Emilio Morenatti, Associated Press
MADRID — Spain's economic fortunes have gone from boom to deep financial crisis over the past decade. Here are the main developments:
BIRTH OF THE EURO
—Spain is one of 12 countries that joined the single European currency in 1999. Following the euro's launch in 2002, the euro is now shared by 17 countries. Spain's membership in this powerful bloc gave it access to lower interest rate loans than it would have got on its own.
—Cheap money triggered a real estate boom as property developers and families borrowed heavily. This fueled an unprecedented economic expansion, known as the "Spanish fiesta". The country's then-muscular economy, the fourth-largest in the eurozone, rode out the 2008 financial crisis as its main lenders — and savings banks called cajas — were widely viewed by investors as sound.
FROM BOOM TO BUST
—Unemployment started rising. The jobless rate, which stood at 8.3 percent in 2007, jumped to 18 percent in 2009. It is now almost 25 percent. The huge numbers of unsold properties in Spain caused prices to plummet.
CAUGHT UP IN EUROZONE'S DEBT CRISIS
—As the eurozone's debt crisis worsened with problems in Greece, Ireland and Portugal, Spain's problems became more acute. By 2009, the financial sector was sitting on euro 445 billion ($553.49 billion) worth of property-related loans. Regional governments also turned out to be deep in debt as income linked to new construction licenses and taxes dried up.
—In 2010, Socialist Prime Minister Jose Luis Zapatero introduced controversial hikes in the retirement age, from 65 to 67, and in sales taxes to get a handle on the size of government debt and appease markets. Zapatero's measures failed to halt the country's slide into recession and he was forced to call early elections in 2011.
CHANGE AT THE TOP
—The conservative Popular Party, led by Mariano Rajoy, took office in December 2011. Rajoy moved quickly on reforms and austerity measures, triggering massive demonstrations by people worried about their future. Many protesters were young — the jobless rate for those between 16 and 24 has reached 52 percent.
DRAGGED ALONG BY THE TIDE
—Rajoy has had to nationalize eight lenders facing bankruptcy as Spain fell into a double-dip recession. But investors and markets have continued to focus on the financial sector's euro180 billion in toxic real estate assets and the financial health of the wider eurozone. This has sent Spain's borrowing costs on the international debt markets to worryingly high levels.
EATING YOUR WORDS
Rajoy and his team have been adamant that the Spanish banking sector would not need a bailout. On May 28, he said: "There will be no rescue of the Spanish banking sector."