Economic Crisis Landed Spain In Deep Political And Economical Trouble

Economic Crisis in Spain

Since 2008 to 2014, Spain has been suffering from financial crisis, and now it has become a painful experience for the people in Spain. People are without jobs and inflation is getting higher. Spanish government has been completely failed in recovering from this downfall. Things have been changing so fast in Spain, People are protesting government for all this, and they have been on road constantly in day and in night; these things making the atmosphere more uncomfortable in Spain. A great number of people have left the country seeking for jobs outside in neighbor countries.

These days, Spanish companies are having to pay three times more to borrow than their peers in Germany. Mainly stifling an economic recovery allows providing jobs for only one of the four people in the Spain seeking for job.


According to Bank of America, Merrill Lynch’s calculations based on European Central Bank(ECB) data, Spanish banks charged 4.2 percent from companies for loans for more than a year till May, just short a euro-era record of 4.39 percent in April, adjusting for anticipated inflation, whereas German lenders demanded only for 1.51 percent.

High real borrowing costs high risk hampering the investment that is required to boost an economy which is recovering from a six year failure. Tackling the budget deficit and create chances for new jobs. Since Mario Draghi has taken over at the ECB, the stock of loans to non-financial companies and households (in Spain) is going down two times faster than in 2011.

Notably, Mario Draghi’s, president of the ECB, policy statement was the major debt crisis on 26 July 2012. He narrated policy, “the ECB is intended and ready to do everything what is god and what it takes to preserve the euro. And believe me, it will be enough.” The subsequent program that was announced on September 6, 2012 for unlimited purchasing of short-term sovereign debt, i.e. OMT(Outright Monetary Transactions), put the ECB’s balance sheet behind the pledge.

Stefano Loreti who is a partner at Hayfin Capital Management LLP, which manages around 5 billion euros ($6.8 billion) of assists, including Spanish loans, stated, “Lenders in the periphery are still scared of a significant credit risk, so it would be hurry if I say that we have thrown off the credit crisis behind.”

Cesar Fernandez who is a Madrid-based fund manager at Deutsche Asset & Wealth Management, which oversees about 934 billion euros of assets, said in an interview, “As long as real rates in Spain remain high on a relative basis, companies based in the country have to gain competitiveness via other tools such as labor costs.”

Spanish Prime Minister Mariano Rajoy himself is relying on the recovery to tackle a government debt burden approaching 100 percent of gross domestic product and taking down the highest unemployment rates in the European Union like Greece. Spain’s current economy is still about 7% less than it was high in 2008 and consumer prices are still stagnant.
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