In the first part, Spain’s economy historically will be analyses, in order to identify its strengths and weaknesses and eave a better grasp and understanding of the current situation Spain faces today. Later will be analyses 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.
GAP, employment, private consumption, employment, labor 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 analyses Neither 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 supreme 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 Near to Spain’s admission to the European community in the year 1986. Samisens and Reinhardt (1999) show that generally, a multitude of weak economic fundamentals precede economic crises. Boyd, Nicola, and Louisiana (2009) question whether a banking crisis” is actually a crisis in the banking system or Just a response to government interventionist policies. Finally however, Clomp (2010) claims that there IS no common factor that causes crises.
Spanish Economic History ere history of Spain can be traced back to the earliest of people; The Iberian, Cells, Greeks, and Carthaginian were all visitors at some point of time. The Romans arrived in Spain shortly before BBC and occupied the territory for over 600 years. Thanks to the Romans, ‘Hispanics 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 Romeos 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 Catholics). Although the Philologist Kingdom settled in Spain in DADA, this highly Romanizes group did little to further Iberian culture and there are few remnants of their period in Spain. Another very significant influence and key point in Spain’s history is the Moorish Invasion. He Moors were a nomadic people from North Africa. They invaded Spain taking their religion and culture with them in 711. In Southern Spain, the Moors established a caliphates in Corncob, and the court grew in wealth, power, and culture. During this period, Christian rulers continued efforts in Northern Spain to recapture the south. ere last Moorish city, Granddad was recapture in 1492, and most of the Moors were driven out of Spain. It can be said that seven hundred years of Moorish influence feet an unquestionable mark on Spain, making it distinctly different even today from the rest of Western Europe.
The Moors not only brought their religion, but also their music, their art, their view of life, and their architecture. From the establishment of the first mosque in Corncob in 785 until the time of their expulsion by the Catholic kings in 1492, the Moors dominated the intellectual life of the area and had a profound impact on European civilization, which took in many of their ideas. For example, with advanced irrigation systems imported from Syria and Arabia, the Moors turned Spain’s dry plains into fertile farmland.
To the land’s traditional crops, the Moors added oranges, lemons, rice, cotton, and much more. It can be argued that Muslim influence was good for Spain as it modernized knowledge and learning in the country, and encouraged a wider cultural awareness through its introduction of different architectural designs, style of religion and language structure. 6 ere Spanish Conquest of the Americas In the 1 5th century Christopher Columbus, an expert in literature as well as sailing, believed he could sail across the Atlantic to Asia, and moved to Spain where the monarchs approved the venture.
Columbus set forth on his Journey, landed of the coast of the Caribbean island in 1492, and thus the Spanish invasion began. After a Nave of ‘conquistadores’, the Spanish defeated the Aztec, Amman, and Inca Civilizations, colonizing a good part of South and central America and organized a huge imperial system to exploit the land, labor, and mineral wealth of the New World. During the Spanish colonial period, the economy was based on exploitation, both of land and of Indian labor. The ‘encomia’ system put in place consisted of, in return and labor to the Spanish.
Another aspect of the Spanish colonial economy was the exploitation of land. Spain collected, through the ‘quaint, one-fifth of all subsequent ownership grants. Huge amounts of gold and silver was extracted from the New Nor, as well as the gold and Jewels stolen from the Aztec. The New World became real cash cow for Spain, which used its 20% of proceeds to wage endless wars in Europe. Slavery also became common in order for the Spanish merchants to retain something to sell in return for the gold, silver and other goods produced in the New Nor. The Spanish kings failure to manage his complex and flung out empire, the any costly lost wars waged in Europe in that period, and the overlooked inflation led to the bankruptcy and downfall of the Spanish empire. Individuals and entities invested beyond their means, and gold and silver prices fell dramatically, which led to a series of defaults in the sixteenth and seventeenth centuries. Treasure and Prices in Spain (1505-1650) In the sixteenth century, gold and silver poured into Spain from its New World colonies and the rest of the Spanish empire.
As prices rose over time, the first observation of a probably connection between the inflow of treasure and the rise in rises, one of the first economic theories (the Crude Quantity Theory of Money) may be made. The statistics available are only partial; there are statistics on the import of treasure into Spain, but none for the export of gold and silver. Also, the extent of hoarding and diversion of resources into Jewelry and such is unknown. However, these statistics available allow for a crude test quantity theory of money . Fear Cumulative Import of Treasure Price Level 1505 371 40. 6 1510 1187 38. 6 1515 41 . 16 1 520 3376 1525 3510 50. 39 1 530 56. 78 1535 5198 48. 95 10136 58. 20 1545 9. 49 1550 20599 59. 05 1 555 30465 71 . 02 79. 09 1565 49672 32. 38 1 570 52803 33. 84 1575 74710 103. 71 31962 102. 77 1585 121337 111 . 35 1 590 145170 113. 97 1595 180355 214784 137. 23 1605 239187 142. 20 1610 270592 130. 57 1615 295120 127. 86 1620 325232 129. 94 1625 352243 124. 21 1630 377198 136. 77 1635 394309 126. 81 410624 121. 46 1645 424388 132. 91 1650 4361 59 143. 22 Source: Earl J. Hamilton, American Treasure and the Price Revolution in Spain, 1501-1650, Harvard University Press 1934. Hen these data are plotted, shown below, the results indicate a relationship vehement century, the price level did not rise, even though treasure continued to be imported. Here the lack of statistics is vital. Considering that gold and silver was flowing out of the country to pay for manufactured goods as fast or faster than it as flowing in, them there would actually be no increase in the amount of money in circulation. Pre-longitudinal Spain Spain was a primarily a rural, agrarian society, from the sixteenth century until the early twentieth century, as its industrialization was delayed compared to other Nesters European countries.
