Failed remedies and implications of the economic crisis in Spain

Abstract

In this paper we critically re-examine the current debate about the crisis and exit strategies. The starting point is the need to re-focus on the structural problems facing the Spanish economy paying particular attention to low productivity level and the reasons for it. Moreover, an overemphasis on the exogenous and financial character of the crisis has shifted attention awayfrom the demand side. The paper then moves to the analysis of strategies and policies implemented and their potential impact on the future development of the economy, paying particular attention to institutional change. Compared to other European countries under similar conditions, social dialogue has remained alive as a mechanism aimed at legitimizing a top-down adjustment strategy that is perceived as undemocratic by a large sector of the citizenry. The internal devaluation strategy imposed as a consequence of membership to the Euro will have a long-lasting impact upon the institutional pillars and dominant forms of coordination in the economy, not to mention the consequences for democratic governance both at domestic and EU levels