The adoption of the Euro in 2002 had driven down long-term interest rates, prompting a surge in mortgage lending that jumped more than fourfold from 2000 to its 2010 apex. The growth in the Spanish property market, which had begun in 1997, accelerated and within a few years had developed into a property bubble, financed largely by regional banks, known as "Cajas", which are regional savings banks under the oversight of regional governments, and fed by the historically low interest rates and a massive growth of immigration. Fueling this trend, the Spanish economy was being credited for having avoided the virtual zero growth rate of some of its largest partners in the EU in the months previous to the global Great Recession.
Property boom and bust (2003–2014)
Economy of Spain
Economy of Spain | Property boom and bust (2003–2014)
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Spain's economy had created more than half of all the new jobs in the European Union over the five years ending 2005. At the top of its property boom, Spain was building more houses than Germany, France and the U.K. combined. Home prices soared by 71% between 2003 and 2008, in tandem with the credit explosion. The bubble imploded in 2008, causing the collapse of Spain's large property related and construction sectors, causing mass layoffs, and a collapsing domestic demand for goods and services. Unemployment shot up.
Economy of Spain | Property boom and bust (2003–2014)
The adoption of the Euro in 2002 had driven down long-term interest rates, prompting a surge in mortgage lending that jumped more than fourfold from 2000 to its 2010 apex. The growth in the Spanish property market, which had begun in 1997, accelerated and within a few years had developed into a property bubble, financed largely by regional banks, known as "Cajas", which are regional savings banks under the oversight of regional governments, and fed by the historically low interest rates and a massive growth of immigration. Fueling this trend, the Spanish economy was being credited for having avoided the virtual zero growth rate of some of its largest partners in the EU in the months previous to the global Great Recession.
Economy of Spain | Property boom and bust (2003–2014)
The last years of the 1990s saw property values begin to increase. The Spanish economy was being credited for having avoided the virtual zero growth rate of some of its largest partners in the EU (namely France, Germany and Italy) in the late 1990s and at the beginning of the 21st century. In 1995 Spain started an impressive economic cycle marked by an outstanding economic growth, with figures around 3%, often well over this rate. Growth in the decade prior to 2008 steadily closed the economic gap between Spain and its leading partners in the EU. For a moment, the Spanish economy was regarded as one of the most dynamic within the EU, even able to replace the leading role of much larger economies like the ones of France and Germany, thus subsequently attracting significant amounts of native and foreign investment.
Economic history of Spain | Boom 1997–2007
The country was confronted with very high unemployment, entrenched by its then rigid labour market. However the economy began to recover during the first José María Aznar administration (1996-2000), driven by a return of consumer confidence, increased private consumption and liberalization and deregulation reforms aiming to reduce the State's role in the market place. Unemployment at 7.6% (October 2006), represented a significant improvement from the 1980s levels and a better rate than the one of Germany or France at the time. Devaluations of the peseta during the 1990s made Spanish exports more competitive. By the late 1990s economic growth was strong, employment grew strongly, although unemployment remained high, as people returned to the job market and confidence in the economy returned.
Economic history of Spain | Boom 1997–2007
By the mid-1990s the economy had commenced the growth that had been disrupted by the global recession of the early 1990s. The strong economic growth helped the government to reduce the government debt as a percentage of GDP and Spain's high unemployment rate began to steadily decline. With the government budget in balance and inflation under control Spain was admitted into the Eurozone in 1999.
Spain | Economy
Spain had continued on the path of economic growth when the ruling party changed in 2004, maintaining robust GDP growth during the first term of prime minister José Luis Rodríguez Zapatero, even though some problems in the Spanish economy were becoming evident. According to the "Financial Times", Spain's rapidly growing trade deficit, had reached 10% of the country's GDP by the summer of 2008, the "loss of competitiveness against its main trading partners" and, also, as a part of the latter, an inflation rate which had been traditionally higher than the one of its European partners, back then especially affected by house price increases of 150% from 1998 and a growing family indebtedness (115%) chiefly related to the Spanish Real Estate boom and rocketing oil prices.
Economy of Spain | Economic and financial crisis
In these early times Spain had already a huge trade deficit, a loss of competitiveness against its main trading partners, an above-average inflation rate, house price increases, and a growing family indebtedness. During the third quarter of 2008 the national GDP contracted for the first time in 15 years, and, in February 2009, Spain (and other European economies) officially entered recession. The economy contracted 3.7% in 2009 and again in 2010 by 0.1%. It grew by 0.7% in 2011. By the 1st quarter of 2012, Spain was officially in recession once again. The Spanish government forecast a 1.7% drop for 2012.
2008–2014 Spanish financial crisis | Introduction
The residential real estate bubble saw real estate prices rise 200% from 1996 to 2007. €651 billion was the mortgage debt of Spanish families in the second quarter of 2005 (this debt continued to grow at 25% per year – 2001 through 2005, with 97% of mortgages at variable rate interest). In 2004, 509,293 new properties were built in Spain and in 2005 the number of new properties built was 528,754. In a country with 16.5 million families, there were 22–24 million houses and 3–4 million empty houses. From all the houses built over the 2001–2007 period, "no less than 28%" were vacant as of late 2008.
2008–2014 Spanish financial crisis | Property bubble
In 2008, the shockwaves of the global financial crisis punctured the Spanish property bubble, causing a property crash. Construction collapsed and unemployment began to rise. The property crash led to a collapse of credit as banks hit by bad debts cut back lending, causing a recession. As the economy shrank, government revenue collapsed and government debt began to climb rapidly. By the 2010 the country faced severe financial problems and got caught up in the European sovereign debt crisis. In 2012, unemployment rose to a record high of 25 percent. On 25 May 2012, Bankia, at that time the fourth largest bank of Spain with 12 million customers, requested a bailout of €19 billion, the largest bank bailout in the nation's history.
Economic history of Spain | Economic Crisis, 2008–2013
A virtually exclusive preoccupation with the politics of democratization during the politically and socially unstable period when the new constitution was drafted and enacted, absorbed most of Spain's politics and administration at the expense of economic policy. Because of the failure to adjust to the changed economic environment brought on by the two oil price shocks of the 1970s, Spain quickly confronted plummeting productivity, an explosive increase in wages from 1974 to 1976, a reversal of migration trends as a result of the economic slump throughout Western Europe, and the steady outflow of labor from agricultural areas despite declining job prospects in the cities.
