Monday, March 21, 2016

Drowning in debt

Bigastro faces the impossibility of having 25 million euros of debt. With an annual budget of 4.1 million euros it cannot hope to ever pay off  that amount and at the same time try to maintain services.

The town owes 19.5 million euros for pending court agreements to pay short term and long term debts. On top of that there are 6.1 million euros of additional debt that the town would have to pay if it loses the pending cases involving urban issues.

How the town came to have such a high level of debt is a matter of history.  Bigastro was under socialist rule for almost 30 years, first with Moya and then with Medina. During that period the town benefited greatly from wilful extravagance which it now has to pay for. During that time anything was possible and everything was affordable. A new Auditorium - why not, a Sports Centre with a heated swimming pool - certainly, multi storey car park - but of course; the list goes on and on. However, that is all an aside. we cannot undo the wrongs of the past. The situation is what it is and no matter whose fault it was, the town has to try and resolve the problem in whatever way it can.

The town already has a plan to refinance 2016 fees for a period of 10 years with two years grace in which only interest is paid. However, that is described as just a "patch" to keep things ticking over.

The mayor says that the calculation is simple- if the town was allowed to pay 400,000 euros per year at 0% interest, it would take 48.7 years to pay off the 19.5 million euros of current debt. If it had to pay anything more than that, there would have to be cuts in services.

To this end, the town have asked the Ministry of Finance for help by means of an interest free loan of 25 million euros over a 50 year period. Their answer was to wait until the result of the General Election but of course that has left the country in stalemate and still the debt and the interest payments on it continues to throttle the town.

Even if the result of the election had been different, the proposed solution may not have been so cut and dried. It is likely that there are a number of towns throughout Spain that find themselves in similar or possibly worse situations and 50 years is an awful long time for a 25m euro loan from a government that will face re-election over 12 times during that period.

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