Spain goes to polls in shadow of financial woes and terror threat

Spaniards go to the polls today in the second consecutive election to be haunted by the fear of terrorism. Four years after the Madrid train bombings dramatically affected the result of the election held 48 hours later, campaigning was brought to a premature halt after the murder – blamed on ETA separatists – of a socialist councillor in the Basque country on Friday.

But Francisco Hernando Village, a mammoth development of 13,000 flats beside the motorway 20 miles south of Madrid, is the most dramatic example of the worry that looms largest with voters. As you approach this gleaming new town outside Seseña, you glimpse sky through unglazed windows. Blocks remain unfinished, cranes soar into the brazen sky and, close up, there is silence. This is no roaring building site, but a ghost town chilled by winds that whip the bleak Castilian plain.

Spain's entire construction industry, motor of a booming economy for more than a decade, is in crisis. For years, no one dared utter the word "crash": now the only question for Spaniards is whether it will happen this year or next. Apartments in Seseña, and in similar developments throughout Spain, are being discounted by up to 30 per cent.

With a glut of around 500,000 new flats nationwide, and a credit squeeze throttling demand, sales have dropped by some 50 per cent, construction has stalled, and contractors and big development companies are facing crisis.

Many Britons and Spaniards who scrambled to buy holiday homes as an investment are now walking away, abandoning large deposits on properties whose value is nosediving.

Francisco Hernando, 63, the flamboyant developer and former sewer digger who created the gargantuan complex that bears his name in Seseña, has had to sell his yacht and three of his four planes. He faces jail for non-payment of €3m (£2.3m ) tax, amid allegations of corruption during the years of easy money, and has asked for time to find the funds.

Further down the chain, others in the industry also worry. Pedro Paredes, 45, came from Peru 17 years ago, and launched his own plasterboard company in 2003. Last summer, he drove me round Valdecarros, a mushrooming residential area on Madrid's southern fringes. He employed 140 men, and we visited sites where his workers were installing light, cheap, internal walls.

Now it's a different story. "I've had to lay off half my workers. I now have fewer than 70," Mr Paredes said last week. "Everything's come to a halt, and I'd say the future is uncertain. Banks are squeezing our credit, and we have to watch who we work for." A developer he worked for had gone bankrupt, he said. "He didn't pay me. It's a brutal symptom of what's happening everywhere."

Mr Paredes is aware that Spain's woes are part of a wider global downturn. Like many others, he reckons it will make little difference whether Jose Luis Rodriguez Zapatero's ruling Socialists or Mariano Rajoy's conservative Popular Party win today.

"Their influence will be minimal," he said. "This reality doesn't depend on who's in power." Even some business leaders reckon the veteran socialist Economics Minister and former EU economic commissioner, Pedro Solbes, has a sturdier record than his conservative counterpart, the business mogul Manuel Pizarro, who parachuted into the political arena in January.

Not everyone has lost hope, however. In Seseña's brash new frontier, Alberto Vera, 29, and his wife, Maria, 24, jingled the keys to their new flat as they celebrated in the township's only bar, Los Cafelitos. They have a 35-year mortgage on a flat whose price has already dropped. "I'm not worried," Mr Vera shrugged. "We've struggled to get this, and we want to make our life here."