A perfect storm in a sunny economy: a political economy approach to the crisis in Spain

Although Spain's economy was seen as a miracle during the most recent expansive phase (for its labour market outcomes in terms of job growth, among other things), the economy's development during those years suffered from severe problems that deserve attention. This became more relevant in a context like the current one, where there is no consensus around which economic policies might lead the country back onto a stable growth path. Using a systemic approach in which we analyse the growth model, the role of Spain in the European division of labour, the financial sector, the labour market, the public sector, and the distribution of income, we contend that, in contrast with several narratives concerning the crisis in Spain: (i) the 'living-beyond-our-means' discourse is not true; and (ii) certain political and economic aspects, usually missing in those narratives, are essential to understanding the recent evolution of Spain.