Economic history of Spain | The Post-Franco period, 1975–1980s
The new management, led by José Ignacio Goirigolzarri reported losses before taxes of 4.3 billion euros (2.98 billion euros taking into account a fiscal credit) compared to a profit of 328 million euros reported when Rodrigo Rato was at the head of Bankia until May 9, 2012. On June 9, 2012, Spain asked Eurozone governments for a bailout worth as much as 100 billion euros ($125 billion) to rescue its banking system as the country became the biggest euro economy until that date, after Ireland, Greece and Portugal, to seek international aid due to its weaknesses amid the European sovereign debt crisis.
Economic history of Spain | Economic Crisis, 2008–2013
The 2008–2014 Spanish financial crisis, also known as the Great Recession in Spain or the Great Spanish Depression, began in 2008 during the world financial crisis of 2007–08. In 2012, it made Spain a late participant in the European sovereign debt crisis when the country was unable to bail out its financial sector and had to apply for a €100 billion rescue package provided by the European Stability Mechanism (ESM). The main cause of Spain's crisis was the housing bubble and the accompanying unsustainably high GDP growth rate. The ballooning tax revenues from the booming property investment and construction sectors kept the Spanish government's revenue in surplus, despite strong increases in expenditure, until 2007.
2008–2014 Spanish financial crisis | Introduction
At its peak in 2007, construction had expanded to 15% of the total gross domestic product (GDP) of the country and 12% of total employment. During that time Spain capital inflows –including short term speculative investment– financed a large trade deficit.
Economy of Spain | History
According to "The Economist", Spain has the world's 10th highest quality of life. Following the financial crisis of 2007–2008, the Spanish economy plunged into recession, entering a cycle of negative macroeconomic performance. Compared to the EU's and US's average, the Spanish economy entered recession later (the economy was still growing by 2008), but it stayed there longer. The economic boom of the 2000s was reversed, leaving over a quarter of Spain's workforce unemployed by 2012. In aggregated terms, the Spanish GDP contracted by almost 9% during the 2009–2013 period. The economic situation started improving by 2013–2014. By then, the country managed to reverse the record trade deficit which had built up during the boom years, attaining a trade surplus in 2013 after three decades of running a trade deficit.
Economy of Spain | Introduction
Prior to transfer the Bank of Spain will determine the value of the assets based on appraisal reports. For several years prior to 2008, the Spanish authorities had decided to ignore the problems associated with the cajas. These problems were essentially due to easy access at low borrowing costs which facilitated uneconomic lending practices, overly encouraged by local and regional governments. This provisional of 'loose money' fueled the growth of the property and constructions sectors of the economy; eventually leading to an unsustainable overexposure to these sectors at classic speculative bubble. The scale of impaired and bad debts were masked by the initial growth and then exposed by the effects of The combination of the global Credit Crunch and then Sovereign Crisis of the Eurozone which revealed these domestic problems and the scale threatened the Spanish economy.
SAREB | History
In the wake of its joining the EEC, Spain experienced an economic boom during two decades, cut painfully short by the financial crisis of 2008. During the boom years, Spain attracted a large number of immigrants, especially from the United Kingdom, but also including unknown but substantial illegal immigration, mostly from Latin America, eastern Europe and north Africa. Spain had the fourth largest economy in the Eurozone, but after 2008 the global economic recession hit Spain hard, with the bursting of the housing bubble and unemployment reaching over 25%, sharp budget cutbacks were needed to stay in the Euro zone.
History of Spain | Spain within the European Union (1993 to present)
Due to its own economic development and the EU enlargements up to 27 members (2007), Spain as a whole exceeded (105%) the average of the EU GDP in 2006 placing it ahead of Italy (103% for 2006). As for the extremes within Spain, three regions in 2005 were included in the leading EU group exceeding 125% of the GDP average level (Madrid, Navarre and the Basque Autonomous Community) and one was at the 85% level (Extremadura). These same regions were on the brink of full employment by then. According to the growth rates post 2006, noticeable progress from these figures happened until early 2008, when the Spanish economy was heavily affected by the puncturing of its property bubble by the global financial crisis.
Economic history of Spain | Convergence with the European Union
Also, during the period spanning from the mid 1980s through the mid 2000s, Spain was second only to France in being the most successful OECD country in terms of reduced income inequality over this period. Spain also made great strides in integrating women into the workforce. From a position where the role of Spanish women in the labour market in the early 1970s was similar to that prevailing in the major European countries in the 1930s, by the 1990s Spain had achieved a modern European profile in terms of economic participation by women.
Economic history of Spain | Boom 1997–2007
The Bank of Spain reported that household savings in 2006 has been overwhelmed by debt. In fact, the Bank of Spain has warned each year about the high indebtedness of Spanish households, which according to the institution was unsustainable. The private debt stood at 832.289 billion euros at the end of 2006, an increase of 18.53% year-on-year, and reached 1 trillion euros by the end of 2010. The Bank of Spain also warned on the excessive indebtedness of the construction industry. President of the Chambers of Commerce of Spain, Javier Gómez Navarro, said at an event organized by the Association of Financial Journalists, entities "never recover" 30% of the debt owed to the housing sector.
Spanish property bubble | Real estate debt
Then, with the dramatic decrease of oil prices that took place in the second half of 2008 plus the manifest bursting of the real estate bubble, concerns quickly shifted over to the risk of deflation, as Spain recorded in January 2009 its lowest inflation rate in 40 years, followed shortly afterwards, in March 2009 by a negative inflation rate for the first time since the gathering of these statistics started. Subsequently, apart from temporary minor oil shocks, the Spanish economy has generally oscillated between slightly negative to near-zero inflation rates during the 2009−early 2016 period. Analysts reckoned that this was not synonymous with deflation, due to the fact that GDP had been growing since 2014, domestic consumption had rebounded as well and, especially, because core inflation remained slightly positive.
Economy of Spain | Prices
Due to the lack of its own resources, Spain has to import all of its fossil fuels, which in a scenario of record prices added much pressure to the inflation rate. Thus, in June 2008 the inflation rate reached a 13-year high of 5.00%. Then, with the dramatic decrease of oil prices that happened in the second half of 2008 plus the confirmed burst of the property bubble, concerns quickly shifted to the risk of deflation instead, as Spain registered in January 2009 its lowest inflation rate in 40 years which was then followed in March 2009 by a negative inflation rate for the first time ever since this statistic was recorded.
