A Decade of Lost Growth: Economic Policy in Spain through the Great Recession

Abstract

In 2008 the Spanish economy sank into recession, returning to growth in 2014. This paper explores the policies that were pursued by two successive governments to escape the recession. It comments on one of the most contentious strategies, that of austerity, and underlines the constraints on policy imposed by membership of the European Monetary Union (EMU) and a decentralised state. The Great Recession and accompanying austerity policy were associated with huge social and economic costs. Policy targets on the debt and deficit were not met. This experience, together with the broader sluggish growth in Europe and the political consequences associated with austerity, pointed to the need for a new policy mix.