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Financial Crisis in Spain

Would you like to know the causes and the consequences of the economic crisis in Spain 2008-2013 that Francisco Carballo-Cruz has written? Just read this post in which you can get information about it.

A financial crisis is the depressive phase of the evolution of an economic recession that comes with a loss of credibility, strength and power of a financial system, capitalism system, bankruptcy of the establish order, loss of value of financial elements and consequences very difficult to control.

This crisis is the worst since the Great Depression in the 1930s. This crisis called as well, as Great Recession, began in 2008 and continues nowadays. It has been prolonged for more than 5 years and not only affects in the economic area but also the politic and social area.  This crisis has affected many countries of the world and specially, the developed countries. The crisis began as an extension of the international financial crisis, but the internal imbalances accumulated in the pre-crisis period aggravated the situation.

In Spain, this crisis meant the end of the estate agency bubble, the banking crisis and finally the unemployment. Furthermore, many measures were imposed in order to try to improve the situation but these measures brought problems like for example the strikes (15 M) due to the cutbacks. Experts still think that the end of this crisis is very far yet.

After 4 years of crisis, the Spanish economy is getting better with little recoveries. However, to overcome this situation it is necessary to break the vicious circle of low economic growth, high unemployment and elevated debt.

The Spanish government made 2 main reforms:

1. The Banking Sector’s Reform: The start of the crisis showed that it was very important and neccesary to make a deep reform due to structural reasons and intrinsic characteristics of the Spanish economic growth during the period before the crisis but this reform did not take place until 2010. However, in 2009 a new instituion with a key in the process of bank restructuring was created, it was called Fund for Orderly Bank Restructuring whose role was to strength the bank solvency.

2. The Labour Market Reform: In order to solve some of the structural problems of the work market, they undertook a reform of this market in 2010. The main objectives of this reform were: the reduction of the duality, the wage rigidity and the promotion of internal flexibility within firms. The main characteristic are: 1. Promotion of the indefinity hiring 2. The extension of the workers that can be hired 3. Introduction of new limits on temporary hiring and on contracts’ duration 4. Extensions of the groups of workers that can benefit from traineeships and apprenticeships.

CAUSES OF THE CRISIS

–       We have committed the same errors as in the crisis of 1929

–       Many banks granted loans unconsciously and this money was never returned, what caused the bankruptcy of some banks

–       During the estate agent bubble, the 17 regions of the country received revenues in this sector and that caused the market collapse starting with a recession

–       Banks needed money so they tried to rescue them.

–       Our actual government president, Mariano Rajoy tried to establish some methods so as not to be rescue by other countries so he made some strong and cruel cutbacks like for example increasing the consumption tax.

CONSECUENCES

–          Protests and several strikes due to the cutbacks: General strike in Spain 2010, 29th Mars 2012 and the European in 2012 and the protests in 2011.

–          Department of Defense suffered cutbacks and they had to take some measures: Scrapping aircraft carriers, troop reduction of 75,000 people, about 5,000, reduction of 73 order vehicles infantry fighting Pizarro, reduction in helicopters and reduction of the use of ships, aircraft and armored vehicles to save fuel and maintenance.

FAMOUS SENTENCES

  • José Luis Rodríguez Zapatero (Sep. 11, 2007). During a speech in the Deputies Congress: “Haciendo uso de un símil futbolístico, se podría decir que la economía española ha entrado en esta legislatura en la Champions League de la economía mundial”
  • José Luis Rodríguez Zapatero (Abr. 26, 2008). During the Federal Committee’s inaugural speech of PSOE: “La peor previsión de paro siempre será mejor que la mejor que tuvo el PP”.
  • José Luis Rodríguez Zapatero (Agosto, 2007). During an interview with El País: “España está totalmente a salvo de la crisis financiera”.
  • José Luis Rodríguez Zapatero (Febrero, 2008). During an interview in Punto Radio: “Los parados no son parados, son personas que se han apuntado al paro”. Febrero de 2008. Entrevista en Punto Radio.
  • José Luis Rodríguez Zapatero (Mayo 2011). During a meeting in Santander: “Miente como un bellaco quien diga que hemos hecho recortes”.

EXPERTS OPINIONS ABOUT THE CRISIS.

–          Joseph Stiglitz (ex-economist, Nobel Prize and BM’s boss): “We are in the midst of one of the worst crises of the century, and until we hit bottom we cannot stay afloat”

–          Muhammad Yunus (Peace Nobel Prize in 2006): “This crisis today tells us that our system [microcredit] is the one that is working”

–          Geroge Soros (Soros investment fund ):“Instead of just buying toxic debt, most of the funds [federal] should be used to recapitalize the banking system”

Emilio Estevez: “Where people are now in terms of the economic crisis, they’re looking at what we think is the bottom, and I think that’s when people look to film and to spirituality”

– Carmen Busquets: “Investors are impatient and they are also desperate for the “next big thing”, and they are not paying attention to the fact that the “next big thing” can be an economic crisis that they have created by being very irresponsible with their power”

REFERENCES: (all information taken the 20th November 2013)

–  Francisco Carballo-Cruz: “Causes and consequences of the economic crisis in Spain 2008-2013” (9 Sept 2013). PANOECONOMICUS, 2011: http://www.doiserbia.nb.rs/img/doi/1452-595X/2011/1452-595X1103309C.pdf

–  Brainy quote: “Economic crisis quotes”(Copyright© 2001-2013):  http://www.brainyquote.com/quotes/keywords/economic_crisis.html

–  2008–13 Spanish financial crisis. (2013, November 21). In Wikipedia, The Free Encyclopedia. Retrieved 08:48, December 4, 2013, from http://en.wikipedia.org/w/index.php?title=2008%E2%80%9313_Spanish_financial_crisis&oldid=582733648

–  Crisis económica española de 2008-2013. (2013, 3 de diciembre). Wikipedia, La enciclopedia libre. Fecha de consulta: 08:49, diciembre 4, 2013 desde http://es.wikipedia.org/w/index.php?title=Crisis_econ%C3%B3mica_espa%C3%B1ola_de_2008-2013&oldid=71144412.

–  Lanacion.com (El Mundo): “¿Qué opinan los expertos sobre las consecuencias de la crisis en España?” (Oct 2, 2008): http://www.lanacion.com.ar/1055473-que-opinan-los-expertos-sobre-las-consecuencias-de-la-crisis

–  El observador: “5 causas de la crisis económica” (Jul 5, 2012) Last modification Nov 20, 2013: http://www.elobservador.com.uy/noticia/228865/las-cinco-causas-de-la-crisis-espanola/

Author: Aroa Sobrino Esteban

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