You're conflating multiple things – 1. train detection (which can be track circuits, as described by you, axle counters or on the most modern systems even train-based train detection), 2. how to transmit the stop/go information to the train (driver), and 3. how to ensure that the train (driver).

LZB (the "German system that is more advanced that basic electrical fault based system") does 2. and 3., but in its usual mainline implementations still needs a conventional train detection system.

> it was just switched off because it was broken. That's downright reckless, and it shouldn't be a normal behavior.

The Spanish line in question is actually equipped with conventional colour-light signalling (and the corresponding conventional train protection system) as a fall back, which is perfectly safe, too.

The only critical bit (which by the looks of it unfortunately failed here) is managing an unplanned transition between the two, because for reasons of cost, the fallback signalling utilises much longer block sections than the LZB signalling, so if the LZB fails unannouncedly, you can end up with multiple trains (each inside its own dedicated LZB block section) inside the same line-side signalling block section, so restarting the train needs to be safely managed by getting them out of the accidentally shared block section one at a time.