ECONOMY OF SPAIN and sovereign debt of spain whilst in the european union and eurozone
1. Research question: What is the basic problem in Spain’s economy?
One of the core reasons is the selfmade banking crisis. The real estate sector became a big overkill which has been caused by the banking crisis. The construction industry has become a large-scale losses for banks and in the public sector unemployment has risen and housing prices have fallen. Spain also has a problem with competitiveness as there has not been success with any export and the unemployment rate has increased. The country is in a loop, and the correction is difficult.
If Spain would be different from the euro area, the German losses in economic growth would increase by 850 billion and credit losses into 266 billion by the year 2020. In comparison if Italy would be different from the euro area, Germany would lose 1 700 billion, and would have to give up 455 billion they are owed. Greece, Spain and Italy differenting from the euro area would take the euro into crisis and the global economy into a deep recession and 42 in the world biggest economy would lose a total of 17 200 billion euros.
It has been said that the euro would manage if Greek would differentiate, but not if Spain would do the same. Spain's economy is so large and the expulsion from the euro zone would have more severe consequences, also in a political way. It could even mean the euro zone rupturing on a larger scale. And if Spain falls, the Italian economy would likely follow. That could mean that the euro would remain valid as a currency further north in Europe for a smaller number of users. There is fundings available for saving Spain's economy, but after that there might not be enough to help any other countries anymore.
Spain’s economy is the 12th largest economy in the world, 5th largest in the EU and 4th largest in the Eurozone. It is ranked as 44th in the ease of doing business rank. GDP is the world’s 9th largest, $1.406 trillion, $30,500 per capita (PPP 2011). Services make 66,6% of GDP, construction 10%, industry 11,7%, energy 2,3% and agriculture 2,3%. Main industries are machine tools, metals and metal manufactures, chemicals, pharmaceuticals, shipbuilding, automobiles, tourism, textiles and apparel including footwear, food and beverages.
When looking at the Human Development Index (statistics about life expectancy, education and income), Spain is ranked in the list as number 20. Out of 47,3 million inhabitants 23,1 million are counted in labor force, and the average gross salary is 21 150 euros yearly. Unemployment rate in November 2012 was 26,6%.
Inflation (CPI) was 2,9% in November 2012. Spain is a Euro-area member since beginning of 1999 and the euro banknotes and coins were introduced on beginning of 2002 after a three years transitional period. The national central bank of Spain continues to exchange the old currency, peseta, for an unlimited period.
Spain is a part of trade organizations EU, WTO and OECD. Spain’s main export partner countries are France (18,3%), Germany (10,6%), Portugal (8,7%), Italy (8%), UK (6,7%) and U.S. (4,2%) (2009). Imported goods include fuels, chemicals, semifinished goods, foodstuffs, consumer goods, measuring and medical control instruments, machinery and equipment. Spain’s public debt is 68,1% of GDP (2011 est.).
In this statistic is seen the government revenue and spending from 2003 to 2013. In 2011, government revenue in Spain amounted to around 377.1 billion euros, while government spending came to around 472.1 billion euros.
2. Spanish financial crisis
Between 2008 and 2012 the Spanish financial crisis started as part of the world Late-2000s financial crisis and continuing as part of the European sovereign debt crisis. The Spanish crisis was due in particular to a severe increase in unemployment (more than a quarter of Spain’s workforce, 26,6%), long term loans issued commonly for 40...
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