Audio Transcript:

LISA MULLINS: President Obama speaking earlier today, his call for fiscal responsibility comes just after he signed a massive stimulus bill into law. That means the deficit is gonna go up before it goes down. For now, the priority in Washington remains jump-starting the economy and dealing with underlying problems such as the housing crisis. Governments around the world are wrestling with similar issues and their experience may offer some answers. The World's Gerry Hadden's in Spain now, another country that's been hit by both a credit crisis and the collapse of a housing bubble.

GERRY HADDEN: Houses essentially are not moving, and one of the leading real estate associations here in Spain predicts that, by the end of this year, there'll be a million and a half empty homes on the Spanish market.

MULLINS: One of the things that President Obama is doing here about the housing crisis is trying to get people to be able to refinance their mortgages at lower rates more easily to allow families who owe more on mortgages than their homes are worth to be able to pay off the mortgage and not risk foreclosure. What are the remedies that are being proposed by the government in Spain to the very similar problems there?

HADDEN: Last year, the Spanish government passed a law that lets people extend their mortgage. So if you have a 25-year mortgage, without any penalties, without having to pay fees to your bank, you could make that a 30-year mortgage, which, in the short run, means you pay less monthly; although, over the long run, you end up paying more money in interest. But, in terms�but that was a measure passed to get us through this immediate crisis over the next 3 to 5 years. Now, because the unemployment rate is soaring � it's over 13% � over a million people entered the jobless ranks last year, many of those in the construction sector, if you lose your job now, you can apply to your have your mortgage literally suspended for up to 3 years. In other words, you don't have to pay a dime, no penalties, no interest for 3 years on your mortgage.

MULLINS: What do the banks say about that?

HADDEN: They don't like it, but the banks also don't want to become real estate agents, and that's what's happening. They're being overwhelmed by the foreclosures that, in the past, they weren't used to dealing with, and there are stories now of Spanish banks that, literally, are having to learn the real estate business, and they're having to go out and show these houses that suddenly they've become the owners of. And they've got the keys lost and mixed up, and just tossed in drawers everywhere. I mean, they're literally learning the ABC's of becoming real estate agents, and it's the last thing they want to have to deal with because, again, if the prices don't come down and the market stays oversaturated with over a million unsold homes, then they're sitting on essentially huge assets that aren't worth anything.

MULLINS: Gerry, one other question: Spain was one of the first countries to be hit by the credit crisis last year. Was it coincidental that it happened right around the time that it happened here in the United States? In other words, to what extent did one affect the other?

HADDEN: Spanish politicians essentially have blamed the United States for the credit crunch, for the financial crisis here, and that's been echoed across Europe, even though many Spanish banks were, you know, playing the same games that U.S. banks have been playing. So, is it coincidental? I think there's some truth to that. I mean, the credit crunch began, and so much of it is psychological. It spread across the Atlantic, many European banks, many Spanish banks were involved in some of these exotic derivative products and�so, no it's not a coincidence that the Spanish banks began to take hits soon after the financial crisis began in the U.S.

MULLINS: The World's Gerry Hadden speaking to us from Barcelona, Spain. Yet another country suffering from housing woes is Ireland. Not that long ago, Ireland was the �Celtic Tiger' and the country was experiencing a housing boom. Now that boom has turned to bust. John Murray hosts "The Business" program on RTE Radio in Ireland; he says home ownership has long been a part of the Irish identity.

JOHN MURRAY: There's a very long tradition of home ownership in Ireland. It dates back to the period in our history when, you know, England were the masters, where the importance of a bit of land, the ownership of land was caught up with the whole sense of national identity, and that has stayed with us today. There are European countries where home ownership doesn't have the same cachet. So, what we have in Ireland is, over the last decade, the economic boom created a demand for houses, and that meant that young people were very keen to get on the housing ladder with their increased financial well-being. But, unfortunately, the estimate of how many houses we would need, and tax breaks given by the government, encouraged the level of house building that has left us now with thousands of empty houses, and a lot of young people are in above their heads with mortgages that they can little afford. At the moment, they're in a bit of a limbo, but we'll see what happens, perhaps in 2010 or 2011.

MULLINS: Well, it sounds like there in Ireland, there's the Irish dream similar to the American dream of home ownership, and you say it's mostly young people. They were given tax breaks; there are tax breaks here as well for those who own a home, but the main problem here in the housing crisis, seemed to be that homeowners were obtaining loans that they had no ability to pay back, especially as the economy changed. The difference there is what?

MURRAY: Well, I suppose there, they're known as sub prime loans; what we had here for a while at the peak of the boom was 100% loans, where people didn't even need the deposit on a house to actually buy the house. And the banks insisted all along that they had done what are called �stress tests' on the individuals taking out the mortgages, and of course, we're seeing now that the banks weren't rigorous enough in their application of the criteria for the people getting mortgages. And the worry must be: as the unemployment rate moves from 5% nine months ago to an estimated 10 and past 15% at the end of this year, that a lot of young couples will find it just impossible to make ends meet, and will find themselves having to give the keys back because they just haven't got the means to pay for these houses.

MULLINS: Did you say that the unemployment rate in Ireland could double or even triple by the end of next year?

MURRAY: Yes, that's the prediction, and this goes back to one of the reasons why Ireland enjoyed such a big economic boom was to do with the construction industry. 20% of national output was related to construction; now, because of the collapse of the property market, you have a huge chunk taken out of the economy. So, the big thing here is we always knew that the boom wouldn't last forever; it's the pace of the collapse and the disappearance of the boom that's shocking everyone.

MULLINS: Just one other question: if Ireland has had this major crash as you're saying, I wonder if people there are assigning blame to the government, if they're assigning blame to the United States, or if perhaps they're not assigning blame at all.

MURRAY: Oh no, they're assigning blame, all right. In fact, they're assigning blame to the government, and as recently as last Saturday, in the center of Dublin, you had over 120,000 people gathering for a protest march. So, at the moment, blame is fairly and squarely set at the door of our government.

MULLINS: Thank you very much. John Murray, host of the weekly program The Business on RTE Radio in Ireland. Thanks, John.

MURRAY: Thanks, Lisa.