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Lesson 3: The 2008 financial crisis

The EU economic policy reaction

Monday 18 September 2023, by Carlos San Juan

This lesson tries to recover the views of the crisis from Spanish research services and the European Commission, including the following presentation and reports: The reports of the Bank of Spain at the beginning of the crisis chapters first Overview of the Financial Crisis and second The Crisis and the Potential Growth of the Spanish Economy and the last update form the Bank of Spain Annual Report. Finally, some comparisons of the policy response of the crisis are reported.

Compulsory reading:

Lesson 3. The business cycle in Spain. The 2008 financial crisis (Slides downloadable below)

Panic-driven Austerity in the Eurozone and its Implications.

PAUL DE GRAUWE AND YUEMEI JI, Social Europe Journal 25/02/2013

Complementary readings:


For an explanation of the origins of the Great Financial Recession, see the 2009 reports’ chapters 1 and 2:

Chapter 1 OVERVIEW OF THE FINANCIAL CRISIS Bank of Spain Annual Report 2009


The world economy has experienced the most severe shock since the Second World War. The ensuing economic policy responses have been on an unprecedented scale. Their reaction has averted a catastrophic spiral and activated the start of the recovery. However, the legacy of the crisis will have far-reaching and multi-faceted repercussions. In Spain, the traumatic impact of this episode has compounded the difficulties stemming from the imbalances that had built up during the previous expansion and from some of the inefficiencies still weighing on the economy. Accordingly, exiting the crisis will be a complex task posing specific challenges. This chapter addresses the main difficulties Spain faces in emerging from the crisis and the economic policy requirements this imposes. The following chapter complements this chapter with a more selective theme-based approach and delves into the medium-term problems related to potential growth and supply-side policies. See the pdf downloadable below.


Bank of Spain Annual Report 2009


As described in Chapter 1, in the crisis besetting the Spanish economy, external factors and other domestic factors have been linked to the build-up of significant imbalances. These took the form of high private debt, losses in competitiveness and an excessive concentration of resources in the real estate sector, and they were not only due to the factors that drove spending exuberance but were also related to the persistence of a series of structural obstacles that limit the economy’s growth potential. In turn, the crisis, given its dimension and nature, is exerting effects that go beyond the conjuncture impact on activity and employment and bear down negatively on the level of potential output and its growth in the medium and long term.

The rapid application of expansionary monetary and fiscal policies on the demand side to uphold the level of activity has managed to check in the short term the strong recessionary impulses and to circumvent any dangerous feedback loops. See the pdf downloadable below.

See also for the first reactions in the EU versus the US as the policy response to the financial 2008 crisis

To compare with the COVID-19 EU and ECB policy reactions:

Coronavirus response: Banking Package to facilitate bank lending supporting households and businesses in the EU

Finally, to compare with the current situation after the COVID-19 pandemic and the geopolitical instability in Europe, see:

“Considerations around the role of economic policies in a more geopolitical world: an EU perspective.” Javier J. Pérez. Director, International Economics and Euro Area Department Banco de España. September 25, 2023, see the presentation at the UC3M

For an updated analysis of the current situation of the economy, see the Bank of Spain’s Last publication of the Annual Report

Attached documents

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