Spain in the monetary union – development factors, causes of economic problems and adjustment processes

Abstract

On the basis of the analysis conducted the author states that the long -term economic growth in Spain was a result of many factors, the most important being: 1) an increase in investments, 2) the rising number of population in productive age and growing employment. Further proliferation of economic activity came after the introduction of the euro as a result of the credit boom and high investment and consumption demand. The greatest risks connected with adopting the common currency by the catching -up countries are: 1) a surge in domestic demand, 2) increased prices and wages, 3) the real
effective exchange rate appreciation, 4) reduced export competitiveness, 5) imports and the current account deficit on the rise. Spain is the classic case of a country with stimulated domestic demand, developing inflation and growing unit labour costs as well as lowered competitiveness. However, the crisis has contributed to the deepening of macroeconomic imbalances.