ft.com/alphaville All times are London time
News
A hat tip to the Twittersphere for highlighting this story from Spain’s elEconomista.es on Wednesday, which recounts the sad tale of a town called Villajoyosa in the Valencia region of the country.
We have to rely on Google Translate — but from what we can make out, it seems to suggest it’s the first Spanish town to officially admit it is approaching bankruptcy, if you equate the suspension of all payments — bar essentials — with that classification.
Via Google Translated version:
The Consistory is thus tesoreramunicipal recommendation, he advised in a report “to suspend payments to vendors, except those that the law considers as priorities, namely the costs of personnel, pending from previous years and those for interest and bank loans . And in any case, resume payment of invoices in terms of improved income.
According to the report, the municipal box barely 30 September, with 286,847 euros available, compared to some unpaid bills amounting to 11.2 million, the Treasurer warned that “this situation is causing not only the impossibility of dealing regular payments to suppliers, but could make it harder in the future can be addressed properly staff costs (salaries liquid, social security, advances …)”.
And since that reads a little convoluted we did seek some advice from a Spanish speaker — who confirmed this isn’t so much the first Spanish town to go bankrupt, but the first case in which a Spanish town has admitted to suspending payments.
One of the interesting datapoints covered too comes from the Spanish Federation of Municipalities and Provinces (FEMP), which apparently believes up to 30 per cent of Spanish councils could go bankrupt this year.
All that said, we need to alert to the usual reader caveats when covering “the Spanish story” – so as not to be accused of any biases.
elEconomista is, we understand, a left leaning Spanish periodical. The town in question is tiny– some 33,797 inhabitants according to its Wikipedia page. And the sums in question are small too, about â?¬11.2m in unpaid bills.
But word on the street, we understand, is that the story reflects a much larger trend involving towns and local authorities all over Spain skipping or delaying payments.
The cash-strapped status of local authorities and how it has been contributing to the financing burdens of autonomous regions, for example, was recently picked up by this Financial Times story:
This week's move by Catalonia's Generalitat, the autonomous regional government, to raise up to â?¬2.5bn ($3.5bn) by selling bonds through local banks has fanned the smouldering fires of Catalan nationalism and exposed the financial weaknesses of Spain's devolved system of government.
The neighbouring Mediterranean region of Valencia is also in dire financial straits and the outlook for each of the 17 Spanish regions is listed as "negative" by credit rating agencies. Total debt of the autonomous regions has doubled to almost â?¬105bn in five years, according to the Bank of Spain.
Well known independent Spain-based economist Edward Hugh, meanwhile, has highlighted the municipality debt burden as a key area of concern for some time too.
As he noted back on October 4:
On the other hand, Spain's regional governments, far from reducing their deficits are in fact increasing them like never before. In fact total autonomous community debt hit 104 billion euros (0r 10.4% of GDP) in June according to the latest Bank of Spain data, up from 82.9 billion one year earlier. That is to say, the regional governments increased their debt by nearly 25% year on year, and there is no sign so far that they are putting the brakes on.
Of course, the regional governments only accounted for about 14% of last years deficit, so even if their deficit does shoot up, it won't be a determining factor, but it will make it much more difficult for the total deficit to fall within the targeted limits.
The local authorities, on the other hand, have things a lot tougher, since their revenue from central government is significantly down, and they find it very hard to increase their borrowing from banks, so their rate of new debt accumulation is definitely slowing.
The debt build up of both the Spanish autonomous communities and local authorities can be viewed in chart form here and here.
So given all that we’ll leave it up to you to decide whether the Villajoyosa case is just the first of many.
Related links: Cash-starved Catalonia turns to locals – FT Moody's strips Spain of its last AAA – FT Alphaville Spanish Towns Struggle Under Crushing Debts – WSJ Dispatches from Euroland – FT Alphaville
WP Cumulus Flash tag cloud by Roy Tanck and Luke Morton requires Flash Player 9 or better.
