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An EU court overturns the country’s mortgage law amid growing grass-roots opposition.
MADRID, Spain — Daubed on the wall of one lender in the city center are the words: “This bank kills people.”
That’s an increasingly common sentiment in Spain, where banks are blamed not just for helping prompt this country’s dire economic crisis, but also foreclosures practices that have forced tens of thousands from their homes and driven a desperate few to suicide.
Spain’s economy is in recession for the second time in four years. It has a jobless rate of more than 26 percent and its soaring bond prices have put it at the heart of the European debt crisis.
But the most visible symbol of the country’s woes is the wave of home repossessions — hundreds of them a day, activists say.
Especially dramatic cases, such as that of 53-year-old Amaia Egaña, have fuelled public outrage.
She jumped off the balcony of her fourth-floor apartment in Barakaldo, northern Spain, in November 2012 just moments before she and her family were due to have their home taken over. She died instantly.
Other similar suicides have also taken place.
“[Evictions] are the main social problem in Spain,” said Marti Batllori, an activist with the grass-roots association Platform for Mortgage Victims (PAH).
The organization has managed to stop many foreclosures by forming human barriers outside homes due to be repossessed, which has discouraged the authorities from following through. However, it estimates that banks have carried out some 400,000 evictions since the economic crisis started to bite in 2008.
“It’s such a big problem because of the quantity of people involved,” Batllori said, “but also because Spanish law is totally out of step with European law.”
Despite his anger, however, Batllori is celebrating. On Thursday, the European Court of Justice ruled that Spain’s mortgage legislation is unfair to homeowners.
The Luxembourg-based court criticized Spanish law for barring judges from deeming the terms of mortgage agreements to be abusive.
The ruling was prompted by the case of a Moroccan man, Mohammed Aziz, who was evicted from his home in Barcelona in 2011. After the foreclosure, he still owed his bank $52,000 in interest.
“We have suffered a lot, but in the end we have won,” Aziz told reporters on hearing the court ruling. “The weak have won.”
That doesn’t mean the battle for a fairer mortgage market is by any means over, however.
The European court’s ruling isn’t binding — its findings are merely recommendations.
Although the Spanish government took some measures to protect struggling homeowners before the court’s decision, it had ruled out a sweeping reform of the country’s century-old mortgage legislation.
The government now seems to have altered its stance, but it’s still unclear how much.
Prime Minister Mariano Rajoy, a conservative, promised “to comply with the sentence.” His government announced on Friday it would study changes to the law, including cutting interest rates for homeowners in arrears and giving them more time before proceeding with repossession.
However, Rajoy seems reluctant to back a proposal by PAH activists calling for evicted homeowners to have their debts wiped out on handing over the keys to their properties, as is the case in the United States. The motion, which has the support of nearly 1.5 million signatories, also calls for a moratorium on evictions.
The government is caught between the political and social clamor to ease regulations for homeowners on the one hand and pressure from the financial system to ensure debts are paid on the other.
The AEB banking association has warned that major changes to the mortgage law could prove disastrous for a financial sector that’s attempting to bounce back from severe crisis.
“The banks fear that if the law is loosened up, we’ll see more people stop paying their mortgages and so they’ll lose money,” said Manuel de la Rocha, an economist at the think-tank Fundacion Alternativas. “The banks are protecting their interests, it’s as simple as that.”
Spain is also trying to rein in its public finances and stick to EU conditions for receiving a $52 billion bailout for the country’s banks last year.
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But it won’t be easy to defuse Spaniards’ growing anger at evictions.
Last month, firemen in La Coruna in northern Spain refused to help the authorities evict an elderly lady. Police have done the same in other parts of the country and some locksmiths have said they won’t change locks on foreclosed properties.
Juan Carlos Castano applauds their stance. He lost his job as a computer engineer after becoming seriously ill and was evicted from his Madrid home in 2010. Under the current regulations, he still owes the bank $239,000 in interest, legal fees and because of a drop in his home’s value.
He’s delighted at the European court’s ruling. But he says anything less than a major reform of Spain’s law would disappoint him.
“Losing your job, for one thing, is very tough, and then you lose your home,” he said. “A lot of people can’t take it — that’s why they’re killing themselves.”