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Friday, August 03, 2012

European welfare state safety net?? Some holes in Spain


Americans are often told that the Europeans have such a great social safety net.  This article about Spain points up a couple of big holes in that net.


Panlador, born in Colombia, has lived in Barcelona for 12 years. He currently has €242,000 in debt. He was a chauffeur before the crisis. Now he's been unemployed for over two years….

Personal bankruptcy doesn't exist in Spain. His debt of €242,000 will stay with him his whole life. "I'm tired," he says….

But who is to blame? Bankia, because it gave a quarter-million-euro loan to a man who was making €940 a month after taxes? Or Panlador, because he took out the loan? No one forced him to do it. Perhaps both are to blame.


There is no equivalent of Germany's Hartz IV welfare payments for the long-term unemployed in Spain.


There is ..a rule stating that the borrower cannot simply return a property to the lender to settle his debt. In the worse case, he stands to lose the property and still owe the bank the full purchase price.

The whole article is well worthwhile. The author is the son of Spanish nationals who moved to Germany, and he seems more German than Spanish despite his Spanish relatives and his Spanish citizenship.


  1. I’m afraid it’s Bankia who should be blamed. If a person is exposed to liquid money, it’s evident that he would try every possible tricks to get it. I am just wondering how Bankia could loan €242,000 to a person whose monthly earning capacity is €940!! Just weird. If we make a rough calculation.

    Panlador’s annual income: €940 * 12 = €11280

    So, it’d take €242,000 / €11280 = 22 yrs (approx.) to repay the whole amount (without including the interest).

    Now, if we take into account that it would take around 40 years to repay the amount including the interest (in case Panlador doesn’t keep a single amount for himself and give the whole lot for debt repayment), so is it in anyway possible. Here, a big question raises against bankia’s lending criteria.

    Debt calculator: http://www.ovlg.com/calculators/

  2. Marc: I agree. The joke used to be that "a bank will only loan you money if you can show them you don't need it". That referred to the bank's desire not to lose money on loans.

    But the shift during this time has been for banks to figure they can repackage the loans and sell them to someone else -- the 'greater fool' theory. This leads to bad loans, government bailouts, and ruined lives.