I am sure you’re well versed with the Financial Crisis of 2008 which had its roots in the depreciating subprime mortgage market in the United States. The resultant global recession was felt particularly in North American and Eurozone economies. The countries worst affected in the Eurozone were Portugal, Italy, Ireland, Greece, and Spain, which are commonly referred to as the PIIGS. So I’ll take you to the time when investors and analysts looked admiringly at the emerging economic powerhouses of Europe: Portugal, Italy, Ireland, Greece, and Spain. Then came the 2008 financial crisis and those five booming economies became the acronymic PIIGS of the global recession. However here I’ll be limiting my discussion to the financial crisis in Spain and how things went for Spain’s economy in 2008.
So back in the 2000s, Spain, together with other founding euro members, adopted the new physical currency euro on January 1, 2002. On that date, Spain terminated its historic ‘peseta’ currency and replaced it with the euro, which has become its national currency shared with the rest of the Eurozone. This culminated a fast process of economic modernization as the strength of the euro raised concerns regarding the fact that Spanish exports, outside the European Union, were being priced out of the range of foreign buyers. The country had lost its monetary sovereignty in favor of the European Central Bank, which has to look after several different -often opposed- national interests.
Spain before the 2008 crisis
As Spain’s economy developed quickly before 2008, its debt-to-GDP proportion was falling. Germany’s, on the other hand, kept on rising. After Spain joined the Eurozone, the nation encountered a long boom, supported by a housing bubble and financed by modest credits to manufacturers and homebuyers. House costs rose by 44% between 2004 and 2008, and since the bubble burst, they have fallen by a third. The economy, which grew 3.7% every year on normal from 1999 to 2007, contracted at a yearly pace of 1% from that point forward.
Spain’s economic story outlines the way that the Eurozone’s issues run far more profound than the issue of unreasonable getting by of not well-taught governments. Greece, Portugal, and Italy had an abundant excess obligation. Yet, the Spanish government’s obtaining was leveled out – that is, it ran a decent spending plan consistently until the night before the 2008 crisis. Thus, even though the Spanish government, had moderately low obligations, it needed to intensely manage the impacts of the property breakdown, the downturn, and the worst joblessness rate in the Eurozone. This led to the financial crisis in Spain.
Economic Crisis, 2008–2013
In 2008, the shockwaves of the worldwide monetary emergency punctured the Spanish property bubble, causing a property crash. Development fell and joblessness started to rise. The property crash prompted a breakdown of credit as banks hit by awful obligations, cut back loaning, causing a downturn. As the economy shrank, government income crumbled and government obligation started to climb quickly. By 2010 the nation confronted extreme budgetary issues and became involved with the European sovereign obligation emergency.
In 2012, joblessness rose to a record high of 25 percent. On 25 May 2012, Bankia, the then fourth-biggest bank of Spain with 12 million clients, mentioned a bailout of €19 billion, the biggest bank bailout in the country’s history. The new Chairman of Bankia, José Ignacio Goirigolzarri announced a loss of 4.3 billion euros (2.98 billion euros considering a monetary credit) contrasted with a gain of 328 million euros revealed until May 9, 2012. On June 9, 2012, Spain approached Eurozone governments for a bailout worth 100 billion euros ($125 billion) to protect its financial framework, as the nation turned into the greatest euro economy (after Ireland, Greece, and Portugal) to look for worldwide guide because of its shortcomings during the European sovereign debt crisis. A Eurozone official told Reuters in July 2012 that Spain yielded just because at a gathering between Spanish Economy Minister Luis de Guindos and his German partner Wolfgang Schaeuble, it was suggested that Spain might require a bailout worth 300 billion euros if its acquiring costs remained impractically high. On August 23, 2012, Reuters announced that Spain was haggling with Eurozone members over conditions to cut down its acquiring costs.
How has Spain fared since 2008:-
Spain’s economic growth for all of 2018 was twice the rate of European Union nations as a whole. However, it wasn’t quite as good as had been expected. The nation’s long recovery appeared to have lost momentum. The Spanish economy grew at a rate of 2.4% in 2018 rather than the 2.6% that had been expected. The forecast for 2019 was lowered to about 2% to 2.1% to reflect the apparent slowdown.
Consumer spending has been increasing significantly year over year since 2014. The best year of all was 2018, when spending rose 8.9% over the previous year, to $822.8 billion. The nation’s tourism industry continues to be one of its greatest strengths. It was the second most visited nation in the world in 2018, with 82 million foreign visitors who spent an estimated $173 billion, according to the World Tourism Organization.
Spain’s national debt remains at a frighteningly high level. In the second quarter of 2019, government debt increased by about $11.5 billion to $1.32 trillion in total. That’s about 98.9% of the country’s gross domestic product (GDP). In Europe, only Greece and Italy are worse off. The country owes about $64 billion in interest payments alone each year.
Spain’s unemployment rate stood at 14.2% in September 2019. That is the lowest it has been since 2008. While it still compares unfavourably to the 7.5% rate in the Eurozone as a whole in 2019, the jobless rate in Spain has been showing steady improvement since early 2013, when it hit a peak of just under 27%. Still, young workers continue to struggle in 2019. About 32.8% of all Spanish workers, aged between 18 and 24, were unemployed as of September 2019, according to Eurostat.
GDP and Growth
After serious austerity measures and major reforms into the Spain economy, it 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. Although jobs are starting to be created the unemployment still stands at 22.6% in April 2015. In 2014, after years of economic recession, Spain grew up 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.
How the 2008 crisis compares with the coronavirus fallout in Spain
Twelve years after plunging into a protracted economic crisis, Spain’s economy is reeling from a new and unexpected economic shock caused by the coronavirus pandemic, which has brought the economy grinding to a halt. Jobless claims are already soaring and experts estimate that the cost of the first four weeks of confinement alone could be in the range of €49 billion. As it looks into the mirror, what Spain sees is a country that has yet to fully recover from the previous financial crisis: its debt and deficit levels are higher now, and so is unemployment. But on the other hand, its export sector is stronger than it was in early 2008, there is hardly any inflation, and Europe seems to be (more or less) listening.