In Spain, Publicly Financed Projects Founder Marta Ramoneda for the International Herald Tribune. Statues used at the publicly financed Cuidad de la Luz movie studio in Alicante. ALICANTE, Spain - In headier times, Ciudad de la Luz was envisioned as a mega-movie studio "where fairy tales are made real." Its state-of-the-art wave-making machines could whip up a tsunami-style disaster in an enormous water tank facing the Mediterranean Sea, like a Hollywood on the Spanish Riviera. But today the water cannons at Ciudad de la Luz, which means City of Light, are dry, and the studio's 54 acres of back lots are nearly deserted. The publicly financed compound is up for sale, and struggling to attract film production companies. European Union authorities have issued an ultimatum to the regional government of Valencia to explain by this week how it intends to recover $325 million in taxpayers" money improperly spent on movie mogul ambitions. The answer could be brief. "Effectively, there is no money to give back," said José Ciscar Bolufer, the vice president of Valencia's current regional government. The studio's creation, in 2005, was part of a building binge repeated throughout Spain's 17 autonomous regions. As the nation's crisis now deepens, the combination of interests - bankers, construction magnates and regional government officials - responsible for excesses like Ciudad de la Luz has come under new scrutiny here and elsewhere. In the aftermath of Spain's banking bailout in June, the central government in Madrid is facing intensifying pressure from investors to balance the country's books by curbing the regions" powers over spending, particularly on health and education. The conservative government of Prime Minister Mariano Rajoy has also blamed the regions for much of Spain's recent fiscal problems and, as a result, set strict 2012 budget targets and passed legislation levying fines on regions that fail to meet the goals. Earlier this year, Mr. Rajoy's government threatened to take over the finances of wayward regions. That, however, would probably set off a political firestorm in a country where regions have fought hard to bolster their autonomy, including the right to use their own languages. They regained those powers in the late 1970s, when Spain's fledgling democracy drew up a new Constitution after decades of authoritarian rule under Gen. Francisco Franco. Gradually, the regions were put in charge of more of Spain's public expenditures, eventually accounting for about half - twice the level of three decades ago. Ciudad de la Luz has become a prominent example of Valencia's frenzy of modern-day pyramid building, which left a legacy of $25.5 billion in regional debt and bankrupt infrastructure projects as well as the backlash now building against it. Valencia's other investments included a harbor for superyachts, an opera house styled like the one in Sydney, Australia, a futuristic science museum, the biggest aquarium in Europe and a sail-shaped bridge, not to mention an airport that never had a single arrival or departure. It also attracted extravagant events like the America's Cup and Formula One racing. European Commission investigators were particularly critical of the grandiose movie studio in an examination done in response to complaints from private studios that Valencia was distorting market competition with its heavy public financing. Joaquín Almunia, the commission's vice president for competition policy, concluded that there was no need to spend public money on the studio and that no private company would have invested in such a project because Alicante was too far from the media centers of Madrid and Barcelona. While all regions have avoided state intervention so far, Valencia came close to a rescue late last year when it was forced to seek help from Madrid to avoid defaulting on a loan. The region's bonds have deteriorated to junk status and its government and prominent local institutions are shaking from allegations of corruption and misspent funds. "There are three sides of the triangle to this story," said Luis Garicano, an economist with the London School of Economics, who has studied the implosion of Spain's cajas, or savings banks, which played a critical role in regional spending sprees. The regional government and the regional cajas and the developers had a system of trading favors.