PUBLIC FINANCES

Andalusia is the region with the most indebted town and city halls

Madrid’s debt jumped last year as it borrowed to settle suppliers’ bills

Monasterio de la Sierra is a small village in the province of Burgos with a population of only 48. The houses in the village are built of stone and its clock tower is its defining monument. But if there is anything it really stands out for, it would be the fact that among the 8,116 local government administrations in Spain it has the highest debt per capita at 8,520 euros.

Monasterio de la Sierra along with Aguilar de Segarra in the province of Barcelona, which has debt per capita of 8,344 euros are among those municipalities that undertook massive investment projects that caused their debt to soar.

Debt has become a major drag on Spain’s public administrations, with 105 town halls building up debt per capita of over 2,000 euros. Of cities with a population greater than 50,000, the North African exclave of Ceuta has the highest rate at 3,208 euros.

According to figures released earlier this week by the Finance Ministry, Andalusia is the region in Spain with the most number of highly indebted local government administrations with a population of over 50,000 at 16. Andalusian cities Jaén, with debt per capita of 2,553 euros and Jerez de la Frontera with 2,484 euros, are near the top of the debt league headed by Ceuta.

The case of Jerez de la Frontera is particularly noteworthy as its debt soared five times in the course of one year from 103 million euros in 2011 to 526 million last year.

This was the result of the central administration advancing nine billion euros in funding to local governments to help them settle unpaid trade bills to suppliers of goods and services. This pushed up the financial debt of local administrations by 18 percent to 41.964 billion euros last year, compared with a year earlier. Estepona saw its financial debt climb by 382 percent as a result of the plan.

In absolute terms the loan from the central government caused Madrid’s outstanding debt to swell by 1.08 billion euros to 7.429 billion euros, more than the sum of the 23 other most populated cities in the country. The Spanish capital is also the city with the fourth highest debt per capita at 2,297 euros.

The debt of Madrid City Hall, currently headed by the Popular Party’s Ana Botella, swelled as a result of the massive project to put a large swathe of the M-30 central beltway underground and recover part of the land on banks of the Manzanares river as a pedestrian walkway. This investment undertaken by the previous major Alberto Ruiz-Gallardón, who is currently justice minister, during the height of a massive property bubble cost six billion euros, which the city will have to pay over 35 years. The extent of Madrid’s debt is such that it accounts for almost half of that of the 50 provincial capitals in Spain.

But the capital is not the only example of feckless financial management in the Madrid region, which accounts for nine of the 50 most populated municipalities in the country with the most debt per capita. These include Arganda with 1,688 euros, Alcorcón (1,570), Aranjuez (1,335), Torrejón (1,219) and Valdemoro (1,210).

Most of the debt was incurred in the construction of sports and convention centers and other public buildings, work on which began before the current crisis broke. The economic downturn after the bubble burst caused public revenues to plunge. Many of these municipalities have had to put in place draconian adjustments to try and get their finances back in order.

Other cities such as Bilbao, with debt per capita of a little more than six euros, stand out because of the quality of the financial management. Others in this category are Leganés, Barakaldo, Dos Hermanas, Vigo, Fuenlabrada and Badajoz whose inhabitants would have to fork out under 225 euros per person to clear the debt of the cities where they live.

The Finance Ministry figures show that 671 of the 8,116 local government administrations in Spain have debt per capita of under 100 euros. However, practically all of these have a population of under 1,000.