The Sunday Telegraph on Madeira

 Billions of euros of European Union money have been spent in Madeira, yet the island is swimming in debt.

By Colin Freeman

Tucked beneath towering cliffs on Madeira's storm-battered west Atlantic coast, the €50 million Marina do Lugar de Baixo aimed to provide the perfect welcome for super-luxury yachts. Unfortunately, thanks to the huge waves that have fractured the harbour wall three times since it was built in 2005, not even the more adventurous yachtsmen have often been tempted, never mind passing billionaires in floating palaces. Today it lies abandoned, a chain blocking the road where an Oleg Deripaska or Roman Abramovic might have strode ashore, the white clubhouse empty as the Marie Celeste.

Just as spectacular as the ocean breakers off Lugar de Baixo, however, are the waves of European Union cash that have been splashed around Madeira, a Portuguese-owned island better known for sweet wine and winter sun.

While the marina was financed mainly by the semi-independent Madeiran local government, €3.5 million came from Brussels, which, like the other backers, did not heed warnings that a stretch of coast popular with hard-core surfers might be less ideal for yachters.

 Similarly, at the nearby promenade and restaurant complex at Frente Mar Madalena, where a rusting plaque marks a €1.2 million EU grant, developers overlooked the risk of rockfalls from the cliffs. Until, that is, a boulder tore a hole through the restaurant's roof two years ago, since when it too has been empty.

The real big hole though, is the one that such rampant, publicly-backed development has torn in the island's finances, as it has transformed itself into a resort similar to the Canary Islands further south. For Madeira is now swimming in debt as deep as the Atlantic waters around it, thanks to a government-backed building spree fuelled in part, critics say, by over-generous Brussels grants. Today, despite a population of just 250,000, the local administration owes some €6 billion, nearly double the per capita public debt of mainland Portugal.

 The financial crisis, which only came to light last autumn, is hugely embarrassing for Lisbon's leaders, who have already had to negotiate an €78 billion bail-out themselves from Brussels and the IMF. The island is now seen as Portugal's own little answer to Greece, widely considered the most feckless of the southern European debtor club.

 "Madeira is like Greece in the Atlantic," said Gil Canha, a councillor in Madeira's opposition New Democracy Party, which blames years of unhealthily cosy relations between island politicians, developers and Brussels grant-makers. "The European Union has given money too easily, and the government has borrowed far too much from banks. We are a tiny island, you can hardly see us on any map. To have a debt with so many zeros is crazy." Sipping coffee in a square in Funchal, Madeira's balmy capital, Mr Canha looks as relaxed as the elderly British and German tourists wandering past, who like the island's quiet, yob-free reputation.

Yet in his pocket he has a can of pepper-spray, and when out at night, he takes a Browning 0.25 pistol, both of which he is licensed to carry for personal protection. For within Madeira's small community of long-term residents, being politically outspoken can have consequences. Mr Cana has been beaten up twice, had his own bar burned down, and had his family's cars vandalised.

"As a councillor I've complained about corruption in building projects, and got a few stopped," he said. "So they use terror against me." He points the finger at supporters of the island's president, Alberto João Jardim, 69, who has ruled here ever since 1978, making him one of Europe's longest-serving elected leaders.

 A firebrand throwback to the days of Portugal's Salazar dictatorship, for which he once wrote propaganda, his popularity has been cemented - quite literally - by the billions he has spent developing the island, which, prior to the end of Portugal's dictatorship in 1974, was a poverty-stricken backwater.

 Today, a 120-mile road and tunnel network links Madeira's previously isolated mountain communities, cutting journeys around its steep volcanic contours from four hours to just one. But much of the money came from the €2bn in EU grants handed out over the last 25 years, and when that started to dry up a decade ago, Mr Jardim began borrowing on the open market instead, via publicly-backed development firms. Thus did construction continue, to the point where today, even small villages boast lavish civic centres, swimming pools, and football pitches.

As the government-owned newspaper, the Jornal, dutifully reports, the president cuts the ribbons at up to 450 opening ceremonies a year, using them for political rallies where he denounces his enemies in lengthy speeches. Spain's El Mundo newspaper calls him "El Maestro del Insulto" - the master of insults.

