Spanish Crisis

PANOECONOMICUS, 2011, 3, pp. 309-328
Received: 9 September 2011.

UDC 338.124.4(460) DOI: 10.2298/PAN1103309C Original scientific paper

Francisco Carballo-Cruz
NIPE and School of Economics and Business, University of Minho, Portugal
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Causes and Consequences of the Spanish Economic Crisis: Why the Recovery is Taken so Long?
Summary: Spain is currently facing its worst crisis in the last fifty years. The crisis began as an extension of the international financial crisis, but the internal imbalances accumulated in the pre-crisis period aggravated the situation. At present their incomplete adjustment is making difficult the economic recovery. This paper describes the evolution of the economic crisis in Spain. The real estate sector and the banking sector are analysed in detail, as they played a key role in the detonation and the deepening of the crisis. The results of the main reforms carried out so far are also carefully examined. It also discusses the main factors that have delayed the economic recovery up to now (unemployment and indebtedness), and present some alternatives to define an exit strategy. Key words: Crisis, Real estate, Banking, Debt problems, Unemployment, Public debt. JEL: E24, F34, G21, H63, R31.

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Paper by invitation

Financial support from Fundação para a Ciência e a Tecnologia – FCT (Project PTDC/SEN-TRA/108522/2008) is gratefully acknowledged.

After a long period of economic expansion, which began in the mid-nineties, in 2006 the Spanish economy began to show the firsts signs of exhaustion. The international economic crisis, which began in 2007 and deepened in 2008, hastened the end of the expansive cycle and triggered a severe adjustment of the imbalances accumulated during the previous decade, whose correction continues to these days, four years later, pending its completion. The rapid deterioration of the international macroeconomic context highlighted the structural weaknesses of the Spanish

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