Audio Transcript:

LISA MULLINS: Spain is in a severe economic slump. Unemployment now stands at more than 17-percent, among the highest rates in Europe. So many people are out of work that one town has opened the country's first government-run soup kitchen. It's geared toward feeding the unemployed. The World's Gerry Hadden reports from Mostoles.

GERRY HADDEN: In a large hall in this suburb south of Madrid, 36 year old Juan Carlos Tomero is making lunch for himself and about 200 others. All are residents of Mostoles, and all are unemployed. Tomero is among their ranks. He's lost his job as an electrician more than a year ago. He says he's burned through his government unemployment benefits. He says, �I had bought an apartment. But when I lost my job and then benefits I couldn't pay the mortgage so I had to sell it. But I sold it for much less than what I paid and barely covered the costs and my other debts.� Tomero, like a growing number of Spain's roughly 4 million unemployed, has gone from middle class to destitute. That's in part because as the crisis drags on Spain's generous safety net is starting to fray. If you lose your job in Spain you're entitled to four months of unemployment benefits for every year you've worked. That pay is about 2/3rds of your former salary. But it has a maximum limit of 2 years. After that, it swiftly decreases or dries up altogether. �The situation is even worse for immigrants,� says Tomero, �Some can't even afford to go home. At least I can stay with friends.� On this day, there are a fair number of immigrants at the soup kitchen. Miriam and Oscar are a Bolivian couple who arrive with their baby daughter Shayla in a stroller. �I lived in Spain before,� says Oscar, �then I went back to Bolivia. But I found it even worse back home. So I came back to Spain. And now here it is worse than back home!� So bad, in fact, that the Mostoles town council is already building another kitchen to deal with the hungry. Inside the dining hall Mostoles Social Services director, Vanessa Martinez, says other towns across Spain are calling her to copy her model. She says, �At first, when we opened, with all the media attention, people began coming around and the word spread. The town of Mostoles is paying for and running this with tax payer money. So we've had to limit the service to residents to avoid a flood of people coming from other towns.� The International Monetary Fund predicts Spain's unemployment will rise to nearly 20 percent by year's end. That dim forecast has the government ditching a key element of European economic orthodoxy: reigning in public debt. Spain's government has announced a new 18-billion dollar stimulus package for banks and small businesses. Economist Valderiano Gomez says it's about time. He points out that Spain's public debt is only about 40 percent of GDP. That's one of the lowest levels in Europe. He says, �I'm in favor of spending our way out of this crisis. Europe has made huge efforts to balance its books. And the whole point of this effort is precisely so that we can get through the hard times. If we don't take advantage of our relatively low public debt now, then when?� But Carlos Verzosa, economist and Rector of Madrid's Complutense University, says all the spending in the world won't end the crisis as long as European banks are short on liquidity. Until they have money to lend, he says, don't expect to see a recovery. �And the only way to get out of this,� he says, �is to nationalize the banks. We can't force them to lend otherwise.� Barring an economic turnaround, Spain expects a million more people to use up their unemployment benefits by the end of this summer. For The World I'm Gerry Hadden, Mostoles, Spain