Trouble down at the Ayuntamiento

We have all heard about Spain's debt crisis at a national level and the proposed austerity drive, but I have been reading an interesting article in The Telegraph which suggests things may be even worse locally. According to this article - Spain Relying on Short Term Funding as Councils go bust - there is trouble brewing down at the Ayuntamiento (Spanish town hall) in the form of:

- tax revenues down 30% because of the property bust

- 20% cuts in central government funding for municipal councils

- 400 councils across the country not paying water, electricity or phone bills

- "most" councils in Andalucia bankrupt or surviving day to day

A mayor was quoted as saying:

"I am deeply ashamed to know that I won't be able to pay our staff. They have got mortgages, children. What am I supposed to do? We were not able to cover our payroll in June. Neither I nor our councillors have received anything for two years. I've had two heart attacks. My health is cracking. If we cannot solve this, I'm resigning."

Not only are council staff living in fear of not getting paid they are having more work to do. Once council (San Sebastian) has seen a 68% jump in applications for financial assistance in 4 years. Managers are calling for more resources and staff although everyone else is calling for councils to shed staff and costs as part of the solution.

Little surprise then that the councils have their begging bowls out. FEMP (the local government association) has demanded 3 billion € from the government to see cash-strapped authorities through. This would be in the form of easy credit. Councils already had racked up debt of €35 billion by the end of 2009.

Is debt the Spanish national disease? Or is it an addiction that is proving painful to kick? The truth is that Spain's position is similar to most of the rest of the Western world from Washington to London to Tokyo. The "solution" to the original economic crisis was more borrowing at national level, and we now seeing this false comfort slipping away.

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