The Failure: The Spanish Construction Bubble
A significant reason for the Spanish economic crisis is the failure of the Spanish construction project. In 1990, when the Spanish saw the success of American construction, the Spanish wanted success as well, therefore, they began the construction of towns and large cities. The construction industries, like plumbing, electricity, roads, cement, wood...etc., had so much success during those years that unemployment was low and the economy was good and the Spanish were happy. |
But after the construction of the houses and streets and cities, prices of those homes rose because it worsened economic debts due the fact that people could not afford to buy a house. Many college graduates have returned to the house of their parents and a few of the houses that were built in Spain have been bought. Consequently, banks that invested in new homes lost millions of euros and this situation contributed to the economic crisis in Spain.
Banks also contributed to this problem because they gave too many loans to construction companies for building and also because of the worsening global economy, companies could not afford the loans. The banks in Spain do not have money, the population of Spain does not have money and can not pay for the new houses. Therefore, because the banks have millions of debt, the EU had to rescue Spain in 2012, but this was not an effective rescue and thus, the government continues to rescue the economy as a result increasing debt.
Additionally, when the Spanish realized that the houses would not be purchased, all construction stopped and all construction industries suffered. Because companies do not need more workers, many people have lost their positions and jobs and thus, people have less capacity to buy things. The situation has worsened.
Banks also contributed to this problem because they gave too many loans to construction companies for building and also because of the worsening global economy, companies could not afford the loans. The banks in Spain do not have money, the population of Spain does not have money and can not pay for the new houses. Therefore, because the banks have millions of debt, the EU had to rescue Spain in 2012, but this was not an effective rescue and thus, the government continues to rescue the economy as a result increasing debt.
Additionally, when the Spanish realized that the houses would not be purchased, all construction stopped and all construction industries suffered. Because companies do not need more workers, many people have lost their positions and jobs and thus, people have less capacity to buy things. The situation has worsened.
References:
http://www.youtube.com/watch?v=RKhVQN1awg4
http://www.youtube.com/watch?v=RKhVQN1awg4