That’s not true at all. Spain had been steadily reducing her budget deficit and in 2005 actually produced a surplus. Same in 2006 and 2007 which was the result of a solid underlying economy.
However once the global banking crisis hit in 2007/08 which left Spain’s banks exposed to huge losses, the budget deficit went from a surplus to a large deficit. Spain’s GDP was growing at a healthy 4% a year up to 2007 and now it’s plummeted into negative growth.
There is still nothing fundamentally wrong with Spain’s economy. If you strip out the property market, which is where Spain’s biggest problems come from, essentially because they’re run by greedy and corrupt officials, their exports are still strong – despite the strength of the Euro.
Spain received a considerable boost when it joined the Euro because in the run-up to joining the Euro Spain reduced interest rates and upon joining the Euro the low Euro interest rates fueled an economic, consumption and credit boom so it is not surprising that at first sight Spain appeared to be doing very well soon after joining the Euro but the boom and euphoria got completely out of control and Spain started to view itself as a first world country with all the investments made in high speed railways and infrastructure investments like motorways paid for by the EU but this simply obscured the fact that Spain is politically and structurally a completely backward country which doesn’t even have a decent postal service and is bedeviled by a cripplingly slow and corrupt judiciary and corrupt provincial governance.
The strong value of the Euro is damaging Spain’s ability to export to countries outside of the Euro zone and it would be much better for Spain if it dropped out of the Euro and adopted the Peseta because the resulting devaluation of the Peseta will be a tremendous boost to Spanish exports and Spain’s tourist industry.
I am absolutely certain that house prices in Spain will fall a further 75% from today’s prices over the next four years and I am also absolutely certain that unemployment in Spain will reach 50% from the current 26% in four years time.