Saturday, March 15, 2014
Senate (Omni Shoreham)
Most of the analyses on the economic crisis in Spain have concerned themselves with phenomena like mismanaged banks, excessive debts, the bubble in the real estate sector, or the loss of competitiveness. Others have sought to explain the crisis as a byproduct of European Monetary Union (EMU) integration because it eliminated exchange rate risks in a way in which investors in the southern countries accepted lower yields. This led to massive capital inflows toward the periphery that fueled booms that turned into bubbles causing massive current account deficits. When the global financial crisis hit these countries, the bubble burst and investors refused to continue financing these deficits, which exposed these uncompetitive economies. This paper moves beyond those explanations and argues that a fundamental reason for the crisis is rooted in the process of institutional degeneration that preceded the crisis.