2008–2014 Spanish financial crisis | Prices
A Eurozone official told Reuters in July 2012 that Spain conceded for the first time at a meeting between Spanish Economy Minister Luis de Guindos and his German counterpart Wolfgang Schaeuble, it might need a bailout worth 300 billion euros if its borrowing costs remained unsustainably high. On August 23, 2012, Reuters reported that Spain was negotiating with euro zone partners over conditions for aid to bring down its borrowing costs. After serious austerity measures and major reforms into the economy Spain exited recession in 2013 and its economy is growing once more at a rate of 2.5 in 2015 and it is only expected to improve over the coming years.
Economic history of Spain | Economic Crisis, 2008–2013
The GDP shrank 1.2% in 2012. Although interest rates were historically low, investments were not encouraged sufficiently by entrepreneurs. Losses were especially high in real estate, banking, and construction. Economists concluded in early 2013 that, "Where once Spain's problems were acute, now they are chronic: entrenched unemployment, a large mass of small and medium-sized enterprises with low productivity, and, above all, a constriction in credit." With the financial crisis and high unemployment, Spain is now suffering from a combination of continued illegal immigration paired with a massive emigration of workers, forced to seek employment elsewhere under the EU's "Freedom of Movement", with an estimated 700,000, or 1.5% of total population, leaving the country between 2008 and 2013.
History of Spain | Spain within the European Union (1993 to present)
The economic policy caused an increase in the price of butane, gasoline, and tobacco, that led to an increase in the price of other goods that increased with the arrival of euro.
History of Spain (1975–present) | Spain under José María Aznar (1996–2004)
Although jobs are starting to be created the unemployment still stands at 22.6% in April 2015.
Economic history of Spain | Economic Crisis, 2008–2013
In 2008, new constructions came virtually to a halt, but prices were initially relatively stable with sellers reluctant to offer large discounts. The national average price as of late 2008 was 2,095 euros/m2 Actual sales over the July 2007-June 2008 period were down an average 25.3% (with the lion's share of the loss arguably happening in the 2008 tract of this period). Some regions have been more affected than others (Catalonia was ahead in this regard with a 42.2% sales plunge while sparsely populated regions like Extremadura were down a mere 1.7% over the same period). Unlike much of the United States, Spain does not recognize mortgage loans as nonrecourse debt.
Spanish property bubble | Dynamics
The legislature was marked by the international economic crisis of 1992-1993. While the economic situation in Spain since 1985 (coinciding with the accession of Spain into the European Communities) was very favorable and the evolutionary profile of per capita GDP was resembling that of the EU countries, from 1989 the GDP started to decrease markedly and the economy entered a cycle of recession. The five-year period 1985-1989 was characterized by a phase of expansive growth and massive inflow of foreign capital, attracted by high interest rates. Post-1989, however, saw unfavorable economic indicators, and recession and global economic crisis deeply affected unemployment rates.
1996 Spanish general election | Economy
According to calculations by the German newspaper "Die Welt", Spain's economy had been on course to overtake countries like Germany in per capita income by 2011. Unemployment stood at 7.6% in October 2006, a rate that compared favorably to many other European countries, and especially with the early 1990s when it stood at over 20%. In the past, weak points of Spain's economy included high inflation and large underground economy. The turn to growth during the 1997-2007 period produced a real estate bubble fed by historically low interest rates, massive rates of foreign investment (during that period Spain had become a favorite of other European investment banks) and an immense surge in immigration.
Economy of Spain | History
With this majority, it was able to undertake unpopular austerity measures that earlier governments had not.
Economic history of Spain | The Post-Franco period, 1975–1980s
The surplus kept strengthening during 2014 and 2015. In 2015, the Spanish GDP grew by 3.2%, a rate not seen since 2007, the last year before the world financial crisis struck. This growth rate was the highest among larger EU economies that year. In just two years (2014–2015), the Spanish economy recovered 85% of the GDP lost during the 2009–2013 recession which got some international analysts to refer to Spain's current recovery as "the showcase for structural reform efforts". Strong GDP growth was registered also in 2016, with the country growing twice as fast as the eurozone average. In this regard, the Spanish economy is forecast to remain the best-performing major economy in the eurozone also in 2017.
Economy of Spain | Introduction
House ownership in Spain is above 80%. The desire to own one's own home was encouraged by governments in the 60s and 70s, and has thus become part of the Spanish psyche. In addition, tax regulation encourages ownership: 15% of mortgage payments are deductible from personal income taxes. Even more, the oldest apartments are controlled by non-inflation-adjusted rent-controls and eviction is slow, therefore discouraging renting.
2008–2014 Spanish financial crisis | Property bubble
By 2017, following several months of prices picking up, homeowners who had been renting during the economic slump had started to put their properties back on the sales market. In this regard, home sales are expected to return in 2017 to pre-crisis (2008) level. In all, the Spanish real estate market is experiencing a new boom, this time in the rental sector. Out of 50 provinces and compared to May 2007, the National Statistics Institute has recorded higher rent levels in 48 provinces, with the 10 most populated accumulating rent inflation between 5% and 15% since 2007. The phenomenon is most visible in big cities such as Barcelona or Madrid, which are seeing new record average prices, partially fueled by short-term rentals to tourists.
Economy of Spain | Real estate recovery
On 23 June 2008, Zapatero's cabinet adopted an "austerity plan" intended to save €250 million—consisting of a 70% reduction in the public job offer and a salary freeze for senior public servants—as well as financial stimulus measures—injection of €35 billion to SMEs and €2.5 billion annually until 2010 to improve the efficiency in the hotel sector—in order to soften the impact of job losses and rising oil prices, with Zapatero finally acknowledging the crisis during an interview on 8 July. Meanwhile, Martinsa-Fadesa bankruptcy filling in July 2008 as a result of the Spanish property bubble bursting turned into Spain's biggest ever corporate default.
2011 Spanish general election | Background
According to the reports of the Bank of Spain, between 1976 and 2003, the price of housing in Spain has doubled in real terms, which means, in nominal terms, a multiplication by 16. In the period of 1997—2006, the price of housing in Spain had risen about 150% in nominal terms, equivalent to 100% growth in real terms. It is stated that from 2000 to 2009, 5 million new housing units had been added to the existing stock of 20 million. In 2008, the real estate market started to drop fast, and house prices decreased dramatically by 8% in that year.
