Spain slipped into recession at the end of 2008. In the first quarter of 2010, GDP has increased at 0.1% and this is the first rise for this indicator, after seven consecutive quarters of contraction.
Most of the fourth-quarter contraction is attributable to a 2.4 % fall in domestic investment and consumption, the Bank of Spain conclude that the drop in spending by households had an even bigger negative impact than the end of Spain’s extended housing and construction boom.
Basically the roots of the Spanish “problem” are undoubtedly many and complex, but there is one underlying ingredient in the present dynamic which more or less governs everything else: the dependence on external financing due to the ongoing current account deficit.
Since the onset of the economic crisis, Spain, fourth largest economy of the euro zone, has seen its official unemployment rate double to almost 20% of the workforce, going from 1.76 million unemployed in the second quarter 2007 to 4.6 million in the first quarter of 2010.
However, Spain can be considered a successful model of labor integration, which has incorporated a large number of immigrants. In 10 years, these came to account for 10 % of the total population. Temporary jobs rapidly grew according to this demand, but the recession destroyed most of them, leaving thousands of people without a job, what led to a big increase in the number of people getting unemployment benefits, and inflating public spending dramatically.
Read more: Recession & unemployment Spain