ICAN Meeting in Thessaloniki

Ski slopes of debt in Spain

19 February 2013 by Nick Dearden

Last week a former businessman told me with great conviction that the Spanish people had ‘lived beyond their means’. Tonight’s meeting showed just who has lived beyond their means. Iolanda Fresnillo from the Spanish Debt Platform told us some incredible stories about her country’s Public Private Partnerships – the most useless projects imaginable which the state has ended up underwriting.

My favourite example was the airport where a plane has never landed or taken off, because airlines can’t afford to use it. They have had to employ birds of prey to prevent rabbits taking over the runways. A close runner-up is the enormous library which doesn’t have any books in it because the council ran out of money after construction of the building went massively over-cost.

Then there’s a ski resort which was guaranteed by a tourist housing project. When the housing project collapsed – like so many other such projects built during the real estate bubble – the government ended up bailing out the resort. As Iolanda says “the dream of creating the Alps in Spain, has ended up building a ski slope of debt.”

Of course, fortunes were made from Spain’s unsustainable construction boom. The investors who supported these projects were protected by guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). and bail-outs when the bubble burst. What’s more the big banks have become even ‘too-bigger-to-fail’ because the crisis has allowed them to buy up smaller banks for prices as a low as €1.

If these are the winners, who are the losers? First the Spanish public. 25% of public debt is made up of direct bailouts and guarantees, and this doesn’t include the direct EU bank bail-outs. Up to €100 billion has been lost buying up bad banks and their assets. In order to ensure this money gets paid back, the ECB ECB
European Central Bank
The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.

has persuaded the Spanish government to change the constitution to ensure that creditor repayments are legally the first priority for government budgets – mirroring exactly the experience the Philippines.

Secondly, the price is being paid by the poor individually. Currently one person is evicted from their house every five minutes in Spain. What’s more, the banks which benefited from the bail-outs, are the same banks which are evicting people from their homes. And in some cases they are the same banks that made a killing from the debt crisis in Latin America.

As a consequence, the anti-eviction movement runs one of the biggest campaigns in Spain. 1.4 million signatures (real not online) were collected to force the parliament to discuss a law to make life slightly easier for those facing eviction. When the governing Popular Party still refused to discuss the matter, campaigners took a lead from Argentina and started following deputies around, and publicly humiliating them – declaring them the ones responsible for the suicides (now widely reported) of those threatened with eviction.

The law is finally being discussed. It’s one step forward, and we can expect much more from Spain, which has probably the most active and vibrant campaign against debt in Europe.

Other articles in English by Nick Dearden (31)

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