Spain pays the price of financial folly: As airports and luxury flats stand empty as monuments to Spain’s overspending, miners’ protest over subsidy cuts ends in bloody clashes

LAST UPDATED: 13 Jul, 2012 @ 13:03
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Spain pays the price of financial folly: As airports and luxury flats stand empty as monuments to Spain’s overspending, miners’ protest over subsidy cuts ends in bloody clashes

By David Jones

LEAVING the city of Castellon, the road signs point towards the new international airport, and after 25 miles one duly arrives at a sleek concrete and glass terminal, built on an otherwise barren stretch of land beside the motorway.

The grand vision of Carlos Fabra, a charismatic regional politician who promised that the airport would attract 600,000 passengers a year — transforming this underdeveloped stretch of the Costa del Azahar onSpain’s east coast into a holidayMecca— it was opened amid great fanfare 15 months ago.

Approaching the main entrance, however, it becomes clear that something has gone very wrong here.

Though all the facilities are ready — the control tower, the baggage reclaim, check-in desks and restaurants — the runway is empty and the skies above are eerily silent.

No plane has ever landed or taken off at Castellon, and it is possible none will. Maintenance staff and security guards patrol a perimeter fence cordoned with blue police tape.

One of 24 such regional air terminals built duringSpain’s boom years as monuments to the vanity and hubris of powerful local bigwigs such as Fabra, it cost a cool £120?million.

A further £25?million was spent on promoting it, including £2million handed to the local first division football team, Villarreal, for wearing the airport’s logo on their shirts.

The Spanish aviation authority hasn’t granted permission for flights to operate here, and in any case, no airline has shown the slightest interest.

Thus, the only work in progress is a garish 80ft bronze sculpture being erected at the entrance, in the image of its vainglorious founding father Senor Fabra (now facing charges of bribery in an unrelated affair).

That will cost local taxpayers a further £240,000. You really couldn’t make it up.

Spain’s economy is in such dire straits that this week eurozone ministers agreed a series of emergency measures — including a €30?billion loan and giving the country more time to cut its budget deficit — to try to avert total collapse.

In return, Prime Minister Mariano Rajoy has been forced to bring in an immediate VAT hike as well as cuts in local authority budgets. And while EU officials welcomed the developments, police fired rubber bullets to quell demonstrations yesterday as thousands protested inMadridagainst government-imposed austerity.

During recent days I have driven the length and breadth ofSpaintrying to fathom why the eurozone’s fourth-biggest economy has failed so disastrously, and how the beleaguered Spanish people are faring as they teeter on the edge of the financial abyss.

The answer smacks you squarely between the eyes not only in Castellon, but in almost every town and city, for this country has more white elephants than the averageDelhisouk.

My 500-mile journey has taken me from the stifling Costa Blanca, with its endless blocks of unsold holiday apartments, through once-thriving communities where lines of grim- looking men snake around the job-centres, to the mountainous fringes of the Bay of Biscay — scene of an increasingly violent pit strike that, I was warned, could yet light the fuse for a nationwide wave of civil disturbance.

Crossing the vast, burnished wheat plains, and passing ripening vineyards and citrus orchards, Spain often seemed to be meandering along much as always. Stop and strike up a conversation, however, and you realise that this timeless idyll is an illusion.

The prevailing mood was at times so mournful and the scenes so depressing it was difficult to believe this was, barely five years ago, the most vibrant nation on the Continent, and in the midst of a vast construction boom.

In parks and town squares these days, huddles of young people mill around aimlessly with nowhere to go and nothing to do. In some places, up to half of all the under-25s are without work, and without hope of finding it in the foreseeable future. They will becomeSpain’s lost generation.

Sipping her afternoon coffee on a shady terrace in the village of Villarroya de la Sierra, Aragon, grocery store proprietor Belen Soler, 46, told me wistfully her oldest son, aged 20, was among them.

‘This used to be a prosperous region producing wonderful cherries and almonds, and there was work for everyone,’ she said. ‘Now when a job is advertised at the town hall, which is rare, 25 people are in the queue.’

Business after business, shop after shop, is boarded up. Houses have been abandoned and the keys handed to the banks. Building sites appear frozen in time, with rusting cranes and bulldozers, and heaps of bricks and slates crumbling in the sun.

There is an all-pervading air of inertia and torpidity. Away from the teeming resorts,Spainis always sleepy at this time of year but now it has lapsed into a deep, seemingly irreversible coma.

