Aug Posted by glhermine. Turnout: PP EPP The roots of this growth — and, subsequently, the collapse and prolonged economic crisis — was a rapid property boom between and , characterized by an exponential increase in housing prices and a booming construction industry. Politicians, banks, the construction industry and Spanish homeowners in general were all complicit in the bubble.
Similar to the subprime mortgage crisis in the United States, Spanish banks — especially the cajas de ahorro savings banks — granted mortgage loans on extremely lax terms.
Some of the regions which became the most heavily indebted were the coastal boom regions of the Valencian Community, Catalonia, the Balearic Islands, Murcia and Andalusia but also interior regions such as Castilla-La Mancha. Pedro Solbes, the Socialist finance minister at the time, repeatedly dismissed all warning signs of the impeding collapse as being extremely exaggerated. However, with GDP growth collapsing to only 0. Between the third quarter of and the first quarter of , for example, the unemployment rate increased dramatically from Several cajas threatened to go under, having invested heavily in the construction industry, and the government intervened to inject liquidity into several of them beginning in In this context, the opposition PP — despite its deadwood leader, Mariano Rajoy, having lost two successive elections in and and the party failing to generate much enthusiasm at all, was the runaway favourite to win.
Regardless of what one might say about this kind of campaigning, the voters trusted the PP on the issues which mattered the economy and jobs , and the PSOE suffered an historic rout. The PP won The PSOE, however, won only The economy plunged back into recession in the second quarter of , and remained mired in recession until the third quarter of On taking power, Mariano Rajoy soon had to deal with the harsh reality of power and the Spanish economy.
Madrid, for now, was committed to reducing its deficit to 4. After the bubble burst, banks acquired properties from developers before the loans which supported them went bad. Foreclosures mounted as recession set in, leaving Spanish banks as the owners of a very large stock of empty homes. In the spring and summer of , Spain faced a banking crisis, which forced the government to take decisive action. Two financial reforms were approved in February and May , both with the aims of cleaning up the banking sector and restructuring the myriad of failing cajas into stronger, larger financial entities.
