Why Spain Is Going To Go Bust
SURE, we’d all prefer that Spain doesn’t go bust. That the euro survives in some form or other, that we don’t get the cataclysm of an entire continent seeing its monetary and banking system swirling round the U-bend. But that’s probably not the way it’s going to turn out.
The Spanish Government itself wasn’t doing too badly. Certainly, during the boom, they did most of the right things: insist that the banks bolster their reserves, they themselves kept a tight lid on spending. However, not everyone did:
But for all its Disney-esque charm, Moia is rotten to the core.
“We are broke,” said Dionís Guiteras, the town’s newly-elected mayor. “We managed to pay the council staff on July 31, but I don’t know if we will be able to on August 31. We haven’t got any money to pay the electricity company, so maybe the street lights will go out. All of our buildings could be for sale.”
In a bleak warning to residents, Mr Guiteras even prophesied that, unless Moia’s residents rapidly adopted money-saving measures, the town would not be able to bury their dead. “We cannot keep our heads in the sand,” he said.
When we didn’t bury our dead it was because of a gravediggers’ strike, not that we’d run out of money.
Several hundred miles south, near Murcia, police in Moratalla have been told to walk rather than use their patrol cars. The vehicles would not be much use, anyway, as the town’s two petrol stations are owed €120,000 in town hall fuel bills and refuse to fill up municipal cars. The 120 council workers were finally paid last week, after a three month delay, but Moratalla’s list of angry creditors goes on and on – the council owes local businesses €9 million in unpaid bills.
In Barbate, near Cadiz, 180 tonnes of rubbish are accumulating on the hot streets after the council’s workers went on strike, having not been paid since June.
The problem, in Spain, hasn’t been plain. It’s not the national government which is broke: it’s the local ones. There’s also a lot of worry about what the regional governments are hiding in their books: stories abound of nasties hidden away there.
If the Spanish municipalities go bust, the autonomous regions turn out to have the odd few tens of billions of debt hidden here and there, then yes, Spain itself does go bust as well. Not bankrupt, because countries don’t do that. It’s not even necessary for the Spanish Government to pay the debts of these lower levels: the creditors can be told to go sing for their money.
But if those local authorities do go bust then we see the recession getting worse in Spain, the government finds it ever harder to raise the taxes to pay the national debts and once again, the whole edifice falls over.
You know, it’s really not looking all that good for the euro right now.