A decade after Spain’s financial crisis

It has been just over a decade since the beginning of the Spanish financial crisis. Enough time has passed to enable one to analyse objectively whether the changes undertaken by the Spanish government and institutions are producing the desired results. Comparisons with the situation in Italy are revealing.

The Spanish economy officially entered in a recession towards the end of 2018. The spark that brought this about was the collapse of the property market that for more than a decade gave the impression to most developers, bankers, the government and many ordinary people that over-development was the manna falling from heaven to save the country from undertaking much-needed economic and labour market reforms.

Early in 2009 Standard and Poor’s downgraded Spain from its valuable AAA rating to AA+. As usually happens, the Spanish government and international institutions underestimated the seriousness of the debt crisis that soon turned into a financial crisis, and soon after into an economic slump.

The Bank of Spain bailed out Caja Castilla-La Mancha in its first bank rescue operation. It soon had to intervene to rescue other saving banks that were exposed to the crushing property...