Spanish Financial Crisis

This article, written by Steven Hill, explains Spain’s economic past and how it has escalated to the point of becoming a financial crisis. Hill begins the paper with describing how our world views Spain- as a model for social democracy and the ideal European Union. When Spain’s economy crashed in 2008, it was anything but perfect. In 2008, Spain was suffering from an era of depression as levels of unemployment and debt were rising. Hill describes Spain’s economy to be heavily dependent on the real estate and construction sector after Franco’s death in 1975. In 2007, levels of private home ownership topped off at 87 percent, one of the highest rates in the world. The global economic collapse of 2008, the most destructive since the Great Depression

The financial crisis of 2007–2008, also known as the Global Financial Crisis and 2008 financial crisis, is considered by some economists such as Nouriel Roubini, professor of economics and international business at New York University, Kenneth Rogoff, professor of economics and public policy at Harvard University, and Nariman Behravesh, chief economist and executive vice president for IHS Global Insight, to have been the worst financial crisis since the Great Depression of the 1930s. All of them agreed that this is a “one in fifty years event”, however the latest Great Recession is not a typical cyclical recession of the World Economy and no doubt will last for more that usual two years (Business Wire, Reuters). The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of U.S. dollars, and a downturn in economic activity leading to the 2008–2012 global recession and contributing to the European sovereign-debt crisis. (M. N. Baily, D. J. Elliott, 2009). So what are the cаuses of this crisis? Mаny factors dirеctly and indirectly caused the Great Recession, with expеrts plаcing different weights upon pаrticular causes. Major cаuses of the initial sub-prime mortgage crisis and following recession include: Internаtional trade imbalances and tax lending stаndards contributing to high levels of dеveloped

In the past few months, the likelihood of a Eurozone breakup has been escalating due to increasing tensions in the monetary union. The departure of problematic periphery countries like Greece from the Eurozone would have many implications onto Europe and the rest of the world.

The European Debt Crisis often referred to as the Eurozone Crisis, struck the European Union at the end of 2009.

Spain also know as kingdom of spain is a soverign state, and is a part of the rest of the European countries. Spain is designated in the southwestern Europe on the Iberia peninsula, and also boarders the mederterranina sea. Spains capital is Madrid. Spain has had its ups and downs throught out their time period , but one thing you will notice is it always seems to flourish n the end. Does spains background really make it what it is today? Spain went through so many trial times that it might seem as if they would never succeed, but low and behold they did persevere. Does spains global issues really make a difference in its success? There are so many aspects of spain, but only the background, government, and success of spain matter. So, where does spain stand as of today? We will explore, and express all of these subject in spain just to find the conclusion and figure out spains postion in the world.

The European sovereign debt crisis, which made it difficult or impossible for some countries in the euro area to repay or re-finance their government debt without the assistance of third parties (Haidar, Jamal Ibrahim, 2012), had already badly hurt the economies in “PIIGS”, Portugal, Ireland, Italy, Greece and Spain. This financial contagion continues to spread throughout the euro area, and becomes a dangerous threat not only to European economy, but also to global economy.

In 2009 Greece hit a period of economic crisis. The Greek government had made debt obligations that they could not fulfill. As a result, Greece entered a period of deep economic down turn. Given the nature of how the European Union (EU) is constructed with an internal market economy, Greece’s issues spread to Ireland and Portugal. Eventually, it led to the European debt crisis where Greece, Portugal, Ireland, Spain, and Cyprus could not pay back government debts. In the same fashion that Greece affected Ireland and Portugal, the crisis would affect all of Europe, and so the European Central Bank and European Commission of the EU funded bailouts totaling $264 billion to try and stop this from happening. As of now, Greece is the only

Today it is even experiencing better economic growth than the rest of Spain, as well as having the highest GDP. They also control a massive seventy percent of exports in the whole of Spain. Not only does it hold such a large percentage of exports, but the region is also responsible for the production of high-tech (45%) such as automobiles as well as electronic products. It is also importance to note that the Catalan region holds up to nineteen percent of the GDP of Spain, compared to the 9.5% contributed by Scotland to the United Kingdom (Guibernau, 2013, p.

