Spanish Crisis

Index• Definition of economic crisis.• Origins of international crisis. Context.

• Causes of the crisis in Spain.• The beginning of the end. Starting crisis.

• The real estate sector.• The financial sector.• The employment sector.• Difference between the actual crisis and another

crisis.• Until when?.• Conclusion.

Definition of economic crisis

• A formal definition:

A situation in which the economy of a country experiences a sudden downturn brought on by a financial. An economy facing an economic crisis will most likely experience a falling €, a drying up of liquidity and rising/falling prices due to inflation/deflation. An economic crisis can take the form of a recession or a depression.

• Another definition:

A long-term economic state characterized by unemployment and low prices and low levels of trade and investment.

So, What is the meaning of global economic crisis?

Global economic crisis refers to an economic scenario where the economies of countries all over the world have taken a beating.

Origins of international crisis. Context

• 1998 - The president of government then called Jose maria Aznar created the law of the Land. This law proposed to privatize the Land with the aim of increasing the developable land. This became the market of Land in a rental market for the entrepreneur, so the invest increased, a lot of building were built, due to there were more offers, the price of the building decreasing.

• 2002 - the rhythm of the construction was increased. The president of government, Aznar, changed the labour law. the tactic of this reform was similar to. Decreased of labour rights to do more attractive to hiring. So, the entrepreneurs invested more in hiring and so, they got to decreased of unemployment.

• Until here,all sound ok, really?

The beginning of the end

• 2005 - The price of building was duplicated. Spain built per year, more building than Germany, France and Italy together. However the salary was keeping same. So, the bank appeared, the demands to get credits to mortgage was lowering. Getting a mortgage was very easy. where is the trick? Easy... Stretching the mortgage deadline until 40 years... if any day you can´t pay the mortgage, DON'T WORRY, how the price of building always increase, you can sell the house and recovering the invest and you get profits.

• 2007 - the debt of public administration, family and companies was huge as well as the debt from the banks to another financial institutions.

• 2008 - the price of dwelling was so expensive that some people had mortgages during 40 years to live in a too small house. There was to stop it, but nobody knows how do it.

• When, appeared the explosion of the credit crisis from USA, which quickly infected for around the world, banks stopped to lend money, investors stopped to buy debt and panic broke out. How nobody was lending money, the consumption fell down, the economy was shortened, companies started to get fired in mass, and families without job were evicted from their houses.

The real estate sector.

• In late 2007 the news from the spanish real estate sector begin to describe symptoms that could indicate a probable crisis.

• In the first quarter 2008, the main companies of construction saw to reduce their sales a 72%, passing from 500 millions € to 20 millions € of revenue.

• The sector of sales of land decreased their sales almost 100% during the first quarter of 2008.

Comparison between the price of dwelling in Spain and EE.UU.

The financial sector.

• We can see between 2003 y 2007, Spain is the country more indebted from the graphic.

• We can see how Spain have increased their indebted both in the public sector as much as in the private sector:

The employment sector.

• Spain finished 2008 with a record of 3,1 millions unemployed, the number higher from 1996.

• In december, unemployment increased in almost 140.000 respect to november, an increase of 4.7%

• In march of 2014 Spain had the percent higher from eurozone. It was almost 26%.

• Youth unemployment also reached a new record in 2014, with a 57.7%.

• The currently datais 24.5%.

Difference between the actual crisis and another crisis.

In comparison with the crisis lived in the 90's, we can analyze and getting some conclusions. Could the current crisis have the similar duration to the 90's crisis? There are elements similar to, and others to different from. See them.• Firstly, Euro like only coin, Spain haven't

margin to use the devaluations from the ''peseta'' to accelerate the adjustment, as in the 90s.

• Secondly, both in the 90's as in the slowdown that followed the collapse of the stock-market from the ''puntocom'' in the early of the decade, the authority could use the financial politic to encourage to the consumers to buy and companies to invest.

Until when?.

• The spanish crisis will be to extend, at least, five years and then, it depends on several factors, internal, as well as, external.

• The problem consists that Spain has lived the higher real estate bubble from their history, at the same time that the higher international credit bubble has exploited.

• If the rhythm of sales is keeping in 300.000 units per year, the market of housing in Spain would start to normalize in 5 years, as long as, it wouldn't build any dwelling more.

Conclusion.

• I wonder:Who's losing and who's winning with this crisis?