ANALYSIS: Is Spain heading for a crisis even worse than the last one?

With house prices only creeping up and unemployment rising, is Spain heading for an economic crisis even worst than the last one? Graham Keeley looks ahead.

ANALYSIS: Is Spain heading for a crisis even worse than the last one?
People line up for food aid in Valencia

Any British readers who are familiar with the Daily Mail will know that one of the pet obsessions of this conservative newspaper is house prices.

The paper is sometimes teased about this but, it has to be said, that they might have a point; the value of bricks and mortar can be one of the key indicators of the health of any economy.

This is why a story about how Spanish property prices caught my eye this week.

Prices grew at their slowest pace since early 2015 in the second quarter in the wake of the coronavirus pandemic, according to data from the National Statistics Institute (INE).

To refresh your memory, five years ago Spain was beginning to emerge from a deep financial recession but people were still not spending that much money on houses.

Step back to the present. The 2.1 percent increase from a year earlier is over one percentage point smaller than in the first quarter and shows a continued deceleration in the country's real estate market.

New properties showed the healthiest rise in value, going up 4.2 percent, while the price of second-hand homes went up 1.8 percent, according to the INE.

Analysts also predicted prices could fall further in the coming months.

“The moderation in prices will continue in 2020 as a consequence of the domestic and international macroeconomic context,” Anais Lopez, a spokeswoman for online property portal Fotocasa told Reuters.

“It's possible the INE will record the first falls in prices in the next months.”

For many foreigners who snapped up a place in the sun to enjoy life in Spain this will come as bad news.

But it is not just the price of houses which have been devastated by COVID-19.


A homeless man begs on the streets of Barcelona. Photo: AFP

Spain has been hit especially hard by the new coronavirus, posting 18.5 percent contraction in its economy between April-June, compared with the previous quarter.

In simple terms, Spain recorded the sharpest drop in its economy among European Union member states.

Of course what matters is what happens next? And how does this grim news relate to us in real terms?

After the summer, companies are back at work but still many may not be able to recover from the damage they suffered during the lockdown.

Gayle Allard, an economist at the IE Business School in Madrid, said she believed because of the way many companies were going out of business, unemployment could rise to 21 percent this year.

Currently, unemployment stands at 15 percent.

The furlough scheme, which has saved many jobs, is likely to continue until Easter next year for key sectors like tourism, which accounts for 12 percent of GDP and 13 percent of all jobs.

Yet it has angered many business owners because the government insists that when workers return to their jobs they cannot be sacked for six months.

One restaurant owner in Barcelona told me after scraping by for six months with barely any income, she cannot afford to pay for a full staff for six months and sadly some will lose their jobs.

Analysts predict that the economies of major European countries are not likely to recover fully until the end of next year.

Spain's government is predicting a short-term bounce back of 6.8 percent growth next year.

Key to this will be whether the minority government can pass the budget for 2021.

Prime Minister Pedro Sanchez (L), with People's Party (PP) leader, Pablo Casado, outside Moncloa. Photo: AFP


Spain's highly polarized politics has meant no real budget has been agreed for four years and the last one did not have to account for a pandemic or a deep recession.

Spanish prime minister Pedro Sánchez is currently trying to sort out the squabbling factions he needs to make up the votes to get the deal done.

While the Socialist prime minister tries to strike a deal with the centrist Ciudadanos, his far-left partners Unidas Podemos or regional parties, the nation waits to see if he can pull it off.

The odds are Sánchez will succeed and this will allow the government to plough public money to continue a furlough scheme into next year for stricken sectors like tourism and bring in tax rises which are inevitable to pay for all of this.

The €140 billion in grants and loans from the European Union is not dependent on the government agreeing a budget but it would help to make Spain look like it can manage the money.

Meanwhile, for many foreigners living in Spain there is one factor perhaps in their favour: many work for foreign companies but happen to be based here.

For some, this involved travelling regularly in normal times; for others it simply means opening up the laptop.

Of course, no-one will escape the economic impact of the pandemic.

However, my point is if, say, they are working for companies whose economies have not been so ravaged by COVID-19 it could give them a better chance of saving their jobs.

Here's hoping anyway.



Graham Keeley is a Spain-based freelance journalist who covered the country for The Times from 2008 to 2019. Follow him on Twitter @grahamkeeley .





Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members


Will Spain have a sixth coronavirus wave?

