The 2008 crisis in Spain began whit the property market bubble burst, the 2010
banking crisis and the increases of unemployment, which resulted in a change
in the economic model, to try to solve the crisis and increase employment.
Some of the causes of the bubble burst were the continuously increases in both
supply housing and prices, and the adjustable rate mortgages that represent
over 60% of the value of the Spanish GDP, so a lot of people owe a lot of
money on their mortgages. After crises started, the interest rate increased as
much as the mortgage payments.
The banks securitized the major part of this debt and sold it to pension funds,
mutual funds and such other funds in the securities markets. The life savings
and pensions of people were being wiped out.
The main problem was the private debt, which was 227.3% of GDP at the end
of 2010; total debt increased from 337% of GDP in 2008 to 363% in mid-2011.
Spain GDP growth rate for 2008 was 0.89%, a -2.72% decline from 2007, and
continued to decline to -3.76% in 2009, rising rapidly to 0.16% in 2010,
increasing by 3.93%, but falling back to -2.96% in 2012, and thereafter rising to
3.84% in 2015.
The main problem with unemployment in Spain is the excess of supply over
demand. This low demand for labour can be caused by a large reduction in
wages, due to an increase in labour costs. Another cause may be the large
number of temporary contracts in Spain.
In this graph of employment in Spain from 2001 to 2013, the expansion of
construction and the internal market can be seen. In 2009, when the real estate
bubble burst, employment in the construction sector fell by around 35%, while
the domestic market fell by 15%
The most important new measures taken by the government to tackle the crisis
were:
- The 400-euro deduction from personal income tax, with the aim of
encouraging consumption
- The elimination of wealth tax, which saved 1. 800 million euros to nearly
one million people
- The free extension of the mortgage term to two years, and the partial
moratorium on mortgage payments for the unemployed, which consists
of reducing the mortgage payment by 50%, with a maximum of 500
euros per month, for 2 years, but when this period of time passes they
will have to return what has been deferred by applying a pro rata.
In 2012 there were new elections, in which the PP won, so new measures were
taken for unemployment and more jobs. These are some of the measures that
were carried out:
- Raising the income tax between 0 and 7%, depending on the income of
each person, an estimated collection of 6 billion euros.
- Raising VAT, the general rate from 18% to 21%, and the reduced rate
from 8 to 10%, and extra annual income is estimated at 6.5 billion euros..
- Reducing unemployment money from the seventh month from 60% to
50% of the regulated base.
Bibliography:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7320871/
https://www.bde.es/f/webbde/Secciones/Publicaciones/OtrasPublicaciones/Fich/
InformeCrisis_Completo_web.pdf
https://www.managementstudyguide.com/spanish-property-bubble-of-2008.htm
https://www.elmundo.es/mundodinero/2008/11/27/economia/1227793810.html
https://journals.openedition.org/ccec/5721#tocfrom1n3
https://voxeu.org/article/why-spain-s-unemployment-so-high
https://elpais.com/politica/2012/07/11/actualidad/1342039254_993732.html
https://www.abc.es/economia/abci-medidas-economicas-rajoy-201112190000_noticia.html?
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