RASQUERA, Spain (Reuters) - A small town in northeastern Spain, believes it has found a novel way to pay of its debt: cultivating cannabis.

Tucked in the hills of one of Spain’s most picturesque regions, the Catalonian village of Rasquera has agreed to rent out land to grow marijuana, an enterprise the local authorities say will allow them to pay off their 1.3 million euro debt in two years.

Local authorities are keeping the location of the site top secret while Spain’s attorney general investigates the legality of the project. The Catalan regional government has also asked the village for further information about the plan.

Spanish towns are swamped in debt after a decade-long construction boom that imploded in 2008. Almost one in four Spanish workers is jobless and many cities are months behind in salaries for street cleaners and other municipal employees.

Spain’s central government is now forcing local authorities to tighten their belts even further as a euro zone debt crisis drags on, forcing greater fiscal austerity onto most countries using the single European currency.

The mayor of Rasquera, with 900 inhabitants, said the project will not only benefit locals, but also eliminate organized crime and the tax evasion associated with the cannabis industry thanks to government supervision.

“We want to put an end to mafias, we want to finish with the black market, we want to put an end to the underground economy,” said Bernat Pellisa, Rasquera’s mayor of nine years said.

“The only thing this humble mayor wants and has tried to do is to supervise all this in order to benefit society and the neighbors of our village,” he added.

The Barcelona Personal Use Cannabis Association (ABCDA) will pay Rasquera 54,170 euros a month from July 2012 for a 15 hectare plot of land and local authorities hope the farm will generate 40 jobs in the village.

VILLAGERS WELCOME PLAN

The proposal has sparked debate on the legality of cannabis. Spanish law allows the cultivation of cannabis as long as it is for “personal and shared use.” Trafficking, however, is punished with up to six years in jail.

The mayor said residents of Rasquera have welcomed the initiative, as long as it abides by the law, and that he is responding to the wishes of the people.

“It’s a potential solution for the government to pay our debt. They are working to check out if it’s legal and if they can regularize it. And if it is possible, then perfect,” Rasquera resident Josep Francesc, 22, said.

For a 67-year-old woman who didn’t want to give her name, the project would only be acceptable if the cannabis was used for medical purposes.

“They say it is going to be used by laboratories, to produce medicine. If that is the goal, then welcome. There is almost no medicine that doesn’t use drugs. But if it is used in a different way, then I don’t agree,” she said.

As cannabis must be planted in March, 36,000 euros ($47,200)has already been paid and cultivation could begin shortly.

Marta Suarez, spokeswoman of ABCDA, said the plantation in Rasquera was not a business-orientated project.

“The goal is not to maximize our profits or produce as much as possible, but to produce with quality in a controlled environment to supply users...in a responsible, appropriate and informed manner,” she says.

ABCDA has 5,000 members and is based in Barcelona, the capital of the Catalonia region.

If the cannabis cultivation project goes through, the villagers of Rasquera will have an alternative to traditional jobs in olive groves, vineyards and citrus plantations, and the village debt could finally “go up in smoke.”

($1 = 0.7625 euros)