The global financial crisis that began in 2008 had a significant impact on the economic performances of different countries within the world. The global financial crisis, which was also known as the great recession made Spain be a late participant in the sovereign debt crisis within the European region when the given country was not in a position to sustain the financial aspects of the given region. Although the global financial crisis resulted from deregulation of the financial industry in the United States, the effects of the given crisis spread to different parts of the world thus resulting in financial instabilities within different countries in the world. The permission offered to the government to engage in hedge funding, and trading with the derivatives was the significant aspect that contributed to the onset of the financial crisis since the banks sought more mortgages in a bid to enhance more profitability within a given economy. Spain was one of the countries that experienced a significant impact of the global financial crisis resulting in both minor and significant effects in the economic development and financial stability of the nation.
The first significant impact of the global financial crisis in Spain was the substantial economic downturn, which was attributed to negative economic growth and development within the given country. The global financial crisis affected the abilities of the banks to engage in profitable transactions thus leading to incurring of massive debts that were not manageable thus leading to the economic downturn. According to Foo and Witkowska (2017, p. 110), the global financial crisis resulted in inflation of prices of primary commodities in the country thus influencing the affordability of the commodities in a given market. Based on the crisis in the banks, the issue led to an increase in the liquidity crisis thus turning away investors based on the fact that products within the market faced low demand considering their prices. The liquidity crisis in Spain was factored by the fact that businesses had to make their debt payments but did not have proper means that would assist in funding the given businesses to enhance economic development within the given region.
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The second impact of the global financial crisis in Spain was increased cases of unemployment within the region thus leading to an increase in the level of poverty within the society. According to Domínguez‐Mujica, Guerra‐Talavera, and Parreño‐Castellano (2014, p. 120), the economic development of a given country is determined by the nature of employment industry, which helps in ensuring that majority of the individuals in the society can sustain their day to day needs to be based on employment opportunities presented. The severe increase in unemployment rates in Spain contributed to an increase in the poverty levels where consumers in a given market lacked their bargaining power thus leading in a situation that affected the financial stability of the given economy. The third significant impact of the global financial crisis in Spain was the increased in the level of bankruptcy within different companies operating within the given region. Lahey and de Villota (2013, p. 99)argue that financial crisis in a given region does not only affect the consumers and him banks but have a significant impact on the companies and businesses operating within the region. Majority of the companies in Spain faced bankruptcy as they had engaged in high debts that could not be recovered quickly based on the fact that the economic situation did not favor decisive business operations.
Considering that the economy of Spain is one of the largest in Europe with a nominal GDP and the high purchasing power parity, the impact of the global financial crisis did not lead to a complete downfall of the economy but influenced the gradual growth and development leading to an economic recession (Lahey and de Villota, 2013, p. 101). To overcome the recession period and maintain the economic position in the world, the country engaged in the establishment of economic policies that were appropriate based on the nature of impact that the country had experienced. According to Pareja-Eastaway, M., and Sánchez-Martínez (2017, p. 280), proper selection of an economic policy may help towards the achievement of positive economic growth in a given country thus the financial stabilities in major stakeholders within an economy. The intention of the economic policies was to ensure a reverse of the trade deficit that was experienced during the entire recession period based on the global financial crisis that impacted the operations of the major economies across the globe. Perles-Ribes, Ramón-Rodríguez, Rubia, and Moreno-Izquierdo (2017, p. 101) maintain that majority of the countries that did not have the appropriate economic policies to fight and overcome recession and the financial crisis continue to struggle with issues relating to the development of the economy. The first major policy that was implemented by Spain in response to the financial crisis involved real estate recovery to ensure that given industry is in a position to provide funding to the government and overcome the vast debts that are incurred from foreign economies.
According to Perles-Ribes, Ramón-Rodríguez, Sevilla-Jiménez, and Moreno-Izquierdo (2016, p. 360), the Spanish real estate experienced a new boom to help in attracting more investors in the given industry and focus on ensuring that the industry is in a position to provide revenue to the government. The given strategy focused on ensuring a reduction of the European Union funds that were previously used in financing the economy of Spain resulting in the enormous debts that could not be quickly paid off during the recession period in the country. The second economic policy implemented within the state to counter the effects of a recession in the country involved the development of flexible labor markets. Considering that the recession period greatly influenced the employment industry resulting to an increase in unemployment rates in the country, it was necessary for the country to focus on enhancing the labor market to overcome the increasing rate of poverty in the country. Lastly, the country engaged in proper taxation and budgeting tools that helped in sustaining the economy levels of the given country without the fear of getting into high debts. Additionally, the country engaged in research and innovations that helped in predicting the probability of a country getting into a financial crisis to overcome the negative impact associated with the crisis (Domínguez‐Mujica, Guerra‐Talavera, and Parreño‐Castellano, 2014, p. 122).
The policies implemented by Spain in response to the global financial crisis differed with other countries based on the nature of the impact of the global recession. According to Royo (2013, p. 640), a majority of the countries that experienced global recession focused on other policies based on the impact of the recession on the given economies. One of the major determinants of the nature of economic policy to be implemented is the level of economic growth and the sustainability level in the given economy. Given that Spain had experienced a positive economic growth in the past, the economic policies implemented in response to the given recession period capitalized on overcoming the negative impact associated with the slow growth rate and financial instability in the country. Other countries focused on implementing policies that would help in uplifting the country's economy based on an utterly economic downturn that resulted in a complete failure of the economy. Majority of the countries focused on policies that focused on enhancing the liquidity issues in the economy to fight the inflation and deflation rates affecting the economy. Yaya, O.S., Gil-Alana, L.A., and Olubusoye (2017, p.35) argue that the response policies within the given situation focused on overcoming the financial instabilities and capitalize on enhancing positive economic developments.
The ability to overcome the impact of the global recession helped in determining the level of success of the given economic policies implemented by a given country. According to Foo and Witkowska (2017, p. 115), the Spanish GDP grew by 3.2% in 2015, which was a significant indicator that the policies implemented in response to the global financial crisis were useful in overcoming the recession impact. Considering that the Spanish economy was among the largest in the European region, the impact of the recession was greatly felt thus the need to implement appropriate and relevant policies that may help in countering the effects of a recession. The second indicator that the economic policies implemented in Spain were successful included the long-term sustainability of the public finances. The policies to overcome recession and the financial crisis allowed the country to engage in enhancing the sustainability of the finances in the country to ensure that the country is in a position to foresee the financial crisis and deploy strategic measures to overcome the negative issues that may be associated with the global recession.
References
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