Or select a previous briefing:
© The financial Times Ltd 2010 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
var oob = new Advert(AD_OOB);oob.init(); var adPop = new Advert(AD_CORPPOP);adPop.init(); var adRefresh = new Advert(AD_REFRESH);adRefresh.init(); clientAds.fetch(AD_MACROAD); clientAds.render(AD_MACROAD); clientAds.fetch(AD_MARKETINGRIB); clientAds.render(AD_MARKETINGRIB); clientAds.fetch(AD_TLBXRIB); clientAds.render(AD_TLBXRIB); clientAds.fetch(AD_DOUBLET); clientAds.render(AD_DOUBLET); clientAds.fetch(AD_INTRO); clientAds.render(AD_INTRO); clientAds.fetch(AD_HLFMPU); clientAds.render(AD_HLFMPU); clientAds.fetch(AD_HMMPU); clientAds.render(AD_HMMPU); clientAds.fetch(AD_TRADCENT); clientAds.render(AD_TRADCENT); clientAds.fetch(AD_MARKETING); clientAds.render(AD_MARKETING); clientAds.fetch(AD_BANLB); clientAds.render(AD_BANLB); clientAds.fetch(AD_MPUSKY); clientAds.render(AD_MPUSKY); clientAds.fetch(AD_MPU); clientAds.render(AD_MPU); clientAds.fetch(AD_WDESKY); clientAds.render(AD_WDESKY); clientAds.fetch(AD_NRWSKY); clientAds.render(AD_NRWSKY); clientAds.fetch(AD_ARTBOX); clientAds.render(AD_ARTBOX); clientAds.fetch(AD_FTHBOX); clientAds.render(AD_FTHBOX); clientAds.fetch(AD_TLBX); clientAds.render(AD_TLBX); clientAds.fetch(AD_FMBUT2); clientAds.render(AD_FMBUT2); clientAds.fetch(AD_LHN); clientAds.render(AD_LHN); clientAds.fetch(AD_MKTBX); clientAds.render(AD_MKTBX); clientAds.fetch(AD_OOB); clientAds.render(AD_OOB); clientAds.fetch(AD_POP); clientAds.render(AD_POP); clientAds.fetch(AD_BXBAR); clientAds.render(AD_BXBAR); clientAds.fetch(AD_DKTALRT); clientAds.render(AD_DKTALRT); clientAds.fetch(AD_DSKTICK); clientAds.render(AD_DSKTICK); clientAds.fetch(AD_PRNT); clientAds.render(AD_PRNT); clientAds.fetch(AD_INV); clientAds.render(AD_INV); clientAds.fetch(AD_MBATOP); clientAds.render(AD_MBATOP); clientAds.fetch(AD_MBABOT); clientAds.render(AD_MBABOT); clientAds.fetch(AD_MBALINK); clientAds.render(AD_MBALINK); clientAds.fetch(AD_SBHEAD); clientAds.render(AD_SBHEAD); clientAds.fetch(AD_FTNT); clientAds.render(AD_FTNT); clientAds.fetch(AD_1x1); clientAds.render(AD_1x1); clientAds.fetch(AD_CURRCON); clientAds.render(AD_CURRCON); clientAds.fetch(AD_CURRBOX); clientAds.render(AD_CURRBOX); clientAds.fetch(AD_CORPPOP); clientAds.render(AD_CORPPOP); clientAds.fetch(AD_REFRESH); clientAds.render(AD_REFRESH); clientAds.render(); setCurrentTime(1232358020000) Assanka.wp.processClipThis(); var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www."); document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js' type='text/javascript'%3E%3C/script%3E")); try { var pageTracker = _gat._getTracker("UA-1874623-1"); pageTracker._trackPageview(); } catch(err) {} if (typeof Inferno == 'undefined') { var eid = (document.cookie.match(/EID=(\d+)/)) ? document.cookie.match(/EID=(\d+)/)[1] : 'unknown'; pageTracker._trackEvent('Debug events', 'sr23715', 'Load failure for '+eid); setTimeout(function() { var d = new Date(); document.getElementById('infdebug23715').innerHTML = (''); }, 1000); } Read Full Article »