Trapped in Euroland. That’s the title of the horror movie now reaching its climax in the eurozone periphery. From Greece to Portugal, Spain to Ireland, and now Italy, the countries of the European fringe are all locked into Depression-style economic orthodoxy with no clear escape routes in sight.
Nowhere is the debt trap more treacherous than in Valdemoro, a once-burgeoning dormitory town less than twenty miles south of Madrid, frontier of the suburban sprawl that stretches far across the parched Castilian plateau toward Toledo. Here, Rolando Jimenez, a 40-year-old Peruvian security guard, is attempting to enter the now foreclosed and auctioned apartment he bought in 2006 for 216,000 euros, courtesy of a 90 percent mortgage from Basque savings bank Kutxa. Jimenez and his Russian wife had dared hope that a protest held the previous day by a hundred or so young indignado activists, outside the bank’s head office in central Madrid, might ward off the bailiffs. But that was just the euphoria of the demo. “They’ve been and changed the lock,” he says, forcing the key to no avail.
During the frantic construction of the bubble years, this new suburban frontier of apartment blocks, chalets and malls turned Madrid into Europe’s third largest city—after London and Paris—as mass immigration pushed the population of the Spanish metropolis past 5 million. Now it is a semidesert of ghost housing estates. Five miles farther south, a burning wind blows like a hair dryer through the empty blocks of Residencias Francisco Hernandez in Nueva Seseña. The eponymous developer, known popularly as Paco El Pocero—the drains man—planned to build 13,500 apartments financed by a consortium of five banks, and openly encouraged buyers to flip their properties for a profit once the papers were signed. Now banners hang from half-finished blocks: “Pocero: you neither sell nor you pay.”
Beyond, shimmering in the heat, a forest of signs advertise new chalets at discount prices. “When they liberalized zoning requirements, twenty million square meters of farmland here became buildable overnight,” says former mayor of Seseña Manuel Fuentes, of the Communist Party–led Izquierda Unida coalition. Spain built more homes in mid-decade than Germany, France and Italy combined, many in suburban developments outside the big cities, even more as vacation homes on the Mediterranean coast. Now between 700,000 and 1 million remain unsold, with little prospect of a recovery in the foreseeable future. Perversely, though possibly a sign of things to come in November’s general elections, Fuentes lost the Seseña town hall in the May poll to the very same deregulating People’s Party (PP) that liberalized zoning in the late ’90s.
Valdemoro and Seseña could be Southern California. Another burst bubble in the desert. But the Jimenez family finds itself in a worse trap than the foreclosed masses of the American Southwest. Here there is no key in the envelope dispatched to the bank before moving on. Unlike in California, strategic default on home loans is not recognized in Spain, and once the house is sold at fire-sale prices, the remaining mortgage debt is still claimed by the bank after foreclosure. This is a life sentence for Jimenez, who, like so many low-paid workers on the European periphery, blindly saw opportunity in debt. He channeled up to 80 percent of his wages into mortgage payments before rising interest costs and a shortage of work forced him to cease paying last year. Now in temporary rented accommodation, after paying 85,000 euros to Kutxa, he still owes 115,000.