MADRID – Spain is moving closer to the financial tipping-point that could force it to ask for a bailout as the country's borrowing costs neared unsustainable levels Wednesday. The country's economic fortunes have gone from boom to bust over the past decade. Here are the main developments:
BIRTH OF THE EURO
— Spain is one of the 12 countries that launched single European currency in 2002. The euro is now shared by 17 countries. Spain's membership of this powerful bloc endeared it to investors who offered it low-interest loans.
— Cheap money triggers a real estate boom as construction companies and families borrow heavily. This fuels an unprecedented economic expansion known as the "Spanish fiesta". The country's then-muscular economy, the fourth-largest in the eurozone, rides out the 2008 financial crisis as its main lenders — and savings banks called cajas — are widely viewed by investors as sound.
FROM BOOM TO BUST
— Unemployment starts ticking higher. The jobless rate, which stood at 8.3 percent in 2007, jumps to 18 percent in 2009. It is now almost 25 percent. Property prices begin to decline, and the real estate boom eventually bursts, as demand plummets.
CAUGHT UP IN EUROZONE'S DEBT CRISIS
— As the eurozone's debt crisis worsens with problems in Greece, Ireland and Portugal, so Spain's problems become more acute. By 2009, the financial sector is sitting on €445 billion ($553.49 billion) worth of credit linked to the construction sector where values have plunged. Regional governments also turn out to be deep in debt.
— In 2010, center-left Socialist Prime Minister Jose Luis Zapatero introduces controversial hikes in the retirement age, to 67, and in sales taxes to get a handle on the size of government debt and appease markets. Zapatero's measures fail to halt the country's slide into recession and he has to call early elections in 2011.
CHANGE AT THE TOP
— The conservative Popular Party, led by Mariano Rajoy, takes office in December 2011. Rajoy moves quickly on reforms and austerity measures, triggering massive demonstrations by 'indignados' worried about their future. Many protesters are young people — the jobless rate for those aged between 16 and 24 is 52 percent.
DRAGGED ALONG BY THE TIDE
— Rajoy has to nationalize eight lenders facing bankruptcy as Spain falls into a double-dip recession. But he can't hold back the tide as markets fret over the financial sector's €180 billion in toxic real estate assets and the financial health of the wider eurozone.