Spain's Economy
The Housing Bubble and Bust
How cheap euro credit fuelled a massive construction boom in Spain until 2007, and how the bust caused a banking crisis and mass unemployment.
Spain had one of the biggest housing bubbles in history.
The boom
- Low euro interest rates fuelled credit.
- Spain was building a huge share of all new homes in Europe at the peak.
- Construction employed a large share of workers.
The bust
- From 2008, prices fell and building collapsed.
- Construction workers lost jobs.
Cajas
Regional savings banks (cajas) had lent heavily; many failed. Bankia needed a big rescue in 2012.
EU bailout
Spain received up to €100 billion in EU loans for its banks in 2012.
Ghost towns
Unfinished developments like Seseña became symbols of the bust.
The ghost town
In Seseña near Madrid, thousands of flats stood empty for years after the bust.
Thinking Spain's crisis was caused by government debt
It began with private housing debt.
Key takeaways
- Cheap euro credit fuelled a housing boom.
- The bust began in 2008.
- Cajas failed; Bankia was rescued.
- Spain got EU bank loans in 2012.
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