Spanish politicians trying to cushion the blows of austerity plan to seize foreclosed homes to house the needy, discouraging foreign investment and threatening to violate terms of the European bailout of the country's banks.
The regional governments of Andalusia, with the most vacant properties in the country, and the tourist destination of the Canary Islands, are planning to expropriate foreclosed properties for as long as three years to house displaced families. The European Commission has asked Prime Minister Mariano Rajoy's government for details on the regions' actions, to ensure they don't clash with the country's commitments.
"It's third world, populist and akin to policies more commonly seen in Bolivia and North Korea," said Mikel Echavarren, chief executive officer of Irea, a Madrid-based restructuring firm that has advised on 22 billion euros ($28.6 billion) of refinancing. "Investors fear it will set a precedent and other regions will follow suit, making Spanish real estate investment an extremely high-risk activity."
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