Spanish property bubble | Prices and number of houses built
With a 3.2% increase in 2015, the Spanish GDP growth was the highest among larger EU economies that year. In just two years (2014–2015) the Spanish economy had recovered 85% of the GDP lost during the 2009-2013 recession, which got some international analysts to refer to Spain's current recovery as "the showcase for structural reform efforts". By Q2 2016 the Spanish economy had been accumulating 12 consecutive quarters of growth, managing to consistently outperform the rest of the Euro area. Such growth has continued, with the Spanish economy outperforming expectations and growing 3.2 per cent in 2016, almost twice as fast as the Euro zone average.
Economy of Spain | Economic recovery (2014–present)
As of October 2010, the Spanish economy has continued to contract, resulting in decreasing GDP and increasing inflation. From 2011 to 2012 alone, prices rose 3.5% as compared to 2% in the United States. The rise in prices, combined with the recently implemented austerity measures and extremely high unemployment, are heavily impacting the livelihood of Spanish citizens. As the average wage decreases, the buying power of the money decreases as well. The frustration of this decreases in buying power has manifested in several, very large, worker demonstrations.
2008–2014 Spanish financial crisis | Prices
From 1994, a remarkable recovery phase began, from a recession of 1.1% of GDP in 1993 to a growth rate of 2%. Although the economic situation was difficult, unemployment rate began a gradual decline, reaching the end of the legislature in 22% after reaching 24% in 1994. On the other hand, the inflation rate fell to 5.5% between 1994 and 1996, public debt stood at 68% and the deficit at 7.1%.
1996 Spanish general election | Economy
All these factors contributed to a sharp rise in the unemployment rate. Government budgetary deficits swelled, as did large social security cost overruns and the huge operating losses incurred by a number of public-sector industries. Energy consumption, meanwhile, remained high. When the Spanish Socialist Workers' Party government headed by Felipe González took office in late 1982, inflation was running at an annual rate of 16%, the external current account was US$4 billion in arrears, public spending was large, and foreign exchange reserves had become dangerously depleted. In coping with the situation, however, the Gonzalez government had one asset that no previous post-Franco government had enjoyed, namely, a solid parliamentary majority in both houses of the Cortes (Spanish Parliament).
Economic history of Spain | The Post-Franco period, 1975–1980s
Even though the sheer size of Spain's underground economy masks to some extent the real situation, employment is a long term weakness of the Spanish economy. By 2014 the structural unemployment rate was estimated at 18%. After having completed large improvements over the second half of the 1990s and during the 2000s, Spain attained in 2007 its record low unemployment rate, at about 8%, with a few regions on the brink of full employment. Then Spain suffered a severe setback from October 2008, when it saw its unemployment rate surge to 1996 levels. During the period October 2007 – October 2008 the unemployment surge exceeded that of past economic crises, including that of 1993.
Economy of Spain | Employment crisis
Subsequently, in the second quarter of 2017 Spain recovered all the GDP lost during the economic crisis, exceeding for the first time the output level that had been reached in 2008. The Spanish economy is forecast to remain the best-performing major economy in the Euro zone also in 2017.
Economy of Spain | Economic recovery (2014–present)
Due to reforms already instituted by Spain's conservative government less stringent austerity requirements are included then was the case with earlier bailout packages for Ireland, Portugal, and Greece. As the EU's fifth largest economy, Spain remains a large concern. In 2011 Mariano Rajoy took over the government with his conservative views, pushing out José Luis Rodríguez Zapatero and his left-wing views. Trying to get Spain out of the highest unemployment rate in the European Union was proven to be harder than expected. The bailout for Spain has been estimated to not be enough to restore the economy. There is a serious debt in the country, and substantial cuts would have to be put in place to restore the economy at this point.
2008–2014 Spanish financial crisis | 2012 financial bailout
According to the Bank of Spain, this debt amounted to 325,000 million euros as of December 2009 was 96.824 million in bad loans. The president of the Chambers regretted that the Spanish financial system did not admit the impact of the crisis on their assets, as well as the Bank of Spain, which affirmed that it was the responsibility of the whole financial sector: "In Spain, it was never wanted to recognize that the financial system was not in good shape, as this would have forced the banking sector to start re-capitalising policies. The goal of the state's policy has so far been to gain time, to start a mild bank recapitalisation, but time is now running out".
Spanish property bubble | Real estate debt
The European Union at the time Spain joined, in 1986, existed primarily as a trading union - the EEC, and better trade links were vital to the fragile Spanish economy. Unemployment was high, about 18 percent, and the Spanish GDP was 71 percent of the EU average. The single market and European funding offered a chance to bring the Spanish economy up to the standards of the rest of Western Europe, along with the support of Spain's wealthier neighbors. There was the promise of lucrative deals with influential countries such as Germany, France and the UK.
Economic history of Spain | European integration, 1985–2000
During the boom years, Spain had built up a trade deficit eventually amounting a record equivalent to 10% of GDP (2007) and the external debt ballooned to the equivalent of 170% of GDP, one of the highest among Western economies. Then, during the economic downturn, Spain reduced significantly imports due to domestic consumption shrinking while – despite the global slowdown – it has been increasing exports and kept attracting growing numbers of tourists. Spanish exports grew by 4.2% in 2013, the highest rate in the European Union. As a result, after three decades of running a trade deficit Spain attained in 2013 a trade surplus.
Economy of Spain | Exports grow steadily
When Spain joined the EEC in 1986 its GDP per capita was about 72% of the average of its members. At the second half of the 1990s, the conservative government of former prime minister Jose María Aznar had worked successfully to gain admission to the group of countries joining the euro in 1999. Due to its own economic development and the EU enlargements to 28 members, by 2007 Spain had achieved a GDP per capita of 105% of European Union's average, which placed it slightly ahead of Italy (103%). Three regions were included in the leading EU group exceeding 125% of the GDP per capita average level: the Basque Country , Madrid, and Navarre.
Economy of Spain | History
Spain's capitalist mixed economy is the 14th largest worldwide and the 5th largest in the European Union, as well as the Eurozone's 4th largest. The centre-right government of former prime minister José María Aznar worked successfully to gain admission to the group of countries launching the euro in 1999. Unemployment stood at 17.1% in June 2017, below Spain's early 1990s unemployment rate of at over 20%. The youth unemployment rate (35% in March 2018) is extremely high compared to EU standards. Perennial weak points of Spain's economy include a large informal economy, and an education system which OECD reports place among the poorest for developed countries, together with the United States and UK.
