Abstract
Certainly, the crisis in Spain has had a very obvious financial dimension. Scholars from different currents emphasize that banks have been protagonists of the housing boom, the interest rates were very low during the boom, the credit increased exponentially and there has been a problem of private over-indebtedness before the crisis—and of public debt afterward. All of this being true, however, the author carries out a critical analysis of these proposals that explain the crisis from finances. In the chapter, he analyzes the financial dynamics based on profitability and the place that Spain occupies in the Eurozone. According to the theoretical framework, it is not finances that originate the crisis. Reversing causality, the author argues that it is first necessary to ask for the reasons that explain the increase of the debt. And in a complementary way, the functionality of finance during the crisis itself and in the European context is evaluated.
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Notes
- 1.
Other post-Keynesian authors, such as Ferreiro et al. (2016), address the relationship between financialization and income distribution in Spain, but point out that they cannot provide a conclusive causal relationship.
- 2.
It is at least curious—and illustrative—that these authors make reference to the State when it comes to irresponsible indebtedness, as during the housing boom debt has been massively carried out by the private sector, as will be seen later.
- 3.
For these authors, there are two imbalances in the same level, private debt and the deficit of the current account balance, with the same origin, the construction boom. Although there is a second factor in the external element: the loss of competitiveness.
- 4.
The reason is that “an analysis based in net flows may not inform the accumulation of external debt because outflows and inflows cancel each other out”. As they explain, “cross-border gross financial flows were mostly unrelated to trade.” Furthermore, financial vulnerabilities are usually linked to outstanding gross external debt which, in turn, is related to gross capital flows.
- 5.
The amount of non-performing loans relative to total loans was below 1% in this period. In these years, Spain had high coverage ratios, around 50%, even higher than 200% if counter-cyclical provisions are included, even though it is true that they were decreasing over the years.
- 6.
The Bank of Spain itself points out that “yields on ten-year Spanish bonds stood at around 4% a year in the period, which was much higher than the cost of borrowing from the ECB” (BoS 2017: 87).
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Mateo Tomé, J.P. (2019). Financialization and Crisis: From Low Interest Rates to a Credit Boom and Over-indebtedness. In: The Theory of Crisis and the Great Recession in Spain . Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-27084-1_10
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