Spain had a comparatively low debt level among advanced economies prior to the crisis. [1 13] Its public debt relative to GDP in 2010 was only 60%, more than 20 points less than Germany, France or the US, and more than 60 points less than Italy, Ireland or Greece. [114][11 5]Debt was largely avoided by the ballooning tax revenue from the housing bubble, which helped accommodate a decade of increased government spending without debt accumulation. 1 6] When the bubble burst, Spain spent large amounts of money on bank bailouts. In May 2012, Bankia received a 19 billion euro 7] on top of the previous 4. 5 billion euros to prop up Bankia. 118] Questionable accounting methods disguised bank losses. [119] During September additional capital to offset losses from real estate investments.

[120] The bank bailouts and the economic downturn Increased the country’s deficit and debt levels and led to a substantial downgrading of its credit rating.To build up trust in the financial markets, the government began to Introduce austerity measures and It amended the Spanish Constitution in 2011 to require a balanced budget at both the national and regional level by 2020. The amendment states that public debt can not exceed 60% of GDP, though exceptions would be made in case of a natural atastrophe, economic recession or other As one of the largest eurozone economies (larger than Greece, Portugal and Ireland combined[123]) the condition of Spain’s economy is of particular concern to international observers. der pressure from the United States, the IMF, other European countries and the European Commission[1 the Spanish governments eventually succeeded In trimming the deficit from 11. 2% of GDP In 2009 to an expected 5. 4% in 2012.

[123] Nevertheless, in June 2012, Spain became a prime concern for the Euro-zone[126J when Interest on Spain’s 10 year bonds reached the % level and it faced difficulty in accessing bond markets. This led the Eurogroup on 9 June 201 2 to grant Spain a financial support package of up to 100 billion.The funds will not go directly to Spanish banks, but be transferred to a government- owned Spanish fund responsible to conduct the needed bank recapitalisations (FROB), and thus it will be counted for as additional sovereign debt in Spain’s national An economic forecast In June 201 2 highlighted the need for the arranged bank recapitalisation support package, as the outlook promised a negative growth rate of 1 . 7%, unemployment rising to 25%, and a ontinued declining trend for housing prices.

In September 2012 the ECB removed some of the pressure from Spain on financial markets, when it announced Its “unlimited bond-buying plan”, to be Initiated If Spain would sign a new sovereign bailout package with AS of October 2012, the Troika (EC, ECB and IMF) is Indeed In negotiations with Spain to establish an economic recovery program, which is required if the country should request a bailout package for the sovereign state from ESM. Reportedly Spain, in addition to the‚¬100bn “bank recapitalisation” package arranged for in June 2012,[133] now also seeks sovereign financial support rom a “Precautionary Conditioned Credit Line” (PCCL) package.If Spain receives established credit line, Spain would immediately qualify to receive “free” additional financial support from ECB, in the form of some unlimited yield-lowering bond purchases According to recent statements by the Prime Minister, the country as of December 2012 still consider perhaps to request a PCCL sovereign bailout package in 2013, but only if developments at financial markets will promise Spain a significant financial advantage of doing so.As of 7 December 2012, the yield of 10-year government bonds had declined to According to the latest debt ustainability analysis published by the European Commission in October 2012, the fiscal outlook for Spain, if assuming the country will stick to the fiscal consolidation path and targets outlined by the country’s current EDP programme, will result in a debt-to-GDP ratio reaching its maximum at 110% in 2018 – followed by a declining trend in subsequent years. In regards of thestructural deficit the same outlook has promised, that it will gradually decline to comply with the maximum 0.

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5 % level required by the Fiscal Compact in 2022/2027. [138]Though Spain is suffering with 27 ercent unemployment and an economy set to shrink by 1. 4 percent in 2013, Mariano RaJoy’s conservative government has pledged to speed up reforms, according to the Financial Times special report on the future of the European Union.

86] “Madrid is reviewing its labor market and pension reforms and has promised by the end of this year to liberalize its heavily regulated professions. “[86] But Spain is benefiting from improved labor cost competitiveness. [86]