Spain | Economy
In 2012, the Spanish government officially requested a credit from the European Stability Mechanism to restructure its banking sector in the face of a financial crisis. The ESM approved up to €100 billion in assistance, although, in the end, Spain only drew €41.3 billion. The ESM programme for Spain ended with the full repayment of the credit drawn eighteen months later.
Economy of Spain | Introduction
In December 2011, the Spanish central bank, Banco de España (equivalent of the US Federal Reserve), forcibly took over "Caja Mediterraneo", also known as CAM, (a regional savings bank) to prevent its financial collapse. The international accounting firm, PriceWaterhouseCooper, estimated an imbalance between CAM's assets and debts of €3,500 million, not counting the industrial corporation. The troubled situation reached its peak with the partial nationalization of Bankia in May 2012. By then it was becoming clear that the mounting real estate losses of the savings banks were undermining confidence in the country's government bonds, thus aggravating a sovereign debt crisis.
Economy of Spain | Banking system
Indeed, as the impact of cheaper fuel prices faded and economic recovery took hold, moderate inflation in the 1-2% region (in other words, still below the ECB's target) has made a comeback in 2017.
Economy of Spain | Prices
In 2014, after years of economic recession, Spain grew up a 1,4%, accelerating to 3.4% in 2015 and 3.3% in 2016 and moderating by 3.1% in 2017. Experts say that the economy will moderate in 2018 to stable growth of between 2.5% and 3%. In addition to this, the unemployment rate has been reduced during the years of recovery, standing at 16.55% in 2017.
Economic history of Spain | Recovery 2014–present
In this regard, according to Eurostat's estimates for 2007 GDP per capita for the EU-27. Spain happened to stay by that time at 107% of the level, well above Italy who was still above the average (101%), and catching up with countries like France (111%).
Economic history of Spain | Convergence with the European Union
In 2011 the deficit reached a high of 8.5%. For 2016 the deficit objective of the government is around 4%, falling to 2.9% for 2017. The European Commission has demanded 3.9% for 2016 and 2.5% for 2017. The Spanish government official GDP growth forecast for 2008 in April was 2.3%. This figure was revised down by the Spanish Ministry of Economy to 1.6. Studies by most independent forecasters estimate that the rate had actually dropped to 0.8% instead, below the strong 3% plus GDP annual growth rates during the 1997–2007 decade. During the third quarter of 2008 the national GDP contracted for the first time in 15 years in February 2009, it was confirmed that Spain, along other European economies, had officially entered recession.
Economy of Spain | Economic and financial crisis
The export market collapsed apart from some agricultural products.
History of Spain (1810–73) | Economic and social impact
Spain entered crisis period with a relatively modest public debt of 36.2% of GDP. This was largely due to ballooning tax revenue from the housing bubble, which helped accommodate a decade of increased government spending without debt accumulation. In response to the crisis, Spain initiated an austerity program consisting primarily of tax increases. Prime Minister Mariano Rajoy announced on 11 July 2012 €65 billion of austerity, including cuts in wages and benefits and a VAT increase from 18% to 21%. The government eventually succeeded to reduce its budget deficit from 11.2% of GDP in 2009 to 8.5% in 2011 and it is expected to fall further to 5.4% in 2012.
2008–2014 Spanish financial crisis | Public debt
Due to the lack of own resources, Spain has to import all of its fossil fuels. Besides, until the 2008 crisis, Spain's recent performance had shown an inflationary tendency and an inflationary gap compared to other EMU countries, affecting the country's overall productivity. Moreover, when Spain joined the euro zone, it lost the recourse of resorting to competitive devaluations, risking a permanent and cumulative loss of competitive due to inflation. In a scenario of record oil prices by the mid 2000s this meant much added pressure to the inflation rate. In June 2008 the inflation rate reached a 13-year high at 5.00%.
Economy of Spain | Prices
Nevertheless, with the unprecedented crisis of the country's real estate sector, smaller local savings banks ("Cajas"), had been delaying the registering of bad loans, especially those backed by houses and land, to avoid declaring losses. In June 2009 the Spanish government set its banking bailout and reconstruction fund, the "Fondo de reestructuración ordenada bancaria" (FROB), known in English as Fund for Orderly Bank Restructuring. In the event, State intervention of local savings banks due to default risk was less than feared. On 22 May 2010, the "Banco de España" took over "CajaSur", as part of a national program to put the country's smaller banks on a firm financial basis.
Economy of Spain | Banking system
House ownership in Spain is above 80%. The desire to own one's own home was encouraged by governments in the 1960s and '70s, and has thus become part of the Spanish psyche. In addition, tax regulation encourages ownership: 15% of mortgage payments are deductible from personal income taxes. Further, the oldest apartments are controlled by non-inflation-adjusted rent-controls and eviction is slow, thereby discouraging renting. Banks offered 40-year and, more recently, 50-year mortgages. As feared, when the speculative bubble popped, Spain became one of the worst affected countries. According to eurostat, over the June 2007-June 2008 period, Spain has been the European country with the sharpest plunge in construction rates.
Spanish property bubble | Dynamics
The Spanish securities market was worth 22.65 million euros in 2007 an increase from 13.72 million euros in 2006 according to the supervisor's annual accounts published in the official gazette (Boletín Oficial del Estado)
Comisión Nacional del Mercado de Valores | Economic data
Many youths are trying to find jobs abroad, creating a problem for the future domestic economy and job market. Rajoy recently proposed a new budget for 2013 that would be very different and would cut government spending by 8.9%. By April 2013, unemployment had risen to 27%, but is now around 15% – 16.1% as of February 2018 and is one of Europe's fastest growing economies, thus demonstrating that the country is improving.
2008–2014 Spanish financial crisis | 2012 financial bailout
The following table shows the main economic indicators in 1980–2018. Inflation under 2% is in green.
Economy of Spain | Data
Since 1999, housing prices in Spain rose by around 180% in a decade (1996-2006), well above wages, which led to a situation where citizens spend much of their salary in buying a home. The price rise was caused by the housing bubble, which is caused by factors such as the shortage of rental housing (85% of total dwellings intended for property, while this rate is 61% in the rest of Europe and the existence of a park of three million empty houses, which corresponds to 20% of the total. Despite this, Spain is one of the European countries with the lowest rate of renting, which is attributable to a tax policy that favors property ownership.