It was indeed only in the sass’s that the manufacturing output exceeded the agricultural output. Nor War I Engage any type of war. The country benefited from her neutral status by supplying both camps, and together with a sudden rise in export prices, the result gold reserves to triple, and the government was able to liquidate much of the national debt. However, this sudden prosperity only emphasized the weakness of the Spanish economy and widened the gap between rich and poor areas.
The industrial regions of northern and eastern Spain entered a phase of increased activity, while other areas of the peninsula were devastated by shortages and unemployment, forcing husbands of workers to migrate, mainly to Barcelona and Bilbao. The result of this Nas that whereas industrialists and such experienced a previously unknown period of wealth, for many among the working classes, these were years of worsening living standard, and had to bear the burden of the shortages and rising costs of living due to rising inflation.
A program was presented as “economic reconstruction”. This included the nationalization of railways and changes in legislation in regard to railways and mining, extensive budgeting for public works, the creation of an agricultural credit organization, organization of an agronomic service and the work of reforestation, and finally the creation of an organization which prepare the economic life of Spain both for the period of transition between war and peace and for policies Inch will have to be followed after war. Neutrality gave sudden prosperity, but Spain was not able to manage that wealth very well, the gap between wealthy and Norse was made more wide, and many social movements such as strikes came about. Nonetheless, the government showed an effort to help make the economy better. Industrialization he regime of Miguel Primp De Riviera, from 1920 to 1930, laid the foundation for the Spanish industrialization. The necessary infrastructure for development, mainly roads and railroads, were built. However, even though part of the spending was funded by income taxes, this period was characterized by a significant budget deficit.
These deficits led to steep inflation that caused the value of the peseta to drop. A number of financial institutions in 1924 were led to declare insolvency, including Banc Central, one of the largest banks in Spain at the time. After the downfall of De Riviera in 1930, most of the infrastructure plans were abandoned, due to concern about rising inflation and budget deficits 9. Spain during the Great Depression ere depression that most of the world suffered a little after World War l, that continued until the late asses, had a relatively small effect on the Spanish economy. He decrease of production in Spain was significantly lower than in other regions. This was due a few factors. Firstly, Spain was relatively inactive in international trade and therefore did not rely on foreign demand and exchange rates and others. Also, a Nave of immigration from Latin America helped boost agricultural labor, production and returns on foreign investment (Harrison, 1985). Furthermore, Spain did not follow the gold standard during this time, enabling the Bank of Spain to lend freely to entities in need. 0 ere Spanish Civil War, which began in 1936, was a three-year struggle between the Spanish army and the government under Manuel Azans. The period represented a time of extreme protectionism leading to stagnation, though protecting the domestic sectors had been an element of the Spanish economic policy since the end of the nineteenth century. The war was a huge burden financed by the sale of treasury bonds, the use of gold reserves from the Bank of Spain, and foreign aid from Germany and Italy under Hitler and Mussolini, respectively (Harrison, 1985).
The conflict had debilitating and lasting consequences, seeing the national income decreased by more than a quarter (Harrison, 1985) and the government exhausted most of its reserves. The infrastructure of both industry and agriculture was damaged, decreasing productivity from 1939 onwards substantially. By 1939 the Republican forces were defeated, the civil war was over, and Francisco Franco took intro of the country. The start of World War II increased spending load on the economy, and Spain entered a serious depression that lasted almost a decade.
During and after WI, Spain was characterized by high public debt, economic stagnation and high inflation. 11 ere Regime of Francisco Franco Franc’s liberal approach to the economy was unfortunately not match in his approach to labor issues, who’s policies enforced hierarchy, military obedience, centralism, and suppression of human rights, and resulted in the imprisonment and execution of thousands of citizens over the course of Franc’s rule. However, economic policy changed substantially over the years that Franco remained in power 11939-75)12.
During the asses, the most extreme interventionist policies (protectionist measures) were relaxed while the Spanish economy benefited from a cooperation agreement with the US governmental. The authorities presented this set of reforms as a package, the Liberalizing and Stabilization Plan in 1959. The plan opened the Nay to a new institutional design that incite free-market allocation of resources and allowed Spain to accelerate its growth and catch up with the rest of Western Europe .
These reforming programs included measures that favored free-trade, macroeconomic policies to reduce inflation and the size of the fiscal imbalances, and other reforms to protect private property rights. The 1959 Plan marked the beginning of a new era in the Spanish economy as the country entered a process of economic liberalizing and international market integration. Firstly, inflation was reduced, public spending was controlled, and the issue of new public debt limited.