Spanish Towns Struggle Under Crushing Debts

Soon it won't only be castles that are in ruins in Spain.

Inquiring minds are looking once again to the Iberian Penninsula and asking if a noble country with a long and rich history is beginning its dance of death:

BRUNETE, Spain — This leafy town on the outskirts of Madrid, where residents live in comfortable homes behind high walls, marks the next front in Spain’s fiscal crisis.

Struggling to rein in costs, Brunete has cut library and park workers’ hours. Instead of fixing the roof of city hall, town administrators have cordoned off the sidewalk in front to keep tiles from falling on passersby. More gravely, it is as much as three years in arrears to providers of building supplies and electrical services. Soon, it says, it may be unable to pay city workers.

Across Spain, towns that once reaped the benefit of housing-boom revenues are slashing budgets, cutting services and racking up debt. Together, according to Spain’s central bank, the country’s 8,000 municipal governments owe companies some €13 billion ($18 billion), representing more than one-third of their €36 billion total debt.

Economists say the situation is already suppressing Spain’s economy and employment levels. UBS Bank SA forecasts that sharp fiscal adjustments at all levels of Spanish government — not only cities, but also the regional and federal governments — risk pushing Spain back into recession in the third quarter, following timid growth in first and second quarters.

In the longer run, fears are mounting that the government may have to mount some sort of local bailout. Such a move would have negative consequences for Spain’s international creditworthiness, according to Giada Giani, economist at Citigroup in London.

“The sovereign debt crisis is not over,” Ms. Giani said. “As we’ve seen, any negative news runs the risk of being magnified.”

With a birthrate of 1.12, the world is watching the death of Spain. To put this in perspective, one must realize that this birthrate means Spain will lose a little over 50 percent of its population in just 35 years. The real importance of this is that more and more debt is being piled onto fewer and fewer people.


2 Responses

  1. Absolutely! And so few people are talking about it.

    Congratulations Bobbo. I wish you well.

    HT: Gates of Vienna

  2. Spain will probably be the first major EU member to implode. My guess is it will look like Baghdad looked when the Americans rolled into it in 2003 – Everyone in the government will just not show up one day. That’s when the real fun will start.

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