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Will Spain's Lotto Town Avoid Bankruptcy?

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SPOILS OF OLé
DailyFeed

It’s like something out of a fairy tale. A tiny town in a country with nearly 23% unemployment receives a huge, sudden windfall and every resident becomes a near millionaire overnight.

Of course, if fairy tales have taught us anything, it’s that stories like this rarely end well.

Sodeto, a village of 250 people in an inhospitable region of northern Spain has won the lottery -- or part of it anyway. According to Der Spiegel, the town won 17% of the country’s annual Christmas lottery’s biggest prize, “El Gordo,” totaling 700 million euros ($910 million). The village itself took 120 million euros ($158 million).

The rest of the prize money was paid out in other towns in Sodeto’s province of Huesca but Sodeto was the only village where every family won. Its luck can be primarily traced back to the local housewives’ club, which spent weeks convincing residents to buy lotto tickets.

Since their win, many around Spain have viewed the village as a potential cash cow. Salesmen sit in the local bar all day, hoping to sell new cars, homes or investments.

On their end, many residents claim that they want to use the money to improve the town and draw people back to it -- it’s been shrinking for years. Some see the money as a way to improve the area’s agricultural infrastructure.

Of course, even with these fine plans, many have so far spent most of the money on luxuries. One woman bought a Harley-Davidson (HOG), another resident a Jaguar (TTM), others have bought trips to Caribbean. The town even threw itself a big party.

In general, the stats for lottery winners aren’t particularly promising. A 2009 study out of the University of Kentucky, the University of Pittsburg and Vanderbilt found that a lottery win does next to nothing to reduce the risk of bankruptcy.

Stories of big lottery winners who blew all their money buying everyone in their family houses or iPods (AAPL) or cocaine are distressingly common. Beyond that, Harvard professor Dan Gilbert ran a study that showed that lottery winners are often as unhappy as paraplegics a little while after their win.

Apparently there really is no such thing as free money.

So far, Sodeto seems to be doing fine but it remains to be seen how things will pan out in the future. Meanwhile, here’s a list of ten particularly ridiculous collapses by lotto winners.
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