The great construction bubble having burst, no region is without its abandoned follies.

Surely the biggest of them all lies in a town called Sesena, half-an-hour south of Madrid, where a dubious, self-made developer, Francisco Hernando, promised to create ‘the Manhattan of la Mancha’: a vast residential and leisure complex for professional types who couldn’t afford to live in the capital.

Had Hernando’s pipedream been realised, more than 25,000 people would now live in 13,000 apartments in eight-storey blocks overlooking a lake named after his wife, Ana.

However, though a two-bedroom home can now be bought here for £60,000 — less than a third of the original asking price — it is flyblown and deserted.

In one 580-apartment block there is just a single resident: a security guard who couldn’t resist the bargain basement prices.

Thousands of these toxic flats are now in the hands of banks that had no choice but to reclaim them.

Hernando, who once epitomised the fabulous spoils of Spain’s fiesta years, rising from a Madrid slum to bestride a £500?million empire with a fleet of yachts and a private jet, has reportedly upped sticks and moved his business to New Guinea.

Juxtapose this mad extravagance with the many and varied indignities being forced on the Spanish public almost daily, as wages and pensions are slashed, house prices plunge into freefall and the swingeing, EU-enforced cuts package hits public services, schools and hospitals, and you can begin to feel their pain.

And you can understand their dangerously simmering sense of injustice, that they are reaping the bitter harvest of a disaster not of their making.

InMadrid, the proposed economic measures range from reducing daily dustbin collections to stopping free sex-change operations for transsexuals (not before time, some say).

InValencia, the most hard-up province (and that is saying something), children must bring their own toilet-rolls and soap to school along with their exercise books.

Meanwhile, class sizes are increasing; hospitals cannot pay for patients’ drugs; and, as elsewhere across the country, old-age pensioners must pay up to £48 for previously free medicine.

So who is to blame? The answer emerged — or at least a large part of it — when I spoke to Eda Beaumont, a 61-year-old British expat who lives just outside Alicante on the Costa Blanca.

Two years ago, with her 60th birthday approaching, the sports therapist from London started making plans to swap her holiday home for a smarter, more spacious property where she and her partner would spend their retirement.

To maximise their purchasing power, they decided to invest her £50,000 nest-egg in a secure account offering generous short-term interest — and where better than her friendly local savings bank inAlicante, the Caja de AhorrasdelMediterraneo (CAM)?

One of 44 such institutions then dotted aroundSpain, its history dated back to the mid-1800s. During the past decade, however, ‘theCAM’ had become a major player in the construction boom, funding many of the lavish developments transforming the landscape: the tower blocks, shopping malls, golf courses, motorways and airports.

And Eda was delighted with the bank’s offer. Not only would she receive a handsome 7.3 per cent interest rate, but she was assured she could withdraw her savings without penalty whenever she chose.

When she attempted to do so last summer, only to be told she would have to wait weeks because there were insufficient funds, the precariousness of the nation’s fourth-biggest savings bank started to become apparent.

She says: ‘I didn’t hit the panic button because I just thought this was Spain, and I knew how it worked.’

In recent weeks, however, the appalling recklessness — and allegedly criminal chicanery — ofCAM’s executives has emerged, and Ms Beaumont has come to realise that she didn’t really know how the Spanish banking system operated at all.

Nor, it seems, did the vast majority of ordinary Spaniards, millions of whom also ploughed their hard-earned savings into these seemingly solid, regional High Street banks controlling half ofSpain’s entire finance sector.

Today just 11 of 45 branches remain, and the catastrophic story behind their demise (very belatedly being probed by anti-corruption investigators) is a parable for the appalling mismanagement and rampant corruption that helped precipitate La Crisis, as the Spanish have dubbed their economic Armageddon.

Under arcane regulations, they were run not by experienced independent bankers, but local politicians and their cronies, whose decisions were vetted by ‘depositors’ representatives’: laymen who knew nothing about finance.

During the boom years, this allowed them to splash out their customers’ cash with abandon, and left them wide open to criminality involving kickbacks, bribery and the like.

The Bank of Spain recently branded theCAM, which was taken over six months ago for a nominal €1 fee by the Banco Sabadell, as ‘the worst of the worst’.

The way it operated would be hilarious were it not for the anguish it has caused. For among the savers’ representatives co-opted to rubber-stamp complex multi-million-pound decisions were a supermarket check-out assistant, a dancing teacher and a university psychologist.

