11. Spain in the Euro Area (1999–2017)

Spain joined with enthusiasm and internal consensus the EMU. The economic cycle of adopting the euro opened the way to unbridled indebtedness. A long credit, real estate and immigration boom, followed. Spanish big business went multinational for first time in modern history. Nevertheless, exceptional macroeconomic imbalances appeared that made Spain highly vulnerable. When the bursting of the bubble came, a major banking and building crisis and mass unemployment followed. As the euro was under pressure, the era of zero risk premiums came to an end and an enormous fiscal crisis went out of control. Many policy reforms had to be designed in a rush to rescue banks, devalue labour and protect pensions. The European Central Bank policy change was decisive to stop the road to monetary disaster and to restart growth.