An insight into the property crisis in Spain, told by a man whose job it is to repossess houses.

What went wrong with Spain?

Spain's story illustrates the fact that the eurozone's problems run far deeper than the issue of excessive borrowing by ill-disciplined governments.

Greece, Portugal and Italy all had way too much debt.

But the Spanish government's borrowing was under control - that is, it ran a balanced budget on average - every year until the eve of the 2008 financial crisis.

And as Spain's economy grew rapidly before 2008, its debt-to-GDP ratio was falling. Germany's, by contrast, continued to rise.

When Spain joined the euro the Spanish government resisted the lure of cheap loans, but most ordinary Spaniards and its banks did not.

The country experienced a long boom, underpinned by a housing bubble, as Spanish households took on bigger and bigger mortgages.

House prices rose 44% from 2004 to 2008, at the tail end of a housing boom, according to ministry of housing data. Since the bubble burst, they have fallen by 25%.

The economy, which grew 3.7% per year on average from 1999 to 2007, has shrunk at an annual rate of 1% since then.

So, although the Spanish government still had relatively low debts, it is now having to borrow like crazy to deal with the effects of the property collapse, the recession and the worst unemployment rate in the eurozone.


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