[ISL] On the economic development debt binge of Madeira

[rfmcdonald]

The Colin Freeman article from The Telegraph, subtly titled "Billions of euros of EU money yet Madeira has built up massive debts", is clearly oriented towards a specific sort of Eurosceptic reader, not just someone who's hostile towards the idea of British participation in the European Union but someone who's not overly fond of Europeans. That said, the depiction of Madeira, a self-governing Portuguese island hundreds of kilometres off the coast of mainland Portugal in the North Atlantic, as a tight-knit place where an overly personable politician can convince the locals to embark on financially costly and ambitious economic development projects is frighteningly plausible. Madeira, Prince Edward Island--what's a bit of distance between two peripheral North Atlantic islands?

Tucked beneath towering cliffs on Madeira's storm-battered west Atlantic coast, the €50 million Marina do Lugar de Baixo aimed to provide the perfect welcome for super-luxury yachts.

Unfortunately, thanks to the huge waves that have fractured the harbour wall three times since it was built in 2005, not even the more adventurous yachtsmen have often been tempted, never mind passing billionaires in floating palaces.

Today it lies abandoned, a chain blocking the road where an Oleg Deripaska or Roman Abramovic might have strode ashore, the white clubhouse empty as the Marie Celeste.

Just as spectacular as the ocean breakers off Lugar de Baixo, however, are the waves of European Union cash that have been splashed around Madeira, a Portuguese-owned island better known for sweet wine and winter sun.

While the marina was financed mainly by the semi-independent Madeiran local government, €3.5 million came from Brussels, which, like the other backers, did not heed warnings that a stretch of coast popular with hard-core surfers might be less ideal for yachters.

[. . .] Madeira is now swimming in debt as deep as the Atlantic waters around it, thanks to a government-backed building spree fuelled in part, critics say, by over-generous Brussels grants. Today, despite a population of just 250,000, the local administration owes some €6 billion, nearly double the per capita public debt of mainland Portugal.

The financial crisis, which only came to light last autumn, is hugely embarrassing for Lisbon's leaders, who have already had to negotiate an €78 billion bail-out themselves from Brussels and the IMF. The island is now seen as Portugal's own little answer to Greece, widely considered the most feckless of the southern European debtor club.

"Madeira is like Greece in the Atlantic," said Gil Cana, a councillor in Madeira's opposition New Democracy Party, which blames years of unhealthily cosy relations between island politicians, developers and Brussels grant-makers.

"The European Union has given money too easily, and the government has borrowed far too much from banks. We are a tiny island, you can hardly see us on any map. To have a debt with so many zeros is crazy."

[. . .]

He points the finger at supporters of the island's president, Alberto João Jardim, 69, who has ruled here ever since 1978, making him one of Europe's longest-serving elected leaders.

A firebrand throwback to the days of Portugal's Salazar dictatorship, for which he once wrote propaganda, his popularity has been cemented - quite literally - by the billions he has spent developing the island, which, prior to the end of Portugal's dictatorship in 1974, was a poverty-stricken backwater.

Today, a 120-mile road and tunnel network links Madeira's previously isolated mountain communities, cutting journeys around its steep volcanic contours from four hours to just one.

But much of the money came from the €2bn in EU grants handed out over the last 25 years, and when that started to dry up a decade ago, Mr Jardim began borrowing on the open market instead, via publicly-backed development firms.

Thus did construction continue, to the point where today, even small villages boast lavish civic centres, swimming pools, and football pitches.

As the government-owned newspaper, the Jornal, dutifully reports, the president cuts the ribbons at up to 450 opening ceremonies a year, using them for political rallies where he denounces his enemies in lengthy speeches. Spain's El Mundo newspaper calls him "El Maestro del Insulto" - the master of insults.