Don Quixote, the knight of sad countenance, was already occupied by the question of what is reality and what is dream in our world. Together with his squire, Sancho Panza, he courageously fought against windmills, which he thought were enchanted giants. Or he battled mighty armies that turned out to be flocks of sheep whirling up dust. Cervantes' poor hero believes the most unbelievable things – and takes a beating for it again and again. Today, the Spaniards have had something of a reality check – and yet they still seem to believe the most incredible things every now and then: for example, ... that the euro works for them.
After the Second World War and until 1975 the country was under the military dictatorship of the Franco regime. After Franco's death, King Juan Carlos transformed Spain into a democratic monarchy. Since 1986, Spain has been a member of the European Economic Community and subsequently of the EU. Until the financial crisis of 2008, Spain had a solid national budget, and its national debt was even lower than that of Germany. The central problem, however, was the Spanish financial and banking sector. Because of the low interest rates following the introduction of the euro, banks granted loans on a massive scale, especially in the construction sector. When Spanish property prices collapsed during the crisis due to a lack of demand, the banks experienced massive difficulties. The property and banking crisis caused government debt to explode and drove youth unemployment to record highs. The then Prime Minister, Rajoy, immediately took measures to reduce the government deficit and save the banking sector. To recapitalise it, Spain negotiated a credit line of 100 billion euros with the EU, of which only 82 billion euros were needed.
However, persistently high unemployment and low economic growth in the years following the financial crisis increased social pressure and dissatisfaction with the established party system. Then came the strengthening of the Catalan independence movement. In the 2015 elections, two newly founded parties entered the political arena, the populist Podemos with over 20 percent and the likewise new Centre Party Cuidadanos with almost 14 percent. Prime Minister Rajoy remained in office with a minority government until 2018. Since 2014, the Spanish economy has been growing again and the unemployment rate is falling. After various government scandals and pressure from the Catalan independence movement and its referendum in 2017, the population lost its confidence in Rajoy. Since the summer of 2018, the socialist Pedro Sánchez has led the country, also in a minority government. The upcoming elections in early summer are expected to further strengthen the Ciudadanos Centre Party. It is currently unclear whether Spain will be able to form a stable government after the elections.
Spain has overcome the crisis and the prospects for the Spanish economy are positive. One problem, however, remains that of high unemployment.migration from Spain is continuing, especially among young people, with more than 1.5 million young people having left the country since the beginning of the crisis. Another unsolved problem is the smouldering crisis over Catalonia's independence. Overall, however, Spain's situation is far more stable than that of other southern European EU Member States.
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