Wednesday, February 08, 2012

The circle of debt

It isn’t just Bigastro that defaults on payments, I read this morning of a complaint by the Green Party in Torrevieja that the company who are building the new Santa Semana museum are owed over two million Euros for the work they have completed.

Although the project is included in the Plan Trust by the Consell in Valencia, it was the city council that contracted the work so it is to them that the company are making the claim. In all, nine certificates for completed work have been issued (they are waiting for the final certificate).  Normally the constructor would expect staged payments following each completed certificate.

The company concerned now say that they have exhausted all dialogue between them and the council and so are considering taking the case to court. However, as we know from reports in the newspapers, Valencia is in a worse financial state than the towns in this area so I imagine, if they do take the case to law, they will join a long list of other pending claims. 

This is all part of a viscous circle of debt.

Since there is no longer any point in building houses, companies rely upon public works to keep going but then they find that the municipalities and regions have no money to pay for the work they commission.  The companies cannot borrow money from the savings banks which are strapped for cash so they cannot pay their suppliers nor their workers and so eventually everything grinds to a halt. The companies go out of business leaving half finished building projects which are just an eyesore.

The new museum in Torrevieja has a budget of 5.6 million Euros to be paid for by Valencia and was supposed to be open for this Easter. Somehow I don’t think that is going to happen!

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