Valencia, a cruel reflection of Spain's economic woes

Wed May 2, 2012 6:59am GMT

By Julien Toyer and Carlos Ruano

VALENCIA, Spain (Reuters) - Once the beacon of Spain's new economic grandeur, the Mediterranean region of Valencia has become a symbol of all that is wrong with the country.

Over the last decade, surfing on a property boom, Valencia spent billions hosting the America's Cup sailing competition and the European Grand Prix motor race, launching Hollywood-style movie studios, and building the biggest aquarium in Europe, a Sydney-style opera house and several museums.

But now years of free spending, coupled with a hangover from a burst real estate bubble and the collapse of local banks, have put Valencia on the brink of being bailed out by the central government - which has huge budget problems of its own.

The building sector's implosion has forced into the open allegations that corrupt Valencian politicians, developers and bankers were in cahoots during a decade of easy money at low interest rates after Spain joined the euro in 1999.

Valencia and other indebted regions have become a liability for Prime Minister Mariano Rajoy, in office since December, as Spain sinks into a second recession since 2009 and investors speculate that it may follow Greece, Portugal and Ireland into the arms of an international bailout.

Valencia's problems are particularly embarrassing for Rajoy, who has made austerity central to his policies, as his centre-right People's Party has run the region since 1995, being re-elected four times in the process.

"They said it was all to put Valencia on the map, and that's what they did, put us on the map, for corruption, for waste ... bringing shame on Valencia," said Ignacio Blanco, a member of the regional legislature for the leftist Esquerra Unida party.

Valencia, home to five million people, is not the only one of Spain's 17 autonomous communities with debt problems.   Continued...

Workers and union members hold banners and flags of the General Workers Union (UGT) and Comisiones Obreras (CCOO) during a Labour Day march in central Valencia May 1, 2012. The banner reads, "Work, dignity, rights, they want to end all of it." REUTERS/Heino Kalis
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