So much for 'the Spanish dream': Euro crisis turns suburbs into ghost towns
By Ian Johnston, msnbc.com
Just north of Spanish capital Madrid
lies Cuidad Valdeluz. Built during the country's economic boom, it was promoted
as a suburban family paradise for tens of thousands of people
.
Today, it is one of 12 near ghost
towns in Spain, a country that -- despite being the European Union's
fifth-largest economy -- is teetering on the brink of a Greece-style
meltdown.
Spain has the highest unemployment
rate of all European Union countries at 21.7 percent, according
to a report published this month by the Center for Economic and Social Rights.
Among those aged under 25, nearly half -- 46.4 percent -- are without a
job. More than half a million households had no one earning an income in 2011.
The report warned that "over
half the population reports experiencing a heavy financial burden due to
housing costs." The number of foreclosure proceedings rose from 25,953 in
2007 to 93,319 in 2009, an increase of nearly 260 percent.
As she stood on the deserted streets
of Valdeluz, journalist Lindsey Hilsum of the U.K.'s
Channel 4 News said the
suburb illustrated just how far and how fast Spain had fallen.
On the streets of Madrid, they have
a message for the leaders meeting in Brussels: stop cutting and start promoting
growth. For them, the Spanish government decision to recapitalise Bankia, the
country's fourth largest lender, while reducing education spending by 20 per
cent, was the last straw.
"This was the Spanish dream:
new developments, luxury apartments, the good life. But it was all on borrowed
money. Now the developers have lost their investments, the banks are in crisis,
and increasing numbers of Spaniards are homeless," she said.
Homeless and 'in debt forever'
Maria Francisca Cano Munoz, Jesus Munoz Alcaza, their daughter and disabled son are among those about to lose their home.
CNBC's Simon Hobbs discusses the
euro's decline and whether Greece will leave the euro, with CNBC's Michelle
Caruso-Cabrera and Bob Pisani.
"We are going to end up with no
home and in debt forever," Munoz Alcaza, an unemployed construction
worker, told Hilsum through a translator. "We'll have to keep paying for
this apartment, but we won't be able to live in it."
"At first they [bank officials]
were nice and said 'Don't worry, you can pay at the end of the month to avoid
interest,'" Cano Munoz added. "But when you cannot pay at all,
suddenly you are a bad person and 'there's the door... go!'"
As in Greece, politicians are looking
to economic powerhouse Germany for help.
Many residents fear that a slow
economy is cutting into the number of foreign visitors. NBC's Stephanie Gosk
reports.
"Germany has got a lot of
profit from the euro [currency]. Because Spain was rich, we bought many things
that were made in Germany," an independent deputy in Spain's congress,
Irene Lozano Domingo, told Hilsum.
"We are all linked, so if we
are going to hell, they are coming with us. This is what they have to
see," she added.
Like other countries, Spain has
bailed out its banks and slashed government spending. But the economy is now so
bad that some are thinking of quitting the country altogether.
"I don't know. Latin America
somewhere? Brazil, Mexico ... somewhere where it's going up, you know?" a
protester at a recent demonstration against education cuts told Hilsum.
The euro is hitting its lowest level
since July 2010. Discussing the impact the weak euro has on the global economy,
with Larry McDonald, Newedge Group and John Spallanzani, GFI Group
European Union leaders concluded
their latest summit early Thursday with few concrete steps to fix the
continent's festering financial crisis, Reuters reported.
One problem has been the need to get
agreement between either the 17 EU countries that use the euro as their
currency or all 27 member states.
"I think about my one Congress,
then I start thinking about 17 congresses and I start getting a little bit of a
headache," Barack Obama said following the recent NATO summit in
Chicago.
The president's headache could get
substantially worse, according to a report by the Organisation for Economic
Co-operation and Development. It warned Tuesday that while the U.S. and Japan
were leading a fragile economic recovery among developed countries, they could
be blown off course by the European debt crisis.
The biggest continuing fear is that
if Greece cannot be saved, other larger economies — like Spain or Portugal —
might face the same fate.
The leaders gathered in Brussels
recognized that Greece had endured significant hardships and promised to
release development funds aimed at spurring growth, Reuters reported.
But Luxembourg Prime Minister
Jean-Claude Juncker told reporters that the euro countries "have to
consider all kinds of events," the news service added.
Juncker insisted early Thursday that
he had not asked the euro nations to prepare national contingency plans for a
possible chaotic departure of Greece from the currency, saying the
"the working assumption" was that Greece would remain part of the
euro.
But his statement was also a
frank admission that Greece could wind up abandoning the euro.
Germany's Pirate Party rides wave of popularity
Many analysts have said that Greece, already in its fifth year of recession, has no hope of recovery if it sticks to the spending cuts and tax hikes it agreed to in order to secure bailout loans.
"We want Greece to remain in the euro area," German Chancellor Angela Merkel said after the meeting, but she also expected the deeply unpopular policies of austerity to continue. "We expect that they will stick to the commitments that they have entered into."
Ghost towns tell the story of Ireland's faded dream
The perception that European leaders lack the political will to tackle the continent's financial and economic problems has left markets on edge for weeks. Recession is spreading. Banks are under pressure.
Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong, said Thursday: "Europe is not doing enough, and the market may not wait for them."
Reuters contributed to this report.
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