Crisis brings brisk biz for Spanish pawnshops
Faced with rising mortgage payments and plunging sales at her clothing stall at a market in the outskirts of Madrid, Mercedes had no choice but to take her jewels to a pawnshop.india Updated: Dec 16, 2008 22:44 IST
Faced with rising mortgage payments and plunging sales at her clothing stall at a market in the outskirts of Madrid, Mercedes had no choice but to take her jewels to a pawnshop.
Now the mother of three, who is in her 50s, cannot afford to repay the loan she took out using the jewels as collateral and the items must stay in Spain's oldest pawnshop, run by Caja Madrid bank, in the city's historic centre.
"I waited until the last minute to see if I could retrieve them but I don't have the amount needed," she said with a worried expression as she left the shop after paying 200 euros ($260) in interest on a loan of 1,390 euros.
She is not alone.
Pawnshops and second-hand stores are doing a brisk business in Spain where the end of a decade-long property boom has pushed the country's unemployment rate to 12.8 in October, according to Eurostat, its highest level in over four years and the highest rate in the 27-nation European Union.
During the first half of the year, the 21 pawnshops run Spain's saving banks issued 1,34,923 loans, 11.6 per cent more than during the same time last year, according to the Confederation of Spanish Savings Banks (CECA).
They loaned a total of 188 million euros during this period, almost 14 per cent more than during the same period a year ago.
Business at pawnshops had been in decline in Spain since the 1960s but it has increased "sharply" this year as Europe's fifth-largest economy started to run out of steam, said Javier Ubeda, director of the confederation's pawnshop and social works division.
The Spanish economy contracted for the first time since 1993 in the third quarter, shrinking 0.2 per cent, leaving it on the brink of recession, which is broadly defined as two consecutive quarters of negative growth. It expanded by 3.7 per cent last year.
"The amount of pawnshop loans has increased bit by bit until this year, probably because of the crisis, it has grown in a much more pronounced way," Ubeda said.
"During a period when obtaining financing is more complicated, family debt levels have increased greatly and many people are unemployed, people are in more trouble and they turn to pawnshops more," he added.