Spain and Greece's Financial Troubles In the 2007 Recession Essay

907 Words 4 Pages
In 2007,the world witnessed a recession that wasn't seen since the time of the great depression of the 1930's. Causes like slowing down on manufacturing failed business investments all contributed to the recession. One of the biggest causes for the recession was the housing bubble that burst. For a time countries like the U.S. , France and Great Britain saw a great increase on real estate prices until 2007. Banks were lending people mortgages to purchases new houses without truly checking for credit. Unfortunately many of these people could not re pay their mortgages and many banks lost money and went under as a result. One European country, Spain, went through their recession because of the housing bubble and it being burst. …show more content…
At the peak of Spain's boom, nearly 80% of households were owned rather than rented (Goldman, and Lubin). Much like the U.S. housing bubble, home owners couldn't pay back what they owed to banks. Homeowners weren't the only group of people who couldn't repay banks, real estate companies who borrowed to build houses also couldn't repay banks. At the end of 2007, some Spanish banks went bankrupt because of lending to heavily (Knight). With Real Estate agencies losing money, they couldn't afford to build homes anymore, which creates another problem for the Spanish government. A lot of Spain's jobs depended on building homes. Unemployment rose to above 25%, numbers are worse for Spaniards ages 25 and under and their rates were higher than 50% (Knight). Rises in unemployment created a rise in evictions, with people failing to pay their mortgages Knight(). One year nearly 500 people were evicted each day in Spain. With people unable to pay mortgages and real estate agencies unable to continue to build anymore, some town in Spain look like ghost towns. Towns like Valdeluz which was built for 30,000 people, only 700 people live in the town (Goldman, and Lubin). With unemployment increasing and house prices continuing to fall, ghost town are found throughout Spain. With all those problems, it leads back to one central problem for Spain and the cause for the recession, their banks. Spanish banks were willingly handing out loans during the time of Spain's economic boom.

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