Spain’s Ill Wind

It’s hard to avoid a touch of schadenfreude at seeing Europeans who were so quick to lecture Americans about their feckless ways during the financial crisis now struggling with the consequences of their own wild borrowing. But I can’t say I felt any a few weeks ago when I traveled through Spain, a nation staggering under a massive burden of public and private debt and an unemployment rate in the neighborhood of 20 percent. It has the world’s 12th largest economy and, amazingly, it’s teetering on the edge of a financial vortex. According to a reckoning by The Economist, Spain has the least sustainable overall debt position of 14 developed countries it surveyed, including Greece and Ireland.

From the look of things, though, the Spanish have gotten more things of lasting value from their borrowing binge than we got from ours. Yes, they had a U.S.-style housing bubble, but the country is also bristling with new roads, train lines, and other infrastructure that will pay dividends for generations.

In many parts of the arid interior, the landscape is dominated by thousands of tall, gleaming white windmills that stretch along the ridgelines. Spain is the world’s number three producer of wind power (and wine too), behind the United States and Germany. In March, favorable weather helped wind power set a record in Spain, generating 21 percent of the nation’s electricity—and other renewable sources supplied an additional 21 percent. But wind-generated electricity is heavily subsidized by the government, and cutbacks have already begun. Debt giveth and debt taketh away. What a pity if wind power becomes another casualty of the debt crisis.  

Photo credit: Spain's central bank by Steve Walesch via flickr