Spain Economy in Trouble

Spain has the 8^th largest economies in the world, and fifth in Europe- based on its GDP. It is regarded to have the best quality of living standard in Europe, and the 15^th most developed countries in the world - even surpassing Germany, Italy and UK.

Before the economic debacle of 2008, Spain's economy created about half of all the jobs in European Union. During the real estate boom or bubble, Spain benefited with 16 % of its GDP was derived from it. And also, it has only 7 % unemployment in the final year of the real estate boom. There were even talks that it will overtake Germany in 2011.

When the real estate bubble bust, level of Spanish household's debt considerably rose, with the average debt tripled. - mainly due to their boom time real estate mortgages that often times exceeded the value of the property mortgaged.

The real estate bubble started in 1997, fueled by low interest. and surge of immigration. In 2004, there were already signs of problems- like high inflation and a budget deficit of 10% of the GDP.

In July 2009 IMF, estimate that Spain's GDP contracted by 4%., with European Union average at 4.5%. It is also predicted that by 2010, it's GDP contraction will be at .8% or will emerge from recession.

The banking system of Spain, due to its conservative policies, is shielding the country from further economic woes. It could be credited by demanding sufficient protections and collaterals for loans they gave.

But despite of these precautions by the banks, still it is predicted that unemployment will reach the 20% level, and is expected to increase farther. But the financial system of Spain is trying to withstand the impending financial woes. Spanish economy, after a deep dive in 2008, and throughout 2009, it is predicted to stabilize in 2010.

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