Despite Major Causes of Poverty in Spain, the Nation is on the Rise

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MADRID — Europe may finally see the light at the end of their vast debt crisis tunnel, but the repercussions are still devastating for the continent’s most vulnerable. Those in Europe’s southern countries are suffering more than others.

Despite their recent economic upturn, nearly one in three Spaniards live in poverty. Even more devastating is the country’s child poverty rate where, in some provinces such as Andalusia in the south, the child poverty rate stands as high as 44 percent.

Within the last decade, Spain’s peak unemployment rate was 26 percent. For youths, unemployment reaches 39 percent — a high statistic perhaps tied to the 25 percent school dropout rate. Spain’s school dropout rate is — by a significant margin — the highest in the EU.

As a modern, developed nation, the causes of poverty in Spain are primarily economic. It was the perfect storm of the global financial crisis and the collapse of Spain’s real estate bubble that brought the country’s economy tumbling down a decade ago. Only now is it beginning to recover.

Eurozone Crisis

The Eurozone crisis had similar disastrous effects of poverty and unemployment in countries such as Greece, Italy and Portugal; however, unlike those countries, Spain was not in debt and had a thriving economy beforehand. Up until 2007, Spain had a balanced budget and an economy that annually grew an average 3.7 percent from 1999. The swift economic collapse was not only surprising and devastating, but also demonstrative of Spain’s deeper political and financial vulnerabilities.

When Spain adopted the euro in 2002, their economy took off and maintained growth for years under the foundation of a massive housing bubble. The bad property assets the economy relied upon were financed through cheap, abundant loans to builders and homeowners. When the property bubble collapsed, the value of the assets also collapsed and those who borrowed struggled to repay their loans.

Restructuring

Learning from the past, Spain has begin to restructure its banking sector. Yet another vulnerability that needs to be addressed and one of the major causes of poverty in Spain lies with the regional governments. The regional governments are very independent and run most of their own services, including education and healthcare.

When Spain’s economy boomed, the regions ambitiously spent a great deal of money on large projects and infrastructure. When the economy took a downturn, many projects were left incomplete or unused and the regional governments were forced to turn to Madrid for financial aid. As Madrid worked to bail them out, they asked the regions to make significant budget cuts, but local politicians were unwilling to take such unpopular action in times of trouble.

The Euro

Another factor that prolonged Spain’s agony were the rules that govern the euro. The Eurozone’s leaders forced the country to cut/limit spending in an effort to stop the crisis in its tracks. As a result, more people were driven into poverty and still to this day struggle to escape it.

The causes of poverty in Spain have largely been addressed, but the aftermath of the Eurozone crisis and the real estate collapse are still felt by millions. During the crisis, Spain cut child-related spending by at least 15 percent — a cut that is most likely responsible for why the nation’s child poverty is still so high today. Furthermore, while jobs have returned to the country and the economy is growing, wages still remain low.

Fortunately, Spain is on the rise. Money is gradually flowing back into the economy through exports and taxes, and overall the cost of living in the country has gone down. Spain, and the rest of Europe, has certainly learned from its past and now focuses on restoring and progressing for a better future.

Catherine Fredette

Photo: Flickr

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About Author

Catherine Fredette

Catherine writes for The Borgen Project from Kansas City. Her academic interests include International Relations and History, and she goes to the University in Scotland.

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