Ernest Hemingway must be spinning in his grave right now.  Two Spanish towns south of Madrid have had to cut back or cancel their annual bullfights — and the accompanying running of the bulls through the streets — for lack of funding.  A summer in Spain without bullfights is like a summer without sangria — unthinkable!  But the global recession has bitten Spain hard, and Spanish cities are facing funding crises not too different than those in California.  (Read FT Article)

Spain — like California, Florida, Arizona, and Nevada — had a major housing bubble in the mid-2000s that saw the country’s economy become dominated by homebuilding.  When the housing market died an inglorious death (alas, it didn’t die bravely like a well-bred Spanish fighting bull…), an enormous hole was left in the Spanish economy — and in local government budgets.  When Spanish towns rein in their spending on their annual summer fiestas, you know the straits must truly be dire.   But, as the FT article explains, when a town owes back pay to 800 municipal employees, it is rather difficult to justify spending $700,000 on a party.

This situation is reminiscent of the Los Angeles Lakers recent NBA championship.  The Lakers won their 15th championship in June — second only to the Boston Celtics — but the city of Los Angeles couldn’t afford to throw them a victory parade (see Reuters article).  Of the decision, Reuters wrote: “…such a celebration could cost the city $1 million or more at a time when city leaders, faced with a deep budget deficit, were contemplating worker layoffs and cuts in services.”

City officials are right, of course.  When you can’t pay your workers, you have no business funding a party.  But it sure does make life in a recession a lot less fun.

Charles Sizemore, CFA

Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy