One reason is; or was, the house building boom. Spanish banks loaned billions of Euros to developers to build properties for us Brits, Germans, Dutch, Scandinavians and other European nationals to buy, either as an investment or to use as a holiday home. That worked reasonably well when the world and European economies were ticking along, but when the economic crash came, the financial model that the banks loaned money against unscrambled in a very short time.
No one wanted to put their head on the block and buy a property/properties they may not be able to let out, or afford the mortgage repayment if they were made redundant. At the same time, tourism to Spain nose-dived as people saved their money and holidayed at home.
Consequently there are tens of thousands of half finished properties that no one wants, and are slowly going to ruin. The banks foreclosed on the developers, and have assets that are virtually worthless.
Therefore, if the major Spanish banks have these toxic assets that no one wants, they are not lending to small and medium businesses, so the Spanish economy will take years to get back on its feet.
The economy did run in first place on the construction over too many years. None of the partiesw in Spain did listen to the warnings from both World Bank and BBVA (Banco Bilbao).
At the end of the last PP (conservative) government Spain had a surplus. With the chnge to the PSOE (socalist) government started the excess spending in not necessary things, regardless the above warning. The government did not look into something like looking for more stable investments in industry.
Bewsides, eswpecially the saving banks gave housing credits to people which didn′t have a chance to pay the credit back, forgetting about very simple rules like looking into the income, looking for downpayments of minimum 20%. Because of this, the prices of housing exploded, also thanks to foreigners buying property here. Now the banks got all the housing, people could not pay anymore after the worldwide collaps of the money market (Lehman Brothers, Fanny Mae...). I>n the moment they are trying to sell this overstock at discount prices, Look into e.g. www.solvia.es .
In a time where everybody quenstioned the Spanish banking system, the socialist government tried to tell something like "the best banking system and the best solvency of the world". At the end of their government they said that the deficit was 6%, but by re-oing the accounts the new government (conservative) found out that it was about 50% higher, around 9%.
And to save the country from bancrupcy and intervention they had to go to an austerity program, which starts to show the good sides now by a slow groth of the economy.
Remember Margaret Thatcher with her program in th UK!
Spain and Portugal had poor economies prior to acceding the European Union in 1986, since then they have had billions of Euros in grants to improve their infrastructure and economies at the expense of the wealthier member states of the EU such as the UK, France and Germany.
We also have the Newer Eastern European countries who have crap economies and who are basically living off the back of the richer EU countries .
The European union is a scam.
The housing bubble; wasteful projects such as airports and museums that nobody wants or needs, combined with a useless socialist government that did nothing.
Spain also has stupid archaic employment laws and customs that make getting a job complicated and makes it difficult for employers to let people go in hard times. The "convenios", sector-wide labour agreements, insist on annual wage increases even if businesses and even the industry concerned cannot afford them.
Well mainly the housing markets, there used to be a lot of investment money going into that but not so much anymore. Spain also has a 25% unemployment rate.
From my observations and I don't mean to be unkind, it is lack of work ethic. Most people in Spain seem to stop work around lunchtime whereas the Germans and Brits carry on working until 5 or 6 pm and often longer than that. The whole attitude to work is often not good in Spain either, most Germans and British seem to know that good work is essential if you want to be prosperous. I was certainly aware of it and often worked 50-60 hours per week before I retired.
Because our politicians and bankers have turned out to be absolutely corrupt.
What has caused it to be so bad compared to countries like Germany and UK
