Spain's Economy and their Ability to Overcome the Current Economic Crisis

Topics: Economics, Spain, Macroeconomics Pages: 22 (5922 words) Published: September 23, 2013


A Thesis
Presented to the Faculty of European University
In Partial Fulfillment of the Requirements for the Degree:

Bachelor in Science of Business Administration

By: Adham Robin

July 2013

Table of Contents

1) Spains economic history
Pre civil war
Civil war
Post civil war
2) Tourism, industry and agriculture
3) European Union
4) Housing Bubble
5) Overall competiveness of spains economy
6) EU intervention in Spain

This thesis will be structured the following way. In the first part, Spain’s economy historically will be analysed, in order to identify its strengths and weaknesses and have a better grasp and understanding of the current situation Spain faces today. Later will be analysed in depth the factors that have led Spain to the current financial and economic crisis and the economic situation that Spain faces. Further on will be considered the recent efforts of the government to overcome the country’s situation and their success. In continuation will be discussed...

Spain has experienced many financial crises throughout its history. These financial crises have different origins, but they do have common threads. The current recession and following debt crisis follow the same pattern. The monetary and fiscal policies put in place by the Spanish government have played a role in creating and prolonging the current crisis. GDP, employment, private consumption, employment, labour costs, inflation, government deficit, debt ratios, risk premium rates, credit growth, the impact of fiscal policies and the role of economic policies will be discussed in order to shed light on Spain’s current economic situation and analyse whether or not they have the ability to overcome the current economic crisis. The Spanish government can take action to improve the economy and to lessen the effects of its financial crises. The recent subprime mortgage crisis and its repercussions have stimulated renewed interest in the study of other financial crises. Economic and financial crises of the Spanish economy have been a subject of study for many years. Harrison (1985), analyzed the era stretching from the Spanish civil war to Spain’s admission to the European community in the year 1986. Kaminsky and Reinhart (1999) show that generally, a multitude of weak economic fundamentals precede economic crises. Boyd, Nicolo, and Loukoianova (2009) question whether a “banking crisis” is actually a crisis in the banking system or just a response to government interventionist policies. Finally however, Klomp (2010) claims that there is no common factor that causes crises.

Spanish Economic History
The history of Spain can be traced back to the earliest of people; The Iberians, Celts, Greeks, and Carthaginians were all visitors at some point of time. The Romans arrived in Spain shortly before 200BC and occupied the territory for over 600 years. Thanks to the Romans, ‘Hispania’1 developed a road system, aqueducts, theaters, baths and the basis of a common language. The contributions of Rome to Spain are truly significant, including language, government, culture, religion, architecture and infrastructure.  On the other hand, Spain’s natural resources were obviously useful in further expanding the Roman Empire, although Rome’s one major influence to Spain is no doubt religion, when Spain received Christianity.  Today, Roman Catholicism is the leading religion in the country (with 94% Roman Catholics2). Although the Visgothic Kingdom settled in Spain in 410AD, this highly Romanized group did little to further Iberian culture and there are few remnants of their period in Spain.3 Another very significant influence and key point in Spain’s history is the Moorish Invasion.

Moorish Invasion
The Moors were a...

References: Harrison, J. (1985). The Spanish economy in the twentieth century. New York : St.Martin 's Press
Kaminsky, G., and Reinhart, C. (1999). The twin crises: The causes of banking and balance-of- payment problems. American Economic Review
Boyd J., De Nicolò G., and Loukoianova E. (2009). “Banking crises and crisis dating: Theory and evidence.” International Monetary Fund Working Paper, WP/09/11
Klomp, J. (2010). Causes of banking crises revisited. North American Journal of Economics and Finance , 72-87
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