Spain’s most indebted village pays the price of loans leveraged beyond reality

Only 2 of 100 homes are occupied

The new brick houses stand by the dozen, in neat rows which stretch across the sun-drenched hillside. Each has its own walled garden, solar panels on a terracotta tiled roof and space for two cars to park in the driveway…

There is also a silence in the streets for the simple reason that hardly anyone lives here – all but two of the development of 100 homes stand empty…

This is Pioz, the town in the Guadalajara province of Castilla-La Mancha which has now earned the unwanted distinction of being the most indebted in Spain…

Pioz has become the symbol of a crisis-hit nation where town councils have run up debts that far surpass their income, debts which threaten to derail the government’s attempt to meet strict budget deficit targets set by Brussels.

“We are crippled by debt,” explained Dionisio Torres Martinez, the spokesman of Pioz town hall. “It is impossible to exaggerate how big our problems are here. In the short term we are just struggling to find the funds each month to pay for the very minimum of services, let alone meet our debt repayments…”

At night the street lighting is not switched on, road maintenance has been halted and rubbish collection is intermittent.

The town owes 16 million euros in outstanding bills to suppliers and is one of 2,619 councils applying to the central government for help to meet repayments…

The town suffers 25 per cent unemployment, the national average, and at best estimates it could put aside 2,000 euros a year to pay outstanding debts after meeting just the bare minimum of running costs.

“Yeah, life was good here. It’s a beautiful place,” says Ignacio, a man in his 30s, who arrived in the town square on a battered old bicycle. “I had two cars, a new house, lots of work in construction and I thought it would never end. Now I’m unemployed and live with my parents again…”

The spectacular bust in 2007 of Spain’s decade long building boom has left troubled banks burdened with an estimated 185 billion euros in problem loans and assets.

Constructed in parallel to the construction boom and bust that was at the core of the same crash in the United States. I imagine many of the same lies were told. The same paper oversight that ignored fact-checking on whether or not people could afford the homes for sale, whether or not developers could cover the costs of developing the projects, whether or not banks had sufficient collateral to cover the loans – and on and on into derivative trades on a global scale all based on endless increasing sales of homes not yet paid for.

Not a lot of new laws are needed to prevent this sort of collapse. It might be nice if storefront mortgage companies were required to be licensed, receive the same oversight as banks chartered for lending. It might be nice if the excuse of states rights didn’t inhibit such oversight on a national scale.

It might be nice if the politicians we elected to serve in Congress did their jobs. It might be nice if people weren’t so gullible they actually believe populist phrase-mongering, conservative ideology, was going to make a difference – instead of electing folks with an understanding of economics, responsibility.

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