Spain’s troubles mean European recession July 22, 2008Posted by Al in : educational,politics , trackback
Europe is struggling financially at the moment, with large drops in industrial and manufacturing production for the last 6 months for the majority of member states. Even Germany’s rock solid economy is suffering, with a predicted 1.5% contraction before the end of the year. However, it is Spain that has a lot of people worried, because Spain’s economy has been built on construction for the last few years, with nearly 10% of its entire GDP coming from house building. As mortgages become scarcer and people start to bail out of new purchases then this industry is predicted to crash, leaving Spain’s economy to collapse in its wake.
Unemployment in Spain is approaching 10%, with further increases expected as building firms start to go under. Even worse, there is now a glut of housing with 700,000 new homes currently on the market without any buyers. This will lead to tumbling property prices and is already starting to expand into other markets such as car sales. This collapsing economy of one of the main European member states may well have a knock on effect with Spain’s neighbours, such as France and Italy, who are already struggling with difficulties of their own. Whether the European Union can fend off large scale recession remains to be seen, but Spain’s example doesn’t bode well.