Plataforma de Afectados por la Hipoteca | The housing crisis in Spain
At the beginning of 2010, Spain's public debt as a percentage of GDP was still less than those of Britain, France or Germany. However, commentators pointed out that Spain's recovery was fragile, that the public debt was growing quickly, that troubled regional banks may need large bailouts, growth prospects were poor and therefore limiting revenue and that the central government has limited control over the spending of the regional governments. Under the structure of shared governmental responsibilities that has evolved since 1975, much responsibility for spending had been given back to the regions. The central government found itself in the difficult position of trying to gain support for unpopular spending cuts from the recalcitrant regional governments.
Economy of Spain | Euro debt crisis
As one of the largest eurozone economies (larger than Greece, Portugal and Ireland combined) the condition of Spain's economy is of particular concern to international observers. Under pressure from the United States, the IMF, other European countries and the European Commission the Spanish governments eventually succeeded in trimming the deficit from 11.2% of GDP in 2009 to 7.1% in 2013. Nevertheless, in June 2012, Spain became a prime concern for the Euro-zone when interest on Spain's 10-year bonds reached the 7% level and it faced difficulty in accessing bond markets. This led the Eurogroup on 9 June 2012 to grant Spain a financial support package of up to €100 billion.
European debt crisis | Spain
After having completed substantial improvements over the second half of the 1990s and during the 2000s, which put a few regions on the brink of full employment, Spain suffered a severe setback in October 2008, when it saw its unemployment rate surging to 1996 levels. Between October 2007 and October 2008, Spain had its unemployment rate climb 36%, exceeding by far the unemployment surge of past economic crises like 1993. In particular, in October 2008, Spain suffered its worst unemployment rise ever recorded and, the country has suffered Europe's biggest unemployment crisis during the 2008 crisis. Spain's unemployment rate hit 17.4% at the end of March 2009, with the jobless total now having doubled over the past 12 months, when two million people lost their jobs.
2008–2014 Spanish financial crisis | Employment crisis
This article covers the development of Spain's economy over the course of its history.
Economic history of Spain | Introduction
The Spanish government supported the critical development by relaxing supervision of the financial sector and thereby allowing the banks to violate International Accounting Standards Board standards.. The banks in Spain were able to hide losses and earnings volatility, mislead regulators, analysts, and investors, and thereby finance the Spanish real estate bubble. The results of the crisis were devastating for Spain, including a strong economic downturn, a severe increase in unemployment, and bankruptcies of major companies. Even though some fundamental problems in the Spanish economy were already evident far ahead of the crisis, Spain continued the path of unsustainable property led growth when the ruling party changed in 2004.
2008–2014 Spanish financial crisis | Introduction
The economy was heavily focused around agricultural goods. The period saw regional industrialization in Catalonia and the Basque Country and the construction of railways in the second half of the nineteenth century helped alleviate some of the isolation of the interior but generally little changed for much of the country as political instability, uprisings and unstable governments slowed or undermined economic progress.
Economic history of Spain | 1822 to 1898
In the first weeks of 2010, renewed anxiety about the excessive levels of debt in some EU countries and, more generally, about the health of the euro has spread from Ireland and Greece to Portugal, and to a lesser extent in Spain. Many economists recommended a battery of policies to control the surging public debt caused by the recessionary collapse of tax revenues, combining drastic austerity measures with higher taxes. Some senior German policy makers went as far as to say that emergency bailouts should include harsh penalties to EU aid recipients such as Greece. It has been noted that the Spanish government budget was in surplus in the years immediately before the global financial crisis and that its debt was not considered excessive.
Economy of Spain | Euro debt crisis
At the end of the year, students all over the country joined in strikes, demonstrations, and sit-ins, often alongside their rectors and professors. Though still outperforming most of its EU partners, Spain failed to escape the effects of the global economic downturn in 2002. Falling exports, declining domestic consumption, and a sharp drop in tourist revenue helped bring annual gross domestic product growth down to an estimated 2%, the lowest level since 1996.
José María Aznar | Second term (2000–2004)
Spain was one of the few countries to vote Yes for the European Constitution in a referendum in February 2005, though by a lower margin in Catalonia and the Basque Country. In 2008, after the financial crisis reached Spain, the percentage of pro European persons started to fall. Thus, during the five years of the economic crisis, the Eurobarometer shows how the trust in the EU increasingly fell in Spain, and the confidence of the Spanish citizens in the European Union decreased for more than 50 points. Spain became one of the most Eurosceptic countries among all European Union Members, as it happened in pretty much European countries, where nationalist and eurosceptic characterised parties became stronger.
Euroscepticism | Spain
The specific 2008–2014 Spanish financial crisis was caused largely by the housing bubble in Spain, and the subsequent Spanish real-estate crisis has dramatically increased the number of foreclosures and evictions. According to figures from the Mortgage Affected Platform, there have been more than 400,000 evictions since the start of the crisis in 2007. The housing bubble, along with the increase in unemployment in Spain to 25%, together with cuts in payments to the unemployed and other forms of social assistance have left many sectors of the population excluded from both public and private economic circuits.
Suicide in Spain | Social and economic exclusion
Franco's death in 1975 and the ensuing transition to democratic rule diverted Spaniards' attention from their economy. The return to democracy coincided with an explosive quadrupling of oil prices, which had an extremely serious effect on the economy because Spain imported 70% of its energy, mostly in the form of Middle Eastern oil. Nonetheless, the interim centrist government of Adolfo Suarez Gonzalez, which had been named to succeed the Franco regime by King Juan Carlos, did little to shore up the economy or even to reduce Spain's dependence on imported oil, although there was little that could be done as the country had little in the way of hydrocarbon deposits.
Economic history of Spain | The Post-Franco period, 1975–1980s
The economic history of Spain has been described in terms of a regional imbalance between a progressive periphery and a stagnant centre. "The prosperity of the periphery could not be easily transferred to the rest of Spain: there was still no true national economy". "By 1930, when a Roman would still have felt at home on an Andalusian estate, Catalonia contained some of the largest textile concerns in Europe". Madrid had long been a centre of small-scale manufacturing, but the development of Spanish industry began in Catalonia at the end of the 18th century in the form of cotton textiles, and later in the Basque Country centred on the iron ore deposits.