Recovery in the Spanish economy began in the second half of 2013, continuing into the opening months of 2014. There was a moderate increase in quarter-on-quarter GDP and employment rate. Both external and domestic factors helped in reviving the economy. The economic policy decisions adopted by the euro area governments, progress in euro area governance and the ECB’s expansionary monetary policy have contributed to relaxing financial tensions, although they still remain high.

EU as a whole experienced significant economic slowdown in 2008, as reported by the EU commission . In response to this in 2008, the European Economic Recovery Plan (EERP) was launched. The plan aimed to increase demand by bolstering purchasing power, revive the labor markets, and raise confidence in the financial system. Since the EU is only a common currency union and not fiscal union, it limited the ability of EU leaders and institutions to respond. In result, the crisis escalated and in 2009 the European debt crises hit the EU. During this period, some EU members were unable to pay their government debt or to bail out their indebted banks on their own and called to EU financial entities for help. In 2010 leading European countries created various entities such as the European Stability Mechanism (ESM) to deal with the crisis, while the Central European bank (ECB) helped by providing cheap loans and reduced interest rates in order to sustain the money flow between European banks. As a result, European banks became owners of substantial portion of sovereign debt. Due to these stabilizing measures Ireland and Portugal were able to complete their bailout plans in 2014, Cyprus is expected to complete its bailout in 2016, while Spain never received bailout assistance and is slowly recovering. Greece experienced the most dramatic crisis in 2015, since the state was on the verge of financial default. Greece refused to accept the repayment conditions offered by the ECB, and

Secondly, employment has increased in 2015 and 2016 at a high rate, which is clearly a significant improvement over the situation in previous years. However, the temporality and remuneration of many jobs is often not desirable. This situation, which is not exclusive to Spain, has adverse consequences in very different areas, from the financing of the welfare state, to the development of the real estate sector, through social cohesion, business investment in human capital, training and emigration of skilled labor (the problem does not affect only those with less training). Non-inclusive growth affects the sustainability of expansion and, as has happened in other countries, can encourage domestically oriented policies of dubious success. Of course there are no magic formulas to address the problem, but consider that a remuneration greater than productivity, when it is low, generates externalities that merit consideration

Furthermore, Spain must be safeguarded against new interest rate hikes, as high-interest rates are likely to lead the debtors to claim bankruptcy. As a result, it is more vulnerable to the uncertainty and panic in the financial market. Amidst the ongoing recession and soaring unemployment rates, the damaging austerity policies have proven to be costly to the healthy sectors, making it difficult to cope with the collapse of the economy. This has slowed down the pace of Spain’s economic recovery. Therefore, acting as a shield, GLBs could protect the economy from the risk of facing higher interest rates, at least until growth picks up.

In 1936, Spain was pulled into a bloody war leading to dictatorship by Francisco Franco, who maintained control over Spain until the end of 1975. Spain flourished and had economic growth from the 1960s to the until Franco’s death in the 1970s. There was a lot of tension between the Muslim immigrants and the Basque region at that moment. The modern Spain had a robust development which was influenced by a constitutional monarchy in the leadership of King Juan Carlos. The standard of living saw the fastest growth rate in Spain’s history.

This analytical report analyzes the background of European financial crisis and causes impact to the ongoing economic crisis. According to the analysis this terrible situation arises due to amalgamation of numerous complex factors. Reasons caused for this continuing financial crisis varied by country to country in the euro zone. In numerous countries, private debts arising from a property bubble caused to government to transfer sovereign debt to the banking system to avoid the bailouts of banking system.

Spain unlike what we can think due to the rescue plan which was about to be voted, Spain tries to stimulate its economy.