The Spanish economy is the fourth largest within the Eurozone behind Germany, France and Italy and is the 13th largest economy in the world. Many believed that Spain would need an IMF/EU bailout to allow the nation to service its debts after borrowing costs became excessive. Spain’s economy was badly hit by the collapse of a construction and property bubble which burst during the Global Financial Crisis. In the event, a full sovereign bailout was avoided, but the banking sector did receive financial help worth €100 billion.
The Spanish economy has been in recession for more than two years and has experienced some of the highest levels of unemployment in EU history, with younger people (<25 years) hit disproportionally hard. Spanish unemployment is at the 26% mark – i.e. more than one person in four of the workforce is idle. According to Spain’s central bank, the economy will have returned to growth in the third quarter when data is finalised. The bank is projecting that growth will come in at 0.1% for Q3. The Central bank’s projection is an estimate and definitive data will be provided by INE, the nation’s statistical Agency, on the 30th October.
The government has been implementing unpopular austerity measures and reforms to employment law and social security in a bid to get the economy back on track in a sustainable manner and bring the deficit back to within permissible Eurozone levels. Needless to say, these moves have been very unpopular with the Spanish. Once Spain’s economy starts to grow again, unemployment will decline, but experience around the world suggests that the re-employment cycle is lagging much further behind recovery than is typically the case in the post-recession period. However, the recovery from the Global Financial Crisis could best be described as fitful.