National and regional identity in Spain | Economic
According to Spanish automobile manufacturers' association ANFAC new car sales fell 27.5 percent in July from the same time in 2007, the third consecutive monthly drop of over 20 percent. Spain's government forecast the unemployment rate would rise to 10.4 percent in 2008 and to 12.5 percent in 2009. Spain's second largest bank BBVA predicted the unemployment rate could reach 14 percent in 2009. Spain's Purchasing Managers Index for the manufacturing sector in July fell to a new low suggesting a deep recession. In the second quarter Spain's economy grew by 0.1 percent, the lowest gain in 15 years.
Great Recession in Europe | Spain
During the early 1990s, Spain experienced a period of economic crisis as a result of a larger, Europe-wide economic episode that led to a rise in unemployment rates. Many young adults in Spain found themselves trapped in a cycle of temporary jobs, which resulted in the creation of a secondary class of workers through reduced wages, job stability and advancement opportunities. As a result, many Spaniards, predominantly unmarried young adults, emigrated to other countries in order to pursue job opportunities and raise their standard of life, which left only a small amount of young adults living below the poverty line in Spain.
Economy of Spain | Youth crisis
More than 98 percent of home loans in Spain are priced off floating rates linked to Euribor, which has risen 145 basis points since August. Housing accounts for over 10 percent of Spain's economy. The Bank of Spain is concerned about the health of smaller regional lenders with heavy exposure to the mortgage market. Although Spain has avoided recession in the first half of 2008, unemployment in the country has risen by 425,000 over 2007–2008, reaching 9.9 percent. Car sales in Spain fell 31 percent in May. Spain's factory output slumped 5.5 percent in May 2008. The country's business lobby Circulo de Empresarios warned of a "high probability" that Spain's economy would fall into recession in the second half of 2008 due to the housing collapse.
Great Recession in Europe | Spain
In particular, during the month of October 2008, Spain suffered its worst unemployment rise ever recorded. By July 2009, it had shed 1.2 million jobs in one year. The oversized building and housing related industries were contributing greatly to the rising unemployment numbers. Since 2009 thousands of established immigrants began to leave, although some did maintain residency in Spain due to poor conditions in their country of origin. In all, by early 2013 Spain reached an unprecedented unemployment record at about 27%.
Economy of Spain | Employment crisis
Spain had a 7.9 percent decline in retail sales in June compared to the previous year, the largest drop since Spain began registering the results and the seventh consecutive monthly decline. This included a 17.9 percent drop in retail sales of household goods. In Spain food sales in the month of June fell by 6.8 percent. Morgan Stanley issued a major alert on the health of Spanish banks and the Spanish economy in a report, saying, "A momentous economic slowdown is now under way. We believe the deterioration in Spain is just in the beginning stages. The bulk of the pain will be suffered in 2009." Morgan Stanley also warned there was 40 percent chance of a 0.5 percent contraction of the Spanish economy in 2009, with a risk of an even more extreme 1.4 percent contraction in 2009.
Great Recession in Europe | Spain
The main components of the plan called for balancing the national budget, the liberalization of the labor market and international trade and a monetary policy aimed at controlling inflation. During this period of time, the Spanish economy boomed, taking it to levels close to those of Central Europe. As Sardà's reputation grew, he helped found the faculty of Economics at the University of Barcelona and he was appointed director of the delegations of the International Monetary Fund and the World Bank in Spain. In the years that followed he wrote several articles and books focusing mainly on monetary policy. He also founded the Monthly Statistical Report of the Bank of Spain and worked with the central bank research and statistics unit.
Joan Sardà i Dexeus | Academic career and public service
Capital contributions from the EU, which had contributed significantly to the economic empowerment of Spain since joining the EEC, have decreased considerably since 1990 due to the economic standardization in relation to other countries and the effects of the EU's enlargement. On the one hand, agricultural funds from the Common Agricultural Policy of the European Union (CAP) are now spread across more countries. On the other hand, with 2004's and 2007's enlargement of the European Union, less developed countries joined the EU, lowering the average income per capita (or GDP per capita), so that Spanish regions which were considered to be relatively less developed, became in the European average or even above it.
Economy of Spain | Reduction of European Union funds
In this same month, Spain had over 4 million people unemployed, By July 2009, it had shed 1.2 million jobs in one year and was to have the same number of jobless as France and Italy combined. By March 2012, Spain's unemployment rate reached 24.4%, twice the eurozone average. In 2012, unions organized a general strike to protest proposals to weaken union power, enable cuts in wages, and lower firing costs.
2008–2014 Spanish financial crisis | Employment crisis
In the period of 2007-2013, Spanish house prices had fallen by 37%. Each year almost a million homes were built in Spain, more than in Germany, France, and England altogether.
Spanish property bubble | Prices and number of houses built
After the crisis that began in 2008 and the fall of the domestic market, Spain (since 2010) it has turned outwards widely increasing the export supply and export amounts. It has diversified its traditional destinations and has grown significantly in product sales of medium and high technology, including highly competitive markets like the US and Asia.
Economy of Spain | External trade
The Madrid Stock Exchange was inaugurated on 20 October 1831. Its benchmark stock market index is the IBEX 35. Industry started to develop on a large scale only in the 20th century, but then grew rapidly, especially during the "Spanish miracle" period around the 1960s. The economy of the city was then centred on manufacturing industries such as those related to motor vehicles, aircraft, chemicals, electronic devices, pharmaceuticals, processed food, printed materials, and leather goods. Since the restoration of democracy in the late 1970s, the city has continued to expand. Its economy is now among the most dynamic and diverse in the European Union.
Madrid | Economic history
Job destruction in Spain became increasingly noticeable: by August 2008 2.5 million were already unemployed, the highest figure in 10 years. By December 2008, Spain would become the country with the highest job destruction rate in the world, with unemployment nearing 3 million. In October 2008, the government announced a €100 billion guarantee for bank debts and the creation of a €30 billion worth fund—extendable to €50 billion—to purchase 'healthy' assets from banks and savings banks "to ensure the Spanish market liquidity". From November 2008 to January 2009, the government proposed a €50 billion stimulus plan—with €8 billion destined to public investment in municipalities—expected to create 300,000 jobs throughout 2009, which was later criticised for its spending unsustainability and for creating "unproductive" jobs.
