As Spain goes for broke, brickmakers fold

By Andrew Hay

LA SAGRA, Spain (Reuters) - A billion unsold bricks -- 3 months of production -- surround factories in La Sagra, Spain's biggest brick and tile manufacturing region, since the construction sector collapsed after a decade-long boom.

In nearby towns such as Alameda, the wind blows through the skeletons of half-built apartment blocks, abandoned by building firms that have run out of cash and credit. Up to a million new Spanish homes stand empty after years of overbuilding.

Few places better depict the escalating economic crisis in Spain -- the developed country that the International Monetary Fund says will be hardest hit by the global credit crunch.

"The Spanish economy is in for a ferocious fall," said economics professor Antoni Espasa at Madrid's Carlos III University. "It's going to suffer more than Europe and take longer to recover."

Europe will feel the impact, economists say: Spain drove as much economic growth as Germany or France last year, according to Madrid's AFI consultancy, and created over a third of European Union jobs between 2004 and 2007.

Big banks and construction firms like Santander and Acciona long ago diversified beyond domestic housing and today make much of their income abroad.

But smaller banks and firms stayed at home, and Spain's Socialist government continued to forecast high growth until after its March election victory. Up to last year, Spain financed and built more homes than Germany, Italy and the United Kingdom combined, making it more dependent on housing than any Western country bar Ireland.

Sprawled across the plains 40 miles south of Madrid, La Sagra's brickworks and builders are going bust as credit-starved banks cut off lending and Spaniards stop buying homes.

Brickmaker Felipe Greciano stands at the gates of his silent factory, visibly shaken after his family firm fell into a loss and he was forced to fire two dozen employees he had worked with for most of his adult life.

Greciano shut the Los Apares brickworks in Cobeja because construction firms across Spain are freezing projects.

"We are in a psychological crisis," said Greciano as he helped workers cover up machinery and stack the last batches of red bricks to come off the production line.

"You know how Spaniards are, when there is a crisis people just freeze."

CONTAGION

Spain was one of Europe's star economies until last year thanks partly to house construction, now forecast to fall 70 percent this year and throw a million people out of work by the end of 2009, according to the sector's biggest industry group.

The world's eighth largest economy has been hit simultaneously by the end of a housing boom, the global credit crunch, soaring oil prices and a record strong euro. Its problems are spreading as unemployment and inflation rise faster than anywhere in the euro zone, prompting truckers to stage a national strike.