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Small Spanish villages face big budget woes

By Al Goodman, CNN
updated 9:28 AM EDT, Tue March 20, 2012
  • In one village, residents are helping out with municipal tasks
  • Spain's new government has approved a loan fund to help villages pay suppliers
  • Some experts say smaller towns should merge to share costs

Higuera de la Serena, Spain (CNN) -- In a verdant mountainous area in western Spain, the tiny village of Higuera de la Serena has a big problem.

Its municipal debt is a staggering $1 million -- for a town of just 1,000 residents.

Mayor Manuel Garcia no longer has enough budget to pay for a full-time municipal staff.

So on Sundays in the main plaza, they now hand out brooms, shovels, picks and other equipment to any of the townsfolk willing to work. And volunteer badges, too.

"Having the support of the people makes you stronger, and keeps you going, with the help of volunteers," said Garcia, who took office last June with the huge debt already piled up.

Across Spain, municipalities large and small are drowning in debt. It's the result of what many analysts and officials say was unbridled spending and taking out large loans during the economic boom years, only to find revenue all but dried up in the economic crisis.

But in Higuera de la Serena, they're gaining attention for their fiscal fight.

The mayor, from the Communist-leaning United Left coalition, and others on the town council who normally would get a salary have renounced their paychecks.

The volunteers now take on many tasks that in previous times would have been done by municipal employees.

On a recent Sunday, that meant watering the newly planted trees at a new site called Volunteer Park. The water came at no cost to the taxpayers, from the mayor's own small farm.

Just beyond town, a larger group of volunteers scoured the hillsides to pick up trash at a popular picnic site. Nearby, others dug out rocks and debris so an old spring would flow again.

Antonio Vita, a construction worker who was laid off a year ago in northern Spain and has since moved back to his hometown, Higuera, said he was happy to help fix the spring. But he's concerned about Spain's economic predicament and his own.

"I'm worried about all of Spain. Things are not going very well," Vita said. "There's a lot of debt."

Especially for companies and individuals who provide goods and services to town halls. They are owed billions of dollars, and many have gone bankrupt waiting to get paid.

Spain's new conservative government just approved a new loan fund, in conjunction with banks, so that towns could soon get cash to pay suppliers. The loans would be paid back over 10 years at favorable rates.

The government reported that nationwide, 177,000 suppliers may soon be paid $12 billion owed by city halls, under the loan program.

In Higuera, local gas station owner Ignacio Martin said he's owed $8,000 for fuel that heats the school and runs the city vehicles.

"City hall wants to get help from a new national loan fund to pay suppliers," Martin said at his gas station. "They hope to pay me in May, more or less."

That's a potentially much quicker solution than at the town's brand new nursing home. It was built under the previous Socialist local administration at a cost of $2.5 million, mainly with loans and subsidies from the regional government and the European Union, Deputy Mayor Manuel Tamayo said.

But the building can't be opened for use. It sits idle, as sheep graze nearby.

Regional health officials discovered that the building does not meet code regulations. The hallways were built too narrowly, and stretchers cannot make a turn from the hall into the patient bedrooms. The site was designed for 40 senior citizens, and most of them would need to be moved on stretchers or wheelchairs.

The inside of the nursing home is already fully outfitted, with a cafeteria, large television, even exercise equipment.

Tamayo said if it could open, it would create some badly needed jobs in the town, which relies mainly on agriculture. But instead, the town hall must pay a night security guard to ensure that things inside are not stolen.

Yet the sickest patient of all may be Spain itself, said Miguel Hernandez, a professor at Madrid's IE Business School.

With 8,100 municipalities in Spain -- 70% of them with less than 2,000 residents -- he believes some should merge to cut costs.

"Sooner or later, the structure of local government has to change," Hernandez said. "We can't have a country with 8,000 mayors."

But Higuera's mayor said the key is really not overspending the local budget.

Garcia hopes Higuera won't have to merge with another village town hall. But it already participates in a cost-sharing plan with other nearby towns for roadwork improvements and some other services.

Garcia and Tamayo celebrated with the volunteers at an impromptu picnic after the work was done on Sunday.

The volunteers even put together a free lunch, which included stewed lamb and cured ham, local specialties.

They say they'll try to get by hand to mouth, until the bill for years of overspending is paid off.

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