Residents of a bankrupt Spanish town feel cuts pain By Sarah Rainsford

BBC News, Moratalla Published duration 28 September 2011

image caption The tranquil town of Moratalla is penniless

Moratalla looks idyllic from a distance. Its castle, church and sand-coloured houses sit at the bottom of a hill surrounded by almond orchards.

But the tranquil-seeming town in south-eastern Spain is in deep financial trouble. The problems start to appear even on its outskirts.

The local government once used the petrol station there to fill up everything from official vehicles to dustbin lorries. But it has not paid for that fuel for a year, racking up a 42,000 euro (£36,663, $57,290) bill.

"They say they've got no money, but the debt is intolerable now," Jose Antonio explains on the forecourt of his family-run garage. "We won't serve anyone else from the town hall until they pay us what they owe. It's a disgrace."

He is not the only one suffering.

Slow to adjust

image caption Candida Marin worries about the impact of the cuts on social services

Just off the central square, elderly men and women play dominoes and cards at a day-care centre or work with therapists on memory games designed for children. The centre is run by the town hall, but like all public employees the women who work there have not received their salaries in five months.

"The situation is extremely serious. We're having to borrow money off each other; even off our parents. We're just living from day to day," director Candida Marin explains. The staff stay on mainly out of loyalty to their frail charges.

"The fact is, Moratalla is almost penniless," Ms Marin says. "The town hall is in trouble, and has to tighten its belt. It has to cut all unnecessary spending."

She worries, though, that these cuts might put pressure on vital social services. Fees for the town's public nursery have already doubled.

The day-care centre was built during Spain's economic boom, when local governments were busy splashing out. But just outside, the hulking shells of two unfinished blocks of flats stand as symbols of how that boom went bust.

As the income flow began to run dry, politicians were slow to adjust.

"The temptation for any politician is to spend a lot and provide free services. This is good in electoral terms," explains Julio Gomez Pomar, director of the PWC/IE Public Sector Centre. "When you have a lot of money coming in, you can meet this. But not in a downturn."

Dramatic spending cuts

As tax revenue to the regions fell, spending on education and health went on growing. The number of public employees soared.

The level of regional debt more than doubled from 2007-2010, putting additional pressure on government efforts to cut Spain's overall budget deficit and convince investors the country won't follow Greece in needing a bailout.

Mr Pomar expects regional governments to overshoot their own deficit target by 0.7% this year.

"The government is in no position to transfer more funds and it won't let the regions issue more debt because of their deficits," he says. "So they're stuck."

Moratalla's mayor blames his Socialist Party predecessor for what he calls the "critical" situation. The 28.5m euros worth of debt he inherited after winning local elections in May was twice what he had expected.

So he has made a series of dramatic spending cuts.

"Anything that is not essential, we don't do," Antonio Garcia Rodriguez explains. "The police don't conduct routine patrols by car anymore. They go on foot to save fuel and only take the car when the situation requires it."

The town hall is no longer cleaned every day. Ten out of 90 members of staff were made redundant. Those kept on had their mobile phones cut off. The municipal pool remained closed over the summer and the fate of future town fiestas looks bleak.

But the mayor says he still needs emergency credit to stay afloat, and he is sure Moratalla is not the only town in trouble.

"We have brought our situation here to public attention. Perhaps other towns have not done so. They need to disclose their situation, as have," he urges.

Bleak future

With no sign of any imminent financial lifeline, stories of other regional funding crises are emerging.

In Albacete, to the north, the power company cut the supply to municipal-owned buildings last week, fed up that the local government was simply ignoring its million-euro debt. The library and swimming pool were plunged into darkness and remain closed.

image caption Juan Carlos Llorente thinks the future looks bleak

Further west in Huelva, an entire town's police force went on sick leave after four months without pay.

And this month, clinics under contract to the Castilla-La Mancha region announced they would stop performing publicly-funded abortions. They are currently owed more than a year's pay for almost 4,000 terminations.

In Moratalla, much of the money owed is to local small businesses and individuals.

"They owe me 15,000 euros and that's an awful lot for me," says metal worker Juan Carlos Llorente. Metal dustbin parts and park benches lie around his workshop: ordered by the town hall and never paid for.

"I have a wife and two children, a mortgage, loans and a car to pay for from this business," he says. "The future looks very bleak."

The metal worker has been to plead with the town hall dozens of times, with no results.