Chapter 13: Those were the days, my friend: The public sector and the economic crisis in Spain
After more than a decade leading employment creation in the European Union (EU), in 2008 Spain was hit by the international financial crisis, which quickly turned into a severe economic recession. The advent of the international turbulence added to the bursting of the housing bubble and the end of easy and cheap credit in an economy with a large current account deficit. The consequences have been devastating: GDP experienced a fall of 4 per cent from 2008 to 2010, employment declined by more than 10 per cent and, in the context of a growing labour force, unemployment climbed from barely 8 per cent in 2007 to 22 per cent by the end of 2011. After some initial countercyclical measures in line with Keynesian prescriptions, in the middle of 2010 the Spanish government changed the course of its economic policy and embarked on a process of fiscal consolidation, a move partly associated with pressures from the European Central Bank and the ‘international financial markets’.
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