Spanish sherry town has financial hangover

The proud home of Spanish sherry, Jerez de la Frontera, is in the financial dregs, waste bins burning in the streets in the past week in the latest sign of labour strife.

Known for its wine cellars and equestrian arts, this southern city is now trying to dig itself out of deep debts and find a new economic engine in the midst of a Spanish recession.

"Here everything is outsized. We created a bubble over 25 years and then it exploded," said the deputy mayor, Antonio Saldana, in a city hall that houses a peaceful Andalusian patio.

In May 2011, voters in this southern city of narrow alleys, known as one of the cradles of the Andalusian gypsy flamenco dance, gave power to the right-leaning Popular Party, which runs the country.

Taking over from the Socialists and, before them, 23 years of uninterrupted rule by left-wing Andalusian nationalist mayor Pedro Pacheco, the new team immediately denounced the state of the city's public finances.

Throughout Spain, a 2008 property crash, which brought an end to a decade-long construction boom and sent the national unemployment rate soaring to 25 percent, has wrecked public finances.

But as even its own leaders admit, this city of 210,000 residents has a particularly sorry record.

"Jerez has a debt of one billion euros ($1.3 billion), the biggest per inhabitant in Spain," Saldana said.

The crisis can be traced to the decline over 30 years of Jerez's famous cellars, which employed 22,000 people before going downhill, said Francisco Domouso, head of the Caritas charity for the region.

Now the cellars employ just 1,000 people.

"We replaced that in part with tourism and mostly with construction," Domouso said. The public sector became a key motor for the economy "until we stopped financing it".

Fed by fat revenues from the property market in the vast territory of this region, spending on public jobs exploded during the boom times.

In the city hall, the deputy mayor says more than 40 people enjoyed salaries surpassing 100,000 euros a year.

The new team axed the wage bill from 2.634 million euros in 2010 to 774,010 euros in 2012.

"We were living beyond our means," Saldana said, denouncing colossal investments by the city hall.

Jerez invested in huge projects such as a racing track for motorcycle and Formula One trials, now insolvent.

The city has taken over management of the race track.

Saldana says the track has a role in boosting Jerez's profile but he criticizes unproductive expenses, such as a 40-million-euro panoramic viewing platform, that sent costs soaring.

Vowing since its arrival to slash costs, the new team has cut 260 of the 2,000 city hall jobs, and axed the budget for the city's subcontractors by 20 percent.

Those cuts fed industrial strife, leading to a 20-day strike by a rubbish collecting contractor that left tonnes of waste uncollected in overflowing containers in the streets.

Impatience at the strike boiled over this week, prompting residents to set fire to some of the mountains of rotting waste before the action came to an end on Thursday.

Firefighters, school cleaners and rubbish collectors have all struck or protested in the picturesque, paved streets of the city.

Municipal budget cuts, combined with those being implemented across Spain, hit hard in Jerez, which has 34,000 unemployed and a regional unemployment rate of 35 percent.

"The situation is very worrying because we are now at the epicentre of an enormous crisis," said Caritas' Domouso, whose organization allocated two million euros to social work in the region last year, with food aid top of the list.

"But we have the resources, we have the means to get out of this," Domousa said. "What we need is to rediscover our pride as a city, and then that the politicians finally come to an agreement: we need a social pact."