some countries, hotels have been able to raise prices. Jürgen Ringbeck, who oversees the transport, tourism and travel practice at the management consulting firm Booz & Company in Germany, said it was striking how far “the Spanish market has been able to capture more demand even by increasing prices.” He said the average cost of a Spanish hotel room had climbed more than 20 percent since 2009, reaching about $70 a night on average this year, which is also above the precrisis level of $67.

“The pricing power of the Spanish market is surprisingly strong,” Mr. Ringbeck said, “which shows that operators have really understood that their major competitors in North Africa are no longer in a position to be very attractive.”

Not all the South European travel markets have pricing power. Greek operators have opted for more aggressive pricing and more package holidays than in the past, said Mr. Ringbeck, who estimated that Greece’s hotel prices were down around 10 percent from last year.

Niki Kitsantonis contributed reporting from Athens and Elisabetta Povoledo from Rome.

Cyprus Bailout Incites Turmoil as Blame Flies

BRUSSELS — A plan to rescue the tiny European country of Cyprus, assembled overnight in Brussels, has left financial regulators, German politicians, panicked Cypriot leaders and a disgruntled Kremlin with a bailout package that has outraged virtually all the parties.

A Russian market in Limassol, Cyprus. Russia was angry it was left out of talks to aid Cyprus, where it has billions in banks.

In the end, a bailout deal that was supposed to calm a financial crisis in an economically insignificant Mediterranean nation spread it wider. Word of the plan unnerved markets across Europe, raised fears of bank instability in Spain and Italy and sent pensioners into the streets of the island’s capital, Nicosia, in protest.

As markets tumbled and the Cypriot Parliament fell into turmoil, salvos of blame were hurled back and forth across the Continent.

Officials scrambled to explain what went wrong and how best to control the damage of what Philip Whyte, a senior research fellow at the Center for European Reform, called a “completely irrational decision” to make bank depositors liable for part of the bailout. The deal flopped so badly that finance ministers who came up with it shortly before dawn on Saturday were on the phone to each other Monday night talking about ways to revise it. Whatever the outcome, the dispute is a vivid demonstration of why Europe, which until recently was congratulating itself on having weathered the worst of the financial storm, has trouble making decisions with so many different interests represented at the table.

Politics, both domestic and international, get in the way of economics and make it difficult for wealthy countries to line up behind a plan to help the smallest ones. The northern European nations have grown so weary of bailouts for their southern neighbors that they were intent on exacting a hefty contribution from their latest supplicant. Germany in particular, with parliamentary elections looming in September, was set on driving a hard bargain.

A wild card in this instance were the Russians, who have deposited billions in Cypriot banks, extended a $3.25 billion line of credit to Nicosia in 2011 and were in negotiations to help out Cyprus once again. Cypriot leaders apparently were so concerned with keeping their wealthy offshore Russian customers happy that they pushed their own citizens to pay even more than some of the lenders were demanding.

The Russians reacted angrily to a so-called stability tax on deposits in Cyprus, and at being left out of the negotiations. On Monday, Russia’s minister of finance, Anton Siluanov, warned that Russia might not extend the existing credit line because the Europeans had not consulted authorities in Moscow about the deposit levy plan. On Sunday, one Russian official was reported by the Interfax news agency as advising Russians to withdraw funds from Cyprus, saying the banking system was untrustworthy.

The all-night discussions began Friday and ran for 10 hours, ending shortly before dawn on Saturday. Cyprus needed to come up with billions of dollars to help cover the costs of the bailout of the country’s financial sector, or its European allies said they would leave it to face the prospect of collapse alone.

Each of the major stakeholders, which included the International Monetary Fund, the European Central Bank and euro zone finance ministers, entered the room with a conflicting goal. Protecting the small-time saver was at the top of no one’s list. The result was a compromise solution everyone is now unhappy with, officials say, one that stands to cost ordinary Cypriot depositors 6.75 percent of their savings.

The Germans and their northern European allies wanted to exact a maximum contribution from Cyprus to ensure the deal could pass their recalcitrant, bailout-weary parliaments at home. A confidential report by the German foreign intelligence agency, known by its German initials as the B.N.D., was making the rounds, one that painted the island as a haven for money-laundering. The stigma attached to helping the Cypriots — and the political cost in an election year — was rising rapidly.

The I.M.F. was dead set on keeping the debt at what its number-crunchers considered a sustainable level. The Cypriots, meanwhile, wanted to spread the pain around.

Nicholas Kulish reported from Berlin and Andrew Higgins from Brussels. Reporting was contributed by Andrew E. Kramer and David Herszenhorn in Moscow, Jack Ewing in Frankfurt and Andrew Siddons in Washington.

This article has been revised to reflect the following correction:

Correction: March 19, 2013

An earlier version of this article misspelled the surname of a contributor. He is Andrew Siddons, not Siddon.

A Year of Market Gains, Despite Political Turmoil

A year ago, some thought 2012 was destined to be the year that the euro zone — and maybe even the entire European Union — broke up. The banks that supported their governments, and that in turn depended on those same governments for bailouts if they went broke, were deemed to be particularly vulnerable to disaster.

It did not happen, and while the euro zone countries hardly solved their economic problems, the Continent’s stock markets turned out to be good investments in 2012, with bank shares among the best performers. The same could be said about the United States, where the broad stock market posted double-digit gains and Bank of America shares doubled in 2012, albeit from a very depressed level.

Over all, the Standard & Poor’s Euro 350-stock index was up 13 percent for the year, measured in euros, and more than 15 percent measured in dollars. The S.& P. 500 wound up the year with a gain of 13 percent.

It may have been typical of 2012 that it was politicians and central bankers — not economic news or corporate developments — that dominated investor attention. As the year ended, the difference was that it was Washington, not Europe, where the squabbles were taking place.

For much of the year, it appeared that the European squabbles were leading nowhere, and by midsummer, markets were pessimistic about the outcome. Finally, Mario Draghi, the president of the European Central Bank, took decisive action to assure that the banks — and the governments that depended on them — would have access to funds. That did not turn around recessionary conditions in much of the euro zone, but it was enough to turn around financial markets. Prices of government bonds in many of the most troubled countries began to rise. Those who bet that Europe would solve its problems did well in the financial markets.

The accompanying charts show the performance of stocks in 10 economic sectors in both Europe and the United States, both in 2012 and since Oct. 9, 2007, the day that world stock markets peaked before what would turn out to be a world recession and credit crisis.

What stands out is how well financial stocks and consumer discretionary stocks did during 2012. The latter stocks are things purchased by consumers that are likely to do better when the economy is improving. In the United States, the two best such stocks in the S.& P. 500 were PulteGroup, a homebuilder, and Whirlpool, an appliance maker.

But while Europe did better in 2012, it remains much farther from recovering all of the losses experienced since the 2007 peak. The American index is just 9 percent lower than that, while the European index is about a third below where it was then. The only sectors that have completely made up their losses on both sides of the Atlantic are health care and consumer staples. In the United States, the consumer discretionary and information technology sectors have also done so, although the latter sector’s performance is largely because of Apple, whose shares are more than three times as high as they were in 2007.