‘I was never told there were problems, or that we were in crisis,’ the ballet mistress explained lamely a few days ago, during an inquiry inValenciaprobing the bank’s failure.

With this kind of ‘supervision’, one sees how, just two days before it crashed, the savings bank was able to lend £200?million toValencia’s near-penniless regional government.

One understands, too, why many financial experts believe even a proposed £80?million EU bailout may no longer be enough to save Spain’s sandcastle banks from total collapse, bringing the euro down with them.

As for Eda Beaumont, with a hollow laugh she reveals that instead of getting her savings back, she is being offered shares in the bank’s new owner worth only a fraction of what she invested.

Needless to say, like scores more British expats, she has rejected the proposed deal, preferring to fight her case in the courts.

But of course, their hardship pales alongside that of the millions of decent, hard-working Spaniards now being made to suffer for the greed, hubris and criminal dishonesty of those who caused La Crisis: the bankers, developers and politicians running its 17 autonomous regions.

For now, the Spanish are accepting their punishment with characteristic stoicism, but one senses their patience is wearing mighty thin — that there is only so much of this that they will take.

And if, as some fear, the powder keg explodes as it has during prolonged rioting inGreece, history might remember that the fuse was lit — as so often at times of strife — by the militant coalminers.

More than a month ago, 8,000 pitmen — many in the Asturias region of northern Spain — walked out in protest at the government’s decision to cut the subsidy that keeps the unprofitable mines running — part of the brutal, but now vital austerity package.

As I saw, at dawn each morning they also block the motorway to Madrid by starting fires in the tunnels and dragging trees across the lanes, raining the Civil Guard with rocks and mortar-launched fireworks when they try to clear the route.

At one mine, outside Mieres, pickets have vented their feelings by stringing up an eerily lifelike effigy of Prime Minister Rajoy from the pithead tower.

‘Our government should help its own people,’ angry union official Jose Luis Villares told me. ‘If they don’t do that soon, and other industries are betrayed, as we have been, the protests could soon spread and the people will support them because they are angry.’

Last month, another outbreak of serious civil unrest exploded, this time in the northern city ofOviedo, where riot police were pelted with missiles and drenched with water poured from the windows of an apartment block as they tried to evict a young couple with a three-month-old baby.

They were behind with their mortgage repayments, and all pleas to their bank had fallen on deaf ears.

NowSpain’s miners, in the country’s equivalent ofBritain’s Jarrow March of 1936 when the unemployed of the North-East marched in protest toLondon, have brought their own demonstration toMadridwhere they were joined yesterday by numerous protesters and police firing rubber bullets.

From all I have seen in recent days, unless matters improve here — and fast — it will not be long before such a lynch-mob mentality spills dangerously on to the streets all across this proud nation.
This article first appeared in the Daily Mail.

14 COMMENTS

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  1. Tony, I assume that you are suggesting what I detect here- a rather exaggerated and extravagant piece of tabloid journalism, long on rhetoric and short on facts. Hope it doesn’t put off too many tourists visiting Spain this year. Still a great place to live despite its many problems-and which country doesnt have some problems just now? Maybe next week, David Jones will ‘drive the length and breadth’ of Greece – he has to earn a living, after all.

  2. Of course its not true Fred! I repeat his sign-off para:

    ‘From all I have seen in recent days, unless matters improve here — and fast — it will not be long before such a lynch-mob mentality spills dangerously on to the streets all across this proud nation.’

    How many Spaniards do you know personally who are about to join a lynch mob-or have the energy to?! Without exception all of the many spaniards I know have a resigned acceptance of the situation. People are smart enough to know that whichever bunch of politicos are running the store, the medicine has to be taken. Lynch mob? get real.

  3. The headline reads “Spain pays the price of financial folly: As airports and luxury flats stand empty as monuments to Spain’s overspending…”

    Well, some people in Spain are paying the price, others in Spain are very content fat cats. Let us remember that “Spain” did not overspend. Banks got greedy and lent money willy-nilly to people who simply wanted a roof over their heads without having to pay rent.

    After Lehmann Brothers (remember them?) went belly up and Spanish banks started to feel the pinch, they did what all financial institutions do when times are hard. They protected their profit margins. They were not there to create jobs or to provide housing. Their raison d´être was, and still is, to create wealth, as much wealth as possible for their shareholders.

    So let´s not fall into the trap of referring to “Spain” as a person.

