Lessons from the Economic Crisis in Spain
The cajas, the construction boom and the political economy of the bailout.
Summary
The reference has not verified this book in detail; the summary states only what the title, author and subject establish.
Sebastian Royo, a political scientist at Suffolk University who writes on Spanish and southern European political economy, examines Spain's transition from one of the euro area's strongest performers before 2008 to one of its worst-hit economies afterwards.
The account covers the housing and construction boom financed by cheap credit after euro entry, the role of the cajas, the regional savings banks governed by political appointees, in funding property development, the loss of competitiveness through unit labour costs rising faster than in Germany, the collapse in employment after 2008 with unemployment above twenty-five per cent, and the banking restructuring including the Bankia failure and the European assistance programme of 2012.
The reference has not verified this book's contents in detail, and this entry reflects its established scope and the documented Spanish record rather than a close reading. Readers seeking a fuller treatment should note that the recovery from 2014 onward, and the labour market reforms that preceded it, fall outside the book's period.
Key takeaways 6
- Euro entry lowered Spanish interest rates dramatically and directed the resulting credit into property rather than into tradable industry.
- The cajas were governed by regional political appointees and lent to property developers connected to those politics.
- Spain ran budget surpluses before 2008, which shows that fiscal rules would not have prevented the crisis.
- Unit labour costs rose faster in Spain than in Germany throughout the 2000s, and a shared currency removed devaluation as a correction.
- Adjustment through internal devaluation fell on employment rather than on wages, producing unemployment above a quarter of the workforce.
- Banking supervision failed because the supervisor treated the cajas as regional political institutions rather than as banks.
Who should read it
Analysts of the euro area crisis who want the Spanish case, with the caveat that this entry describes scope rather than a verified reading.
Where it sits in the reference 2
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