Effects of the European economic crisis in Spain on Foreign policy, Politics and Social relations

A serious weakness has been exposed in the performance of the economy in Spain because of the global economic and financial crisis. The creation of the euro resulted in a strong growth of the economy since 1995-2007, which was compelled by the credit-driven local demand. The accumulation of high external and domestic imbalances has been triggered by the very low real interest rates. Moreover, the international financial crisis experienced in 2008 has increased unemployment rate and a double-dip recession that is continuing to triple as time goes on (Powel et al., 59). The youth unemployment is rising rapidly for those aged between 16 to 24, and in turn, this is increasing the profits of the unemployment benefit that explains the increase in Spain’s public debt (Powel et al., 62). My aim in this paper entails discussing the European economic crisis in Spain while focusing on three objectives, which are, first, the social and political consequences of the crisis. Second, what impacts the crisis has on foreign policy. Third, the relationship between Spain and other countries in regards to the current economic crisis.

Background Information

Spain’s growth is being weighed heavily with the unwinding economic imbalance. The outside financing essentials are increasing the weaknesses of the economy, and this means that a shift of the present account surpluses ought to be done to minimize the external debt to a balanced level. High universal deficits are rapidly increasing the public debt due to the crisis with the combination of the shifting of a much less growth in the pattern of the taxes. (Royo).

Large sectors such as the banking are highly affected, and a continuous negative economy is experienced as the credit flows rests constrained. Moreover, unhealthy exposure to the construction sector and real estate have eroded both the consumer and investor confidence. Thus, because of the linkage between the sovereign and banking sector increasing, an adverse feedback loop has developed (Carbó-Valverde et al., 79).

Social and Political consequences of the crisis

The economic crisis has largely affected the monarchy in Spain. It has resulted to unparalleled stages of private and public denigration of the royal family and the life that they live. An example to this is the accident suffered by King Juan Carlos in April 2012 at a hunting trip in Botswana, which resulted, to an operation in the hip. Many of the citizens were against the high holidays while still, the fellow citizens were facing issues of unemployment and the consequences of the recession.

Moreover, Politicians have played a major role in the current crisis faced by the country. This is because of their ideology on their mismanagement of crisis where they do not properly regulate the financial sector of the country adequately and undermining the reliability of yet highly important sectors such as Commercial Banks, for politicizing the control and the management of these banks. These institutions were traditionally respected by the citizens, and for the booming in the housing sector that is now partly attributed to the practices of corruption by the local government (Royo).

The central difficulties faced by the government in solving the public spending is another reason that some of the citizens are blaming on the booming of the unexpected significances of political devolution. The existence of the seventeen communities is one of the luxuries that Spain can no longer be able to support. This hence becomes commonplace to blame the legislators at the municipal and regional levels for consuming beyond what they can afford with the unremitting efforts only to carry out favors with voters. This criticism automatically feeds on the corruption scandal that involves the regional and local politicians that have dominated in the contribution of the economic crisis.

Impacts that the crisis has on foreign policy

There are three ways that the current economic crisis has on the Spanish foreign policy. First, the credibility and international reputation of Spain is being undermined. In the 20th century, Spain was regarded to as a country with great success stories, but now due to the crisis, it is termed to as a ‘sick man of Europe.’ Moreover, acknowledging the assistance from large countries to aid in the tackling of the economic difficulties will be perceived that the leaders are not in the position to govern the country more effectively (Carballo-Cruz et al., 309).

Second, overcoming both the crisis and the consequences is one of the most priorities of the government. The policy initiatives that are developed and do not bear any direct link to the economic crisis will not obtain any consideration from the top administrative in the coming years.

Lastly, the deductions on the budget that have been implemented by the government to curb and lessen the shortfall and public expenses are limiting and affecting the funding that was set aside for the wide collection of instruments and policies intended to help in the enhancement of Spain’s influence and presence abroad (Carballo-Cruz et. al., 309).

Impacts that the crisis has on the relationship between Spain and other countries including Europe and the United States

The transatlantic relationship is negatively affected by the economic crisis in Spain in various ways. First, in the U.S., a fresh doubt on the long-term viability is being raised where Europe is the main investment and trade partner, and thus this creates fear that a disaster cantered, narrow-minded Europe will be less important and dependable as an ally when it comes to the topic of solving worldwide issues. Equally, the insight that the crunch is for the Europe to resolve and that the choices for the U.S. participation to solve the crisis are limited may make the Europeans query the whole weight of the transatlantic relationship (Burwell).

Second, the country’s economic difficulties have influenced the country negatively where they are more vulnerable when it comes to its relations with other governments. An example to this can be the decision of the Argentine government to unilaterally expropriate the oil company that belongs to Spain because it was not achieving the contractual obligation that was set. Also, the Spanish government was unable to avoid the overthrow or to make the government in Argentine pay for the behavior. This shows the country’s lack of international power and growing vulnerability.

Lastly, the leadership of Spain in the EU concerning Latin America has been weakened due to the tendency of Spain to politicize its relationships with some governments regions along biased lines, mostly in Venezuela and Cuba.


The United States has contributed to the reductions of the effects of the crisis by increasing the private sector investment. This has resulted in the increase of FDI in Spain, which rose by 18.4% where 6.4% of it came from the U.S. Moreover, the Spanish government has implemented new laws to fight any internet piracy. This will contribute to the implementation of this goal and hence lead to a bilateral contract on the double taxation.

Also, the US and EU have unlocked the transatlantic economic activity to mitigate the effects of the crisis. A close collaboration on the coordination of regulations, undertakings behind the barriers of the border and enforcement of the intellectual property rights have significantly affected the transatlantic trade. This has also helped in addressing the shared market access issues in third countries such as Latin America and in strengthening the norms worldwide and global rules.


There are some actions that Spain ought to take to reduce the impacts of the economic crisis mainly in the transatlantic community. This include; development of a working strategy that will make companies to take the advantages brought by Hispanic market fully. An approximate of 50 million people in the US speak Spanish in areas such as telecoms, publishing, and media.

Spain can also limit the adverse impacts of the disaster on the transatlantic community by embracing a bold and high profile initiatives that will help in inspiring the transatlantic relationship by providing a new chronicle for post-crisis situation. The transatlantic free-trade agreement will help in the achievement of these initiatives and would help in the contribution of the economic regaining in both the US, EU and Spain.

This new agreement proposed should contain three main interconnected goals. First, to open-up or recommence the transatlantic market. Second, the repositioning of the transatlantic partnership to better involve other third countries on matters concerning essential guidelines of the transnational economic direction. Lastly, extension of the rule-based structure to new areas and members.

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