    I agree with you, Steve. Spain is still a great place to live, despite its many problems, and that is why I choose to live here.

  4. Whilst I agree that Spain is not at the civil unrest stage, that could change. The author quantifies that in the article, and states that “unless things change”. If more banks collapse and people cannot get access to funds, and if the bailout falters, I would certainly expect more civil unrest.

    I agree the term lynch mob was ridiculous (but not surprsing from the DM). I wonder why the OP chose to publish this article when they normally are so positive about Spain? Has the worm turned?

    “Banks got greedy and lent money willy-nilly to people who simply wanted a roof over their heads without having to pay rent.”

    Yes, banks are scum. However, they are a necessary evil when your entire system of existence is based on the Capitalist model, and they will always control us while this model continues. Do you have a bank account Steve? Yes? Well, then you are in the system too and helping the banks shareholders get richer. Got an alternative?

    Banks are not 100% to blame, however. Some people got greedy too and lived beyond their means. Just because someone offers you a loan, you don’t automatically take it and ignore the consequences i.e. losing your job etc.

  5. Fred, you said “Some people got greedy too and lived beyond their means.”

    Maybe you are right. But my guess is that the majority of borrowers were living well within their means until times got (very) hard.

    Banks are a useful alternative to stashing your money under a mattress. So maybe we should be looking at how banks operate, rather than criticizing the victims.

    The author of this article wrote “Nor, it seems, did the vast majority of ordinary Spaniards, millions of whom also ploughed their hard-earned savings into these seemingly solid, regional High Street banks controlling half of Spain’s entire finance sector.” That gets closer to the truth. Except for one thing.

    I doubt very much that they had a lot of money to “plough”. Working class people usually have their mortgage and day-to-day living expenses to pay before they can even think about saving some money. And that tells me a lot about the author´s grasp of reality.

  6. At the end of the article, the following prediction appears. “it will not be long before such a lynch-mob mentality spills dangerously on to the streets all across this proud nation.”

    I live in a village near Ronda (Montejaque) and I see absolutely no evidence of a lynch mob mentality emerging. However, such such a thing appear, I wonder who will be the first people who the “mob” will target.

  7. Yes Fred, I have a bank account but with a mutual organisation with no ‘city’ shareholders to get rich. And I lend money through Zopa-a great peer-to-peer lender that enables people to borrow without using the banks and on better terms. It is stupid to say that banks are ‘scum’. A bank is not a person and there are hundreds of thousands of very good people working in Banks. They are an essential part of a thriving economy (or any economy). But they need regulating and unfortunately regulatory bodies tend to attract employees who have a ‘civil service’ mentality rather than the cream of the university finance-oriented output, which heads for banks, for more interesting work, better pay, and better career progression. So Regulators are always several steps behind the game. Hence Lehman, Barclays, RBS, Bankia et al.

  8. Zopa? Sounds like the “Bank of Dave” lol. Needless to say, I’m not won over by your claim. Zopa is not as ethical as you make out. The lenders just want to make lots and lots of money and they mostly lend to people with high credit ratings in any event, so the loans are not universal.

    And when I said banks are scum, I was not referring to the lower echelons of the organisation, more about the upper hierarchy who manipulate markets and lie to their customers, you appreciate.

  9. Zopa-business term for ‘Zone of possible agreement’ Fred, so nothing like Bank of Dave. I know you dont like facts to get in the way of your opinions but they have 500,000 satisfied members who either pay low rates for their loans of they get higher rates on their savings because there is no Bank overhead. It is very transparent, has excellent software and lends to high risk borrowers too-despite your assertion!! The better your credit rating the less you pay-because the bad debt risk is less.

    As for your scum comments-you should not even tar the upper echelons with that brush because of one or two bad apples-bit of a mixed metaphor but you get my drift. That would be rather like me saying that if I knew someone called Fred who was a bigot, then everyone called Fred must be a bigot.

  10. Steve: One or two bad apples? Do you seriously contend that a couple of bent bankers have caused all this aggravation? Give over, it was caused by legal gangsters in government and finance who conspired together in order to fill their boots at everyone elses expense. Of course the top echelon are scum.

  11. Do you work for Zopa lol. I don’t get your drift at all I’m afraid. Fixing Libor rates affected millions of people. That’s scummy in my book; you can of course disagree. I agree on that term, and you disagree. Nothing bigoted about that. I find that people tend use the term bigot a lot whenever they don’t like another persons opinion.

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