While Covid infections are rising across Europe, Spain has managed to keep cases and hospitalisations low so far this autumn. But there are already signs things may be changing. 

people walk without masks on ramblas barcelona during covid times
Spain’s epidemiological situation is the most favourable in the EU and a sixth wave but will there be a sixth wave? Photo: Pau Barrena/AFP

Coronavirus cases have been rising quickly across Europe since October but not so in Spain, which has maintained one of the lowest infection, hospitalisation and death rates on the continent. 

According to prestigious medical publication The Lancet, Spain could well be on the verge of reaching herd immunity, a statement the country’s Health Minister tends to agree with.  

READ ALSO: Has Spain almost reached herd immunity?

Add the favourable epidemiological indicators to the almost 80 percent rate of full vaccination of Spain’s entire population and the immunity claim doesn’t seem so far-fetched. 

But if there’s one thing this pandemic has taught governments around the world – or should have – is to not assume Covid-19 can be eradicated after a few encouraging weeks. 

Not that Spain is letting down its guard, the general public continues to take mask wearing in indoor spaces seriously (outdoors as well even though not required in many situations) and there are still some regional restrictions in place. 

READ MORE: What Covid-19 restrictions are in place in Spain’s regions in November?

And yet, Covid infections are on the rise again, although not at the pace seen during previous waves of the virus. 

On Thursday November 4th Spain re-entered the Health Ministry’s “medium risk” category after the national fortnightly infection rate surpassed 50 cases per 100,000 people.

From Friday 5th to Monday 8th, it climbed five more points up to 58 cases per 100,000 inhabitants. 

It’s the biggest rise since last July but this shouldn’t be cause for alarm, especially as hospitalizations, ICU admissions and deaths all remain low and steady.

A closer look at the stats shows that 1.52 percent of hospital beds across the country are currently occupied by Covid patients, 4.41 percent in the case of ICU beds. 

Daily Covid deaths in October were under 20 a day, the lowest rate since August 2020. 

With all this in mind, is a sixth wave of the coronavirus in Spain at all likely?

According to a study by the Institute of Health Metrics and Evaluation (IHME) at the University of Washington, Spain will have a sixth wave.

The Seattle-based research group predicts an increase in infections in Spain from the second half of November, which will skyrocket in December reaching the highest peak towards the end of the year. 

The country would reportedly need about 24,000 beds for Covid patients (4,550 for critical ones) and there would be almost 2,000 deaths. 

Increased social interactions would mean that on December 30th alone, daily Covid infections in Spain could reach 92,000, the study claims. 

If restrictions were tightened ahead of the holiday period, including the use of face masks, the sixth wave’s peak wouldn’t be as great, IHME states

It’s worth noting that the IHME wrongly predicted that Spain wouldn’t be affected by a fifth wave whereas it ended up causing more than a million infections and 5,000 deaths. 

two elderly women in san sebastian during covid times
The vaccination rate among over 70s in Spain is almost 100 percent. Photo: Ander Guillenea/AFP

The latest message from Spain’s Health Minister Carolina Darias is that currently “the virus is cornered” in the country, whilst admitting that there was a slight rise in cases. 

“I do not know if there will be a sixth wave, but first we must remember that immunisation is not complete in all patients despite vaccinations,” Dr. José Polo , president of the Spanish Society of Primary Care Physicians (Semergen), told El Periódico de España

“That’s because 100 percent effectiveness doesn’t exist in any drug, or in any medicine”.

Despite having one of the highest vaccination rates in the world, Spain still has around 4.2 million eligible people who haven’t been vaccinated, mostly people aged 20 to 40. 

The majority of Covid hospitalisations across Spain are patients who have not been vaccinated: 90 percent in the Basque Country, 70 percent in Catalonia and 60 percent in Andalusia.

Among Covid ICU patients, 90 percent of people in critical condition across all regions are unvaccinated. 

“Although there are many people vaccinated in Spain, there will be an increase in cases because we know how the virus is transmitted and when the cold comes and the evenings are darker we will tend to go indoors, and the virus spreads there,” Cesar Carballo, Vice President of the Spanish Society of Emergency Medicine of Madrid, told La Sexta news.

The World Health Organisation (WHO) has already warned that Europe is at a  “critical point of regrowth”  and that it has once again become the “epicentre”  of the pandemic, due to the generalised spike in cases in recent weeks.

Does that mean that Spain’s daily infections won’t be in the thousands again as winter nears? Or that regional governments won’t reintroