The Spanish Economy

The Spanish Economy is multifaceted and has gone through many highs and lows. There have been many significant events throughout its history, however, in this article we will be focusing on the brief history of the economy, the 2008 economic crash and how the current pandemic has affected the economy as well as the impacts of Covid-19 on women. As all of our knowledge is from research and class, therefore, we will not be able to cover all aspects of the topic or go into great detail. However, we will try to provide you with the best overview of the economy as we can.

There have been several economic blows through modern Spanish history. A crucial one was in 1898 when Spain lost its overseas colonies of Cuba, Puerto Rico, and the Philippines, leading to a sharp fall in the trade of goods and services. Furthermore, during the Franco era (1939-75), in 1959, there was a ‘Stabilisation Plan’ in which the economy was liberalised, and foreign investment was allowed, which opened Spain to international markets after a period of autarky that almost led to economic collapse. This along with other policies led to the economic growth rate exceeding 7% between 1962 and 1966. In 1975, King Juan Carlos assumed power after the death of Francisco Franco allowing for a new period of democracy within Spain.

The first great modern crash that we will talk about is the 2008 economic crash. The most famous aspect of the global disaster was the situation in the United States of America. Leading up to 2008 banks in the US, banks were lending money for mortgages to so-called ‘NINJAs’, borrowers who failed to declare their income, jobs or assets. Therefore, the acronym stands for ‘No Income, No Jobs or Assets’. These borrowers could not pay back the money they were lent and therefore had their houses taken by the bank. Around one-third of borrowers were so-called ‘NINJA’ borrowers, and as their houses were claimed by the bank, neighbourhoods began to empty. This caused even good borrowers to give their houses to the bank and live elsewhere, which led to the value of houses to decrease rapidly. The situation was made worse by banks who sold ‘mortgage-backed securities’ to financial investors. These securities contained both good and bad borrowers from whom the investors would get a percentage of the money paid back, so when borrowers could not pay back and the banks had houses without value, the investors did not receive the money they were due. The situation in the US affected the whole world.

In Spain there was a similar situation. However, this economic bubble was not exactly the same. The Spanish Government Budget remained in surplus despite a strong increase in expenditure. This allowed banks to violate the International Accounting Standards Board by relaxing supervision on the financial sector. The banks could hide losses which mislead investors, leading to a strong economic downturn. This resulted in severe unemployment and bankruptcies in major companies. Unemployment reached 18.5% in July 2008. This was also known as the Spanish Great Recession.

After years of recession following the 2008 financial crisis, the Spanish Economy had just started to recover over the last few years. However, the Coronavirus has had an extremely detrimental impact on it, and the development and duration remain uncertain.

The International Monetary Fund (IMF) has predicted that the Spanish economy will shrink by 12.8% this year due to all the public health and economic factors involved in the pandemic.

The tourism and hospitality sector had been one of the major contributors to the growth and employment in Spain and now due to current circumstances, these industries have plummeted. The unemployment rate in Spain in 2020 and 2021 is expected to be around 16.8%, which is a shocking statistic for what is said to be an advanced and emerging economy. The worst affected sector was services, with 816,900 fewer people in work, as well as industry which is now down to 127,000.

In recent public announcements, Pablo Hernández de Cos (the Bank of Spain Governor) and the European Banking Authority President José Manuel Campa stated that “what began as a health crisis is now an economic crisis that could extend to the financial sector and put more than one bank up under distress.”

The pandemic is having a severe impact on women, which puts years of progress of gender equality at risk. Women are particularly vulnerable to the economic instability of the pandemic. Approximately 29% of women in Spain worked in jobs that were affected the most by the necessary measures such as lockdowns, compared to 21% of men. At the start of lockdown, women in Spain worked at least two hours more of unpaid housework every day in comparison to men. The key priorities in order to achieve greater gender equality are increasing family and childcare support and promoting flexible working arrangements, which are unable to occur under these unparalleled times.

Key Vocabulary

Autarky – self-sufficiency

Financial Investor – an investor who makes investment decisions based on the prospect of financial gain.

Economic bubble – a period of economic prosperity in which the rice of assets far higher than can be explained.

Government budget surplus – when government income exceeds expenditure.

Here are a few economy-related terms in Spanish for you to expand your language skills:

1. El jefe - boss

2. El paro - unemployment

3. La empresa - company

4. La reunión - meeting

5. Los negocios - business deals

6. El contrato laboral - work contract