Spanish toll roads hit pothole
Nationalization would burden the public debt with the cost of the operators’ bankruptcy
At a supremely inopportune moment, the operators of nine four-lane toll highways — all of them roads inaugurated over the last 15 years — have detected in their accounts a shortage of capital to handle their debt of 3.8 billion euros, paid out to contractors in the process of construction, which cannot be serviced by operating income. This is what is known as a hole in the accounts.
Technically, eight such roads, planned and built during the mandate of Francisco Álvarez-Cascos at the head of the Public Works Ministry, are on the brink of bankruptcy, while a ninth has already declared it. The ministry has hurriedly announced that it is seeking solutions to prevent disaster. The news, coming after the government’s formal request on Monday for a bailout for Spanish banks, intensifies the impression that Spain’s financial and economic structure is coming apart at the seams.
The cause of this new crash, which affects the “spoke” turnpike roads of Madrid and the toll roads to Barajas airport, Ocaña-La Roda and Alicante-Cartagena-Vera, are chiefly to be sought in the exorbitant expropriation costs involved in their construction (these soared to 1.9 billion euros after 241 million were budgeted), and to a sharp drop in toll-road traffic — now standing at just 33 percent of what was planned. But these deviations are not mere natural phenomena, for which the administration would bear no responsibility. The excess costs might have been foreseen (and mitigated) by the government that planned and approved these roads; while the traffic forecasts were clearly inflated to square the accounts.
Ultimately, Madrid’s outer beltway (the M-50) and the four spoke highways formed part of a megalomaniac road project aimed at exhibiting the achievements of the national and Madrid regional governments, both of the Popular Party (PP). The megalomania was accompanied by design faults, such as the decision to make the M-50 free, while the spoke roads, objectively less necessary as they duplicate the first few kilometers of free national highways, were burdened with a toll. The cost of such unsound design is high, and the Zapatero government’s timid attempts in 2010 to strengthen the operators’ balances through participative credits and compensatory accounts — now being continued by the PP — have turned out to be insufficient.
The toll-road crash calls for pragmatism. The worst of the options is that the state put up the 3.8 billion euros of capital necessary to fill the hole. Such a decision would worsen the precarious situation of the public debt, and would lay upon the Treasury the costs of the proprietary claims deriving from the nationalization. Almost all the reasonable solutions include negotiating with the banks holding shares in the operator firms, imposing tolls on the M-50, and extending longer credits and due dates for the accounts of compensation. The political cost also demands payment; the economy is now a little more deteriorated, due to the thoughtless approval of ill-conceived projects.