MADRID, Jan 15 (Reuters) - A packet of cigarettes is enough to cause a fight among the Spaniards and immigrants shivering in the dark outside an emergency homeless shelter in Madrid, set up for a bitter winter and depression-era unemployment.
Police rush in, pushing past jobless Romanian and Hungarian construction workers in flimsy denim jackets. They break it up.
“One day this place is going to explode,” says unemployed waiter Miguel Roa, a Spaniard. Since December, he has lost his job and his home as well as seeing his family split as economic crisis ended 14 years of growth in Spain.
The unemployed are becoming homeless and eating in soup kitchens in Spain, where the global economic crash put a million out of work in 2008, a figure not seen in any European country since the 1930s, according to Spanish newspaper El Mundo.
Spain offers an extreme example of problems brewing across Europe as economies face unprecedented strains from the implosion of a prosperity built on easy money and millions of low-skilled service jobs, many of them held by immigrants.
Its government is walking on egg-shells as it tries to keep a grip on spending and raise economic competitiveness without provoking violent demonstrations such as those in Greece, Bulgaria, Latvia and in pockets elsewhere.
Spain was one of four euro zone countries warned in recent days by ratings agency Standard & Poor’s of a possible cut to its “AAA” credit status as the outlook weakens. The agency cut Greece’s rating on Wednesday, and has warned Ireland and Portugal.
The euro zone’s fourth largest economy must grapple with the costs of welcoming 5 million immigrants in the last decade, more than any other European country, to do jobs that no longer exist since housing and credit booms collapsed.
Foreigners outnumber Spaniards more than two to one in the chilly, prefabricated government shelter in Vallecas, Madrid, where the stench of body odour mixes with the sickly sweet smell of alcohol, tobacco and disinfectant.
Most immigrants say they do not want to go home to eastern Europe, Africa or Latin America after living well in Spain.
“We don’t have work in Hungary either, and at least here you won’t go hungry,” said Sandor Puruczki, 31, a qualified cook and welder from Salgotarjan, who is looking for work across Spain.
Friction is growing as Spaniards and immigrants compete for a shrinking number of jobs at ever lower wages, said the Spaniard, Roa: “Every day there is more tension.”
He sleeps in one of the shelter’s rows of metal bunk beds while his wife and two young children cram into a tiny room in an apartment shared with two other families.
Over a million more workers are expected to be laid off in Spain by 2010, taking the total above four million, according to the Funcas savings bank consultancy. That would be far more than Germany, which has a population nearly twice as large.
Like other countries, particularly the United States, Britain and Ireland, Spain is struggling to wean itself off foreign financing and contain a property crash.
But unlike its European rivals, Spain has no strong financial or technology sectors to fall back on. It has no substitute for a construction-driven, labour-intensive economic model that created 8.5 million jobs in the last 13 years.
Prime Minister Jose Luis Rodriguez Zapatero has exhausted his emergency public spending power with an avalanche of over 70 billion euros in economic stimulus measures.
He has shied away from labour and education reforms: these could boost Spain’s weak productivity, but might also ignite unrest like that seen late last year in Greece.
On his side is a conservative opposition that has been unable to overtake the ruling Socialists in polls, and unions with close ties to the government.
For economist Rafael Pampillon, a key question for Spain is how many immigrants return home during the crisis.
Government efforts to encourage them to leave -- including offers to pay their fare home -- have had little impact, with only 767 signing up in the first month of the programme.
Spain cut the number of illegal immigrants landing on its beaches in 2008 by 26 percent through cooperation with African countries, but thousands continue to arrive.
“Every new immigrant swells the army of unemployed and we have to avoid social tensions in schools, hospitals and the job market,” said Pampillon, of Madrid’s Empresa business school.
With foreigners representing 12 percent of its workforce, Spain has no option but to better integrate immigrants and the young in its workforce, cut a high rate of school drop outs and find new sources of growth and jobs, the Organisation for Economic Cooperation and Development suggests.
Zapatero says his stimulus package should kick in during March and Spain can avoid long-term economic and social damage.
In the meantime, shelter workers worry about an avalanche of homeless once others’ unemployment benefits run out.
They say many of the clean-shaven jobless who arrive each night could soon join the chronically homeless.
“After 10 months or a year in the street, people begin to deteriorate,” said Frenchman Anthony Remigerau, deputy manager of the tightly run shelter. “It’s hard to recover.”
Reporting by Andrew Hay; Editing by Sara Ledwith