DP7909 The Spanish Crisis: Background and Policy Challenges

Author(s): Javier Suarez
Publication Date: July 2010
Keyword(s): economic crisis, Spain, Spanish banks, structural reforms
JEL(s): E66, G20, O52
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7909

This paper reviews the background and key policy challenges of the current situation of the Spanish economy. It describes the strengths and weaknesses of Spain?s recent long growth cycle, the real and financial imbalances accumulated towards its end, and the troubles faced at the current stage. Particular attention is paid to the developments in private and public sector finances and, specifically, to their implications for the banking sector. Attention is also paid to the political-economy background, especially in regards to the undertaking of structural reforms. It is argued that recent external pressure, partly initiated by unjustified catastrophic expectations about Spain, provides an opportunity for accelerating the reforms needed to resume strong growth.