Riches to rags for Spanish towns

Wed Mar 14, 2012 10:29am EDT
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By Blanca Rodríguez Piedra and Catherine MacDonald

PELEAS DE ABAJO, Spain (Reuters) - Fifty years ago Peleas de Abajo was a centre of farming innovation. Now it is famous for claiming to be Spain's most indebted municipality after investments made during the country's boom years went sour.

The small town in the northwestern region of Castilla y Leon is struggling to pay its bills and service a pile of debt that accumulated from an investment in a rest home 15 years ago when cheap loans were plentiful.

The riches to rags story is typical of towns and regions across the country. After years of overspending their finances are under scrutiny as Spain tries to rein in its budget deficit just as the economy heads towards recession.

Every euro is being scrutinized in an austerity drive to chop Spain's deficit to the European Union limit of 3 percent of gross domestic product next year from 8.5 percent in 2011. Town halls alone generated a deficit of 0.4 percent of GDP last year.

The 250 residents of Peleas de Abajo are embarrassed about the 4.6 million debt which equals about 20,000 euros per person, nearly 10 times the level to each inhabitant of Madrid.

"It's disgraceful, it's incredible a small town owes more (per person) than a big city," said Jose Ramon Guerras, 30, who runs the town's only bar, where a handful of men gather at lunch time to play cards.

Outside the bar, the streets are quiet. The only activity in the square is when a handful of women in their dressing gowns came out of their homes to meet the bread van.

It wasn't always this way.   Continued...

A villager stands at the entrance of the only bar in Peleas de Abajo, in northwestern Spain, March 8, 2012. Decades of overspending and accumulated interest on unpaid debt has put Peleas de Abajo 4.6 million euros ($6 million) in the red and the mayor claims it is now the most indebted town in Spain. The town's debt per inhabitant is nearly ten times that of the capital Madrid, working out at nearly 20,000 euros for every resident. Picture taken March 8, 2012. REUTERS/Susana Vera