World - Spain's Bust

HALF-BUILT, unoccupied houses have become monuments to Spain’s economic woes. Seseña, a development near Madrid has become notorious. A big property group, Martinsa-Fadesa, went bust last month. Thousands of buyers now fear they may never see their properties finished or, worse, not get their money back.
Mediterranean properties are the worst affected. They fell in price by over 6% in the year to July, against 3.9% for the whole country, says a property valuer, Tinsa. Reverberations from falling coastal property and collapsing developers are being felt widely. The world’s second-biggest tourist destination attracts buyers from around Europe. They want not just holiday and retirement homes but a nice profit when they sell. Those who thought they could not lose in a market that was seeing annual increases of up to 20% are getting their fingers burnt.
They are not the only ones blaming Spain for their pain. Vodafone, the world’s biggest mobile-telephone operator, recently pointed a finger at Spain when it issued a 2008 profit warning. After more than a decade of buoyant growth in which Spain became fully integrated in the global economy, the domestic slowdown is sending ripples beyond the country’s coastlines.
Spain’s traditional summer holiday has also been disrupted. The normally languid month of August was interrupted this week when the Socialist prime minister, José Luis Rodríguez Zapatero, summoned an emergency cabinet meeting to discuss ways of tackling the economic downturn. It came as unemployment reached 10.4%, inflation hit a 15-year high of 5.3% and quarterly GDP growth stumbled to just above zero. Yet there is not much the government can do; even its fiscal room for manoeuvre is limited. Pedro Solbes, the finance minister, said ruefully just before the holidays that “there are no magic measures.”
Spain’s problem is not that it is suffering more than other European countries, but that it was doing so much better than them before. Bloated by cheap credit and a property bubble, it became an easy place to make money. Companies like Vodafone that depended on it for growth are no longer getting what they expected. Nor are foreigners buying Mediterranean property. Nor, indeed, are Spaniards themselves.