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The Changing Growth Pattern in the Spanish Economy Driven by the Eurosystem: from Poor Supervision to Conditionality on the Provision of Central Bank Reserves

ELADIO FEBRERO


The Spanish economy has experienced a deep change in its growth pattern over the last 20 years, shifting from a debt-led model driven by the real estate sector, from the introduction of the euro to 2007, to a “seemingly” export-led model, from 2014 to 2019. Although this shift was partly due to the unsustainability of the former growth pattern in the long run, it was strongly affected firstly by the poor supervision of banks by the Banco de España, allowing for a huge private indebtedness and real estate bubble, and later by the conditionality imposed by the ECB on governments in troubled economies in exchange for granting access to reserves to banks in their respective jurisdictions. This paper contains three conclusions. Firstly, the Banco de España should explain the degree of complacence with which it viewed the situation until the real estate bubble burst. Secondly, the ECB went beyond its mandate with its conditionality. And thirdly, despite its strong pressure for the adoption of fiscal consolidation and wage devaluation, Spain has not become a true export-led economy.

Volume :- No.14 (2020)

Issue No :- 2 (2020)

Pages :- 179-201

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