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Boom to bust Reconstructing the Spanish economy

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Abstract:

Recession in Spain led to intervention by the government to stimulate the economy, a response that was replicated around the world. But as public finances deteriorated, financial markets and some policy makers demanded credible austerity measures (exit strategies) to reduce growing public sector debts. There was particular external pressure on Spain since any sovereign debt default would have serious repercussions at least throughout the European Union. Thus, from autumn 2009 stimulus measures began to be withdrawn and replaced by austerity ones. In addition, recession highlighted fundamental weaknesses in the Spanish economic model. Part one of this article (Salmon 2010) charted the passage of the Spanish economy into recession through examining key three features that were specific to Spain, the financial system, conditions in the property market, and the exceptional level of unemployment. The second part examines the macroeconomic policy measures taken in Spain and the outlook for a new economic model. It concludes that Spain had little alternative but to severely tighten fiscal policy and that a new economic model will be evolutionary rather than revolutionary.

Keywords: Spanish economy stimulus measures; austerity measures; economic model; exit strategy

Document Type: Research Article

DOI: https://doi.org/10.1386/ijis.23.2.83_1

Affiliations: University of Hertfordshire.

Publication date: 2010-12-01

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  • The International Journal of Iberian Studies (IJIS) is the academic journal for scholars from around the world whose research focuses on contemporary Spain and Portugal from a range of disciplinary perspectives. IJIS is interested in history (20th century onwards), government and politics; foreign policy and international relations.
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