Spain's economy is considered the 13th largest in the world (CIA). They have had many years of consistent growth, 16 to be exact (CIA). Not until recently has the economy contracted. While many blame the global economic recession others blame Spain's housing bubble. Currently, Spain has a collapsed real estate market. This is due to debtors owing more than they can afford to pay or make a year. This is similar to the housing bubble that the United States had. As a nation we were handing out "ninja loans." These were loans that did not require a specific income or sometimes even a job. They would just be lent out to individuals that it was clear could not pay it back, in order for lenders to make a percentage from that loan.
In Depth Look
Spain is on the Euro. The euro zone limit of debt tends to be around 3 percent. In 2010 Spain had a budget deficit of 9.2 percent GDP (CIA). This was more than three times the euro zone limit. Eventually, it resulted in Spain cutting severe spending. This only brought the budget deficit of GDP to 6 percent. However, this is still twice as much as the euro zone limit. Spain is trying its best to bailout the company's that have collapsed do to the contracting economy. Through the privatization of certain industries, increasing competitiveness in the job market through reforms and cutting spending, Spain is hoping to fight the economic down turn. What is even more alarming is that Spain's unemployment has reached five million in 2011 (BBC). In contrast, to the bad news of the economic meltdown Spain is currently experiencing export growth. This could keep the Spanish economy afloat.
Spain does not distinguish itself from America, in that we both are economically dependent on the service sector. The labor force by occupation is 71.7% (2009 est.) service sector (CIA).
Spain has had a history of economic isolationism until it became part of the euro zone (Photius). This means that it is part of the European Union (EU). Moreover, it means that it maintains the same currency as seventeen other countries (ECB). This can have drastic effects on an economy because any fluctuations that the euro has, Spain will be effected by. This is a great tool when the euro is strong because it would imply that Spain's economy is also as strong. Unfortunately, being tied down with one currency between seventeen different countries can become a headache. One of the countries on the euro is Greece. Recently, Greece has had a lot of media coverage do to them defaulting in loans. This brings down the euro which consequently brings down the economies of the sixteen other countries. Spain being one of them.
SOURCES
- CIA - https://www.cia.gov/library/publications/the-world-factbook/geos/sp.html
- BBC - http://www.bbc.co.uk/news/business-17058162
- ECB - http://www.ecb.int/euro/intro/html/map.en.html
- Video - http://www.euronews.net/2012/02/16/spain-s-economy-shrinks-but-bond-demand-stays-high/
- Photius http://www.photius.com/countries/spain/economy/spain_economy_foreign_economic_rel~88.html
Very informative post. The two things I found most interesting where, one the bit about 71% of the workforce being in the service sector and two, the fact that Spain was a isolationist economy until relatively recently. The 71% number is almost the same in France. I wonder if that is the trend trough out Europe. It is also interesting that even being so close to many other countries Spain could be some what closed. It seems to make more economic sense to build an economy with strong partners. Has being a member of the euro zone been a good thing for Spain in the longrun excluding some of the most recent economic issues with Greece and other neighbors?
ReplyDeleteAlso I didn't mention this last week, but the matador picture in your background captures Spain really well and adds to the appeal of your blog overall.