To the likes of many others, Spain has always been recognized as one of the richest countries in

the heart of Europe. Having rich histories since the time of Roman Empire, Spain had made fascinating
approach in revolutionising its economy. Spain returned to democracy in the form of constitutional
monarchy after the death of its ruler, General Franco in 1975 who was also the right wing dictator of
Spain. With Spain returning to democracy, it started to engage more with the European Integration. The
1982 election saw a series of reforms ranging from implementing social security system, partially
legalizing abortion, enforcing on civil liberties and enacting free education for those of 16 or younger
under the rule of newly appointed prime minister, Felipe Gonzalez when his Socialist Party won the
election. Under the influence of Felipe, Spain was successfully lobbied into joining the European
Economic Community (EEC) which is now, the European Union (EU) in 1986. Even though the miracle
years (1959-1974) experienced the revolutionary improvements on social services and infrastructure, a
series of problems ranging from limited education, exclusion of women in the workforce, unevenly
distribution of health care services and country’s poor infrastructure made Spain far left behind to become
as advanced as most of the Western Europe.

The involvement of Spain in the European Economic Community (EEC) was then thought to be a
restart on modernizing process as well as strengthening the population’s average purchasing power. EEC
was renamed as EU in 1992, where Spain turned to be the driving force in the European community ever
since, with its credit-driven domestic demand boom following the introduction of Euro (EU’s single
currency), which also puts Spain to be the leading proponent of the single currency even before it was put
into circulation in 2002. The first two decades saw both economic growth and development strengthened,
where interest rates was decreased and real estate bubble (housing bubble) accelerated unprecedentedly.
Spain was on song when the construction sector alone contributed 16 percent of Spain’s GDP and 12
percent of Spanish employment. Immigration into Spain was increased abundantly, where Spain had
prominently generated more jobs opportunities than all the Eurozone combined. All these contribution
revolutionized Spain from a poor country, to one of the richest countries in the Europe. However, as the
world still perceived Spain as being one of the richest countries in the Europe, nobody would have
forecasted that Spain today is undergoing on a financial and economic crisis. This essay will be looking
into different aspects from political to social to address on the economic crisis problem in Spain is caused.

Spain suffers a blow on financial crisis from year 2008 to present, Spain enters into the European
sovereign debt crisis at a later stage. In June 2012, Spain has finally applied for a €100 billion bail out
from the European Stability Mechanism (ESM) as the country was impotent in bailing out its financial
sector. The reason that have induced on this problem is mainly driven by the enormous collapse of
housing bubble as the previously prime economic performance was sustained and developed by the
construction sector. This downturn was implicitly caused by both the economic and political aspects
whereby the Spain government encouraged on the leniency on the critical development by allowing banks
to ignore the International Accounting Standards Board (IASB) standards to achieve tax revenues from
the buoyant property investment and construction sectors on maintaining government’s revenue surplus
despite the overwhelm of expenditure. Hence, leading to various issues from concealing losses and
earnings volatility as well as misleading investors, analysts and regulators to arise. More than 28% from
most of the houses constructed from year 2001 to 2007 are left unattended as of late 2008 even though
houses owned by the Spanish is more than 80%. The concept of having own home in was proposed in the
60’s and 70’s by the government and was later on implanted on the Spanish’s mentality. Besides, tax
regulation whereby 15% of mortgage payments are made deductible from personal income taxes as well
as non-inflation-adjusted rent controls on old apartments with low eviction, which prompts on ownership
rather than renting. Due to the outbreak on housing bubble, Spanish housing prices are now fluctuating at
a speedy pace, dropping 15.2% over the year. In July 2012, housing prices was estimated to fluctuate at
another 25%. Mortgage holders now will have to continue on paying for their debt even after a
foreclosure. The inefficiency of government in this political aspect have greatly contributed the economic
outburst.

The collapse of housing bubble (Baker, 2010) have ignited on an employment crisis where the
unemployment rate hit on 17.4% at the end of March 2009 as most jobs are either directly or indirectly
associated to the construction sector are almost immediately vanished due to the crisis. Spain’s
unemployment rate have had a sharp increased from 2 to 6 million. This contributed to a heaps on social
impact as Spain has a two-tiered workforce where privileged labor gets wage increases whereas
unprivileged labor will be eliminated (Bentolila, Cahuc and Dolado, 2015). Therefore, temporary workers
in general are dismissed during the recession, thus expanding unemployment. Besides, who would have
thought that 55% of Spanish youngsters, many of them are higher education degree holders are now
unemployed due to the housing bubble outburst and inadequate economic regulations? The increase in
unemployment now led to a staggering increase of unemployment benefit payments, which then
contributed to the estimated rise of public debt from 69 percent of GDP in 20122 to 85% by the end of
year 2012. Due to the (Baker, 2010) denied in their home country. Based on OECD research in 2011, it is
verified that the total number of people who are leaving the country be it Spanish citizens or non-citizens
had overtaken the number of the large-scale immigrants in 2008. The over-pricing house boom does not
only lead to an increase in unemployment, it also left many of the Spanish citizens in vain of being
homeless or surging out on poverty. In another case where the Spanish government have readily
increasing the price of public transport such as train tickets which are up nearly to 2% and subway fares
raises to an enormous 5%, however reducing the toll prices to 30% and 10% respectively for highways
from Castelldefels to Sitges and Montgat to Mataro (Vivas, 2014). The introduction of lower cost on
private transport whereas a higher cost of public transport have explicitly affect the average expenses of
the current Spanish citizens. In addition, the threatened increase in electricity bills by an enormous figure
of 11% have left the citizens in awe. Spain is now ranked the third country with the most expensive
electricity in Europe (Vivas, 2014). However, this matter was brought down by Mariano Rajoy’s Popular
Party (PP) government when it is decided that they should intervene in this matter. To Spanish citizens,
when government have decided to intervene, matters could be solved, yet there are little willingness for
the government to do so as they would rather confront the interests of multinationals instead of shielding
the benefits of the citizens in their home country (Vivas, 2014).

Last but not least, one of the other transition points that have contributed largely to the crisis is
the separatist movement where there is an increase in support for independence in Catalonia, Barcelona.
Catalonia are suffering on high levels of unemployment as with the rest of Spain, with as many as 22% of
the economically active population, yet still lower than Spain’s entire national unemployment rate. A vast
separatist parties are produced in the 2015 regional election (Alexander, 2014). This movement ignited
political conflict between the Partido Popular (PP) of Mariano Rajoy, the Spanish prime minister and the
president of Catalonia, Artur Mas. The Esquerra Republicana de Catalunya (ERC) proposed that spark
civil disobedience, an illegal referendum and a unilateral declaration of independence. Upon the proposal,
Artur Mas threatened to lead on the withdrawal on support towards government, leading to an impossible
pass of the 2015 budget. Besides, as the Catalan region has long been the centre of industrialization of
Spain in goods trading alike textiles, finance, services and hi-tech companies, Catalan stands as one of the
richest lands of Spain, representing 18.8 pc of Spanish GDP as compared to 17.6pc from Madrid
(Alexander, 2014). The segregation would therefore drains Spain’s almost on 20% of its economic output,
which will induced on various ways in carving up the sovereign’s indebted 836 billion euros. The
separatist movement hence would not only disrupt the country’s safeguards, it will also influenced to a
phenomenal change within the society, and country as a whole in all economic, social and political
aspects.

In short, in certain situations, a problem alike the housing bubble and the separatist movement
can be simultaneously economic, political and social. As what was discussed in the essay, poor
governance (political), unexpected financial crisis (economical) as well as devastating unemployment rate
(social) could all make a huge contribution in the problem itself.

[1504 words]
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