"He has accused me of being a Communist, a Marxist, and a member of Opus Dei, among other things," sighed Michael Blandy, chair of the Blandy Group, part of a powerful English business community that settled on the island 200 years ago, when Madeira's position on the trade winds routes made it a pitstop for both the Old and New Worlds. Today, as well as making Madeira wine, Mr Blandy owns the island's main independent newspaper, drawing further barbs from Mr Jardim that he is a "colonialist".  "President Jardim is quite a reasonable character in person, and did a lot of good development work in the old days," added Mr Blandy, who complains that the Jornal - which gets €3 million a year in public funds - is unfair competition. "Unfortunately, there has been too much chasing of EU subsidies, which have been dished out like no tomorrow, and to which the island got addicted like a drug. "Then, around 2000, when money from Brussels become more restricted, we saw the start of more creative accounting, when Mr Jardim set up firms borrowing money to build yet more roads and golf courses. The whole thing is out of control.

Indeed, many claim that Madeira has lurched from underdevelopment to overdevelopment. In some areas, the expressways, tunnels and flyovers look more like a suburb of Los Angeles. And white elephant projects abound. Industrial parks accessible only by steep mountain roads stand largely empty. A helicopter landing terminal has never been used. In Machico village, population 10,000, the seafront is dominated by a vast municipal hall more suited to a large London borough, its theatre and twin cinema screens open only a few nights a year, its two restaurants unused. "It was built using calculations done on a napkin," said Joseph Freitas, a local hotel waiter. "Jardim is good at standing up for Madeirans' rights, but he could use his resources better."

 While much of the public cash for such projects has come from the Portuguese government, Lisbon claims the EU's past willingness to offer matching funding encouraged over-building. "The whole country has too much construction, not just Madeira," insists the prime minister Passos Coelho, whose centrist Social Democratic Party Mr Jardim also belongs to. However, while a spokesman for the European Commission insisted that there were "many good projects co-financed by the EU in Madeira," the German chancellor, Angela Merkel, recently singled the island as an example of how not to spend EU regional development funds. "There are many beautiful tunnels and highways," she said in February. "But this did not contribute to competitiveness." Mr Jardim has responded in typically combative style to criticisms of his financial management, describing Mrs Merkel as "ignorant", and the island's debts as a mere "drop in the ocean". When the credit agency Moody's downgraded Madeira's debt last summer, he even declared that Moody's inspectors were banned from the island.

Such populist rhetoric goes down well with the Madeiran public, which voted him back in for another four year term last October, albeit with just 48 per cent of the vote, his worst result in 33 years. However, Eduardo Welsh, whose blog is Madeira's answer to Private Eye, argues that Portugal's national leaders should have reined him in years ago. "Jardim is a real dictator," he said. "But nothing has been done at national level to stop him, because they are scared of him agitating for Madeira to become independent."

 Like other government critics, Mr Welsh has suffered for his beliefs. The government has brought dozens of libel lawsuits against him, including an ongoing one for a cartoon comparing Mr Jardim to Hitler, in which Mr Walsh was acquitted. The president has now appealed. Mr Welsh and fellow activists also claim to have been roughed up by Mr Jardim's bodyguards and supporters while heckling at public openings, which they attend in a hearse with the slogan "bury the corrupt". The one benefit of the debt crisis, he says, is that it brings international scrutiny to Madeira's problems.

Perhaps with that in mind, the president's office has been declined recent interview requests from foreign journalists. However, a man who attends as many public functions as Mr Jardim is not hard to track down, and The Sunday Telegraph caught up with him as he sat down to an anniversary dinner for a local carnival group. Far from summoning his minders, he proved charming - if defiant. "Madeira was very poor before, and the only way forward was increasing the public debt," he said. "If I hadn't done that, we'd still be saddled with the rest of Portugal's debts today anyway." What about the claims of intimidation? Nonsense, he smiled, the work of "fascists" in the opposition and "cowardly bloggers" like Mr Welsh. And the white elephants, such as the wave-damaged Marina do Lugar?  "I am not like your British empire, I cannot rule the waves. There has been some structural damage, yes, but we are repairing it." With that, he turned back to entertaining his dining companions - but just how much longer he will be the toast of Madeira's grand opening nights is another matter.

Like his mainland counterparts, Mr Jardim has had no choice but to sign up to unpopular austerity measures that will involve slashing public spending by a third and raising local taxes, heralding tough years ahead for residents.

Last Thursday, in a sign of unprecedented dissent in the local party, the mayor of Funchal, Miguel Albuquerque, also declared he would run against Mr Jardim for the SDP leadership. "Jardim could have been a great national politician, but he just wanted to be Mr Big here," said Mr Welsh. "Now even that is coming to an end."