Sunday, April 08, 2012

An unknown future

The prime minister, Mariano Rajoy now admits that things in Spain got out of hand during the boom years when regional governments and town halls competed with each other to show off how rich they were. They built airports, sports pavilions, conference halls and exhibition centres as symbols of their new found wealth. The classic examples are the two airports at Castellón and Ciudad Real which have never opened. They are building another one at Corvera which could well face the same fate and let’s not forget the high speed railway which the country can ill afford.

The new Auditorium at Torrevieja and the Semana Santa museum are prime examples of local governments spending beyond their means. The splendid auditorium where we enjoyed the concert last week will be open for just three months this year. It is not just that the towns can no longer afford the building of these monuments to wealth, they can’t afford to run them. In Bigastro, it is the multi storey car park that has opened for one week since it was built, the sports pavilion  and the auditorium that mark the town’s riches during that period. Thankfully, the aparthotel at La Pedrera was stopped otherwise that would have been another white elephant to add to the list.

It wasn’t just with public buildings that Spaniards went crazy, thousands of homes were built in the hope that people would buy them. Now, in spite of banks selling off their housing stock at knockdown prices, there are still 700,000 new houses on the market with no takers in sight. Outside of Madrid there is a whole town of apartment blocks that stand empty. If you are part of the 24% workforce unemployed the last thing you can consider is buying a new home even a bargain basement prices.  

Understandably in these circumstances, house prices in Spain have plummeted by 25% from the highs set during the boom years and are predicted to fall even further over the next two years. I don’t even like to think about  how much our house would fetch if we had to sell it – I dare say a lot less than we paid for it. Fortunately we don’t have a mortgage otherwise we would now be in negative equity owing more than our house was worth.

In a desperate measure, the government has announced a tax amnesty on those Spaniards who cheated the system by allowing them to pay a one off 10% tax on their hidden assets. During the boom years it was common for builders to take final payments for houses in cash, I know of many at Villas Andrea that paid this way – Pam and I didn’t. Does Sr Rajoy really think that those builders are now going to cough up some of that cash just to help the country out? No, that is carefully stashed away in strong rooms under their houses. It is a nest egg that will ensure their survival until things improve – whenever that might be. 

Increasingly, analysts are predicting that Spain will be forced to join Ireland, Greece and Portugal and will require a bailout from the European Commission, the European Central Bank and the International Monetary Fund. Quite what happens then is anybody’s guess. For sure it will not be good.

Still it is Easter and the sun is shining. I’ve just heard the fireworks that signal the encounter between Mary and her son Jesus down in the town so things are not quite desperate yet.

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