The Global Financial Crisis and its Budget Impacts in OECD Nations Fiscal Responses and Future Challenges
Fiscal Responses and Future Challenges
Edited by John Wanna, Evert A. Lindquist and Jouke de Vries
Chapter 8: Spain facing the global financial crisis: cutting public spending and struggling with structural reforms
The impact of the global financial crisis (GFC) in Spain was far stronger and more prolonged than ever anticipated. The risk of public debt default still imposes immense pressures for fiscal consolidation on the national budget and for the immediate adoption of structural reforms to Spain’s economic, financial and fiscal systems. As with the reaction of most European Union (EU) countries to the crisis, the then Spanish Socialist government first applied an expansive fiscal intervention to avoid financial and economic collapse, and then undertook a series of medium-term fiscal consolidation plans to tackle the quick deterioration of public finances. By 2010 Spain had imposed one of the largest austerity packages in absolute terms of any Organisation for Economic Co-operation and Development (OECD) country. Yet, recovery remained slow and highly uncertain. Since 20 November 2011, the new Popular Party (PP) right-wing government has declared its full commitment to comply with EU fiscal stability targets. And indeed it has started to take further austerity measures and to prepare fiscal legislative reforms as required by the recently amended Article 135 of the Spanish Constitution.
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