Spain experienced impressive growth in recent years though they also significantly expanded the use of credit. Real estate was booming and was one of the hottest markets in Europe as many bought vacation homes or condos. Compounding the local credit problem was the large number of foreign buyers, British in particular. The British pound was much stronger than the euro but in the last 6 months that has changed, bringing it on par with the euro. In addition, the credit loving Brits also began struggling with their own credit problems at home and the first thing to go was the second home.
Globalization can offer plenty of benefits but it does not come without risks. This current recession is a tangled mess. Reuters:
Spain's economy shrank 1.0 percent during the fourth quarter and entered its first recession since 1993, setting the tone for an expected slew of bleak European growth data.
Spain was the first large euro zone economy to publish gross domestic product for the last three months of 2008 and its quarter-on-quarter contraction was slightly less than a Reuters forecast of 1.1 percent, according to the flash estimate released on Thursday by the National Statistics Institute.
It was the steepest decline since the first quarter of 1993 and followed a 0.3 percent contraction in the third quarter, putting Spain into recession alongside Germany, Italy and Britain.
Spanish year-on-year growth shrank 0.7 percent, compared with a forecast 0.8 percent decrease, marking the worst result since the second quarter of 1993.
Spain's economy grew just 1.2 percent in 2008, the weakest annual growth since its last annual recession in 1993, and bang in line with the government's 1.2 percent forecast.
Analysts are expecting even steeper quarterly contractions from Germany, Italy and France when they report GDP on Friday, ahead of wider euro zone data.