2011 Spanish general election | Background
And over the howls of government protectionists, he pushed through a series of measures to encourage foreign investors to enter Spain. The success of the stabilization plan was miraculous. By 1963 Spain had $1.1 billion in foreign reserves and a booming economy."
Alberto Ullastres | Economic studies and work
The Stabilization Plan of 1959 () or the National Plan of Economic Stabilization () were a series of economic measures taken by the Spanish Government in 1959. Its main goal was the economic liberalization of the Spanish markets, marking a turning point from the previous policies oriented towards achieving autarky. The Plan led to an economic boom in Spain for most of the 1960s. The monetary reserves of the Bank of Spain increased, inflation dropped from 12.6% in 1958 to 2.4% in 1960, Spain attracted foreign investment, and the relaxation of tariffs led to the import of new technologies. On the negative side, unemployment increased due to the decrease in production caused by higher imports, which lowered the demand for national products.
Stabilization Plan | Introduction
The large cash inflows from silver reduced incentives for industrial development in Spain. Innovation and investment in education were therefore neglected, so that the prerequisites for successful future development were given up. Thus, Spain soon lost its economic strength in comparison to other Western countries. A study of US oil booms finds positive effects on local employment and income during booms but that after the boom, incomes "per capita" decreased, while "unemployment compensation payments increased relative to what they would have been if the boom had not occurred."
Resource curse | Incomes and employment
Until the global recession which started in 2008, Alicante was one of the fastest-growing cities in Spain. The boom depended partly on tourism directed to the beaches of the Costa Blanca and particularly on the second residence-construction boom which started in the 1960s and revived again by the late 1990s. Services and public administration also play a major role in the city's economy. The construction boom has raised many environmental concerns and both the local autonomous government and city council are under scrutiny by the European Union. The construction surge was the subject of hot debates among politicians and citizens alike.
Alicante | Economy
Total foreign backing amounted to US$420 million. The principal lubricants of the economic expansion, however, were the hard currency remittances of one million Spanish workers abroad, which are estimated to have offset 17.9% of the total trade deficit from 1962 to 1971; the gigantic increase in tourism that drew more than 20 million visitors per year by the end of the 1960s, accounting by then for 9% of GNP; a car industry that grew at a staggering compound rate of 21.7% per year from 1958 to 1972; and direct foreign investment, which between 1960 and 1974 amounted to an impressive US$7.6 billion.
Economic history of Spain | The "Spanish Miracle"
Carlos Bustelo y García del Real (born 1936) served as the Spanish Minister of Industry from 1979–1980. At the time Bustelo entered the cabinet, Spain was emerging from the Franco years and economic development had to contend with what Bustelo called, "the crushing mental inertia," inherited form the old regime.
Carlos Bustelo | Introduction
The Spanish economy diverged from the British economy in terms of GDP during the middle of the seventeenth century. The explanations for this divergence are unclear, but "the divergence comes too late to have any medieval origins, whether cultural or institutional" and "it comes too early... in order for the Napoleonic Invasions to be blamed."
Economic history of Spain | Decline relative to Britain
The Spanish property bubble is the collapsed overshooting part of a long-term price increase of Spanish real estate prices. This long-term price increase has happened in various stages from 1985 up to 2008. The housing bubble can be clearly divided in three periods: 1985–1991, in which the price nearly tripled; 1992–1996, in which the price remained somewhat stable; and 1996–2008, in which prices grew astonishingly again. Coinciding with the financial crisis of 2007–08, prices began to fall. In 2013, Raj Badiani, an economist at IHS Global Insight in London, estimated that the value of residential real estate has dropped more than 30 percent since 2007 and that house prices would fall at least 50 percent from the peak by 2015.
Spanish property bubble | Introduction
In Q4 2008 the Spanish economy officially went into recession after a GDP fall of 1.1%—having already fallen by 0.3% on Q3 2008—putting an end to 15 years of uninterrupted economic growth.
2011 Spanish general election | Background
Spanish membership in these groups was not politically possible, but Spain was invited to join a number of other international institutions. In January 1958, Spain became an associate member of the Organisation for European Economic Co-operation (OEEC), which became the Organisation for Economic Co-operation and Development (OECD) in September 1961. In 1959 Spain joined the International Monetary Fund (IMF) and the World Bank. These bodies immediately became involved in helping Spain to abandon the autarkical trade practices that had brought its reserves to such low levels and that were isolating its economy from the rest of Europe. In December 1958, after seven months of preparation and drafting, aided by IMF, Spain unveiled its Stabilization Plan on June 30, 1959.
Economic history of Spain | The "Spanish Miracle"
The Spanish miracle (, literally "The Spanish Miracle") was the name given to a broadly based economic boom in Spain from 1959 to 1974. It was brought to an end by the international oil and stagflation crises of the 1970s.
Spanish miracle | Introduction
Economy of Spain
Outline of Spain | Economy and infrastructure of Spain
Spain's unemployment rate fell substantially from 2013 to 2017, although the real unemployment rate is much lower as there is an estimation of millions of people working in the grey market, people who count as unemployed or inactive yet still perform jobs. Although estimates of the hidden economy vary, the real Spanish GDP may be around 20% bigger as it is estimated that the underground economy of Spain moves annually 190 billion Euros (US$224 billion). Among high income European countries, only Italy and Greece are estimated to have larger underground economies than Spain. Thus Spain may have higher purchasing power as well as a smaller gini coefficient than shown in official numbers.
Economy of Spain | Introduction
Questionable accounting methods disguised bank losses. During September 2012, regulators indicated that Spanish banks required €59 billion (US$77 billion) in additional capital to offset losses from real estate investments. The bank bailouts and the economic downturn increased the country's deficit and debt levels and led to a substantial downgrading of its credit rating. To build up trust in the financial markets, the government began to introduce austerity measures and in 2011 it passed a law in congress to approve an amendment to the Spanish Constitution to require a balanced budget at both the national and regional level by 2020. The amendment states that public debt can not exceed 60% of GDP, though exceptions would be made in case of a natural catastrophe, economic recession or other emergencies.
European debt crisis | Spain
For a decade following the Civil War's end in 1939, the wrecked and isolated economy remained in a state of severe depression.
Economic history of Spain | Second Republic, 1931–36