2007

SPAINISH FINANCIAL CRISIS

2008
2009

JOB OPENINGS

INTRODUCTION

Spain: A Flourishing Economy

The Maastricht Treaty budget deficits as large as 6.5% of GDP Treaty called for Spain to reduce its long-term interest rates The construction market flourished population grew from 40 million to 45 million during 2000-2008 From 1999 until 2007 the Spanish economy created more than one-third of all employment generated in the Eurozone Prices of houses increased dramatically

Crisis in Spain
The demand for housing had slowed in 2007 By this time, construction accounted for 13 percent of total employment in Spain Unemployment jumped up 10 percent

As unemployment skyrocketed, so did unemployment benefits

Reduction in the Spanish governments tax revenue

Deficit of almost 4 percent of GDP

The Spanish Banking System

Spanish regional savings and loan banks Around 24,000 branches of cajas usually regional politicians control the cajas

Nondisclosure prevented from understanding cajas financial situations

The cajas continued to lend heavily

The Spanish Banking System

By 2009, cajas owned 56 percent of the countrys mortgages, and loan payments Housing market crashed in 2009 The cajas were paralyzed by a lack of income

Loan exposure was around 180.8 billion in mid-2010

Government bailouts kept the banks from going bankrupt

Where is Spain Now?

U.S. loans are non-recourse Spanish loans are typically recourse loans Feb 2011, unemployment hovers around 20 % of the labor force (4.3 Million) Estimated that 70% of the jobs lost after 2008 related to the construction sector Spains public debt as of 2010 was estimated to be 63.4 percent of GDP There are 1.5 million vacant homes in Spain

What Went Wrong?

Eurozone countries had the same monetary policy but different fiscal policies. Members were able to maintain their own spending and taxing policies Inability to devalue the currency

Integrating Europe, it has become a major hindrance in the Spanish crisis

Lack of regulation of Spanish lending institutions and the real estate market

Cajas made too many loans to individuals and corporations

IMPACT OF CRISIS ON SPAIN

GDP

GOVERNMENT DEBT

UNEMPLOYMENT RATE

INTEREST RATE

STOCK MARKET

SPAINS SURVIVAL IS CRUCIAL TO THE EUROZONE

SERVES AS A MODEL FOR WEAKER COUNTRIES

SPAIN IS ALSO REPRESENTATIVE OF A LARGER ENTITY

Spains Financial Future

Spain Leaves the Eurozone

Spain Toughs It Out

Second Euro EMU BailoutOr Not

What Is Happening Now?

New law requiring that cajas reinforce their capital by Sept 2011 Risk-weighted assets Created the Fund for Orderly Bank Restructuring (FROB) in Jun 2009

Implemented austerity measures

EU created the European Financial Stability Facility (EFSF) in 2010

European Commission has also adopted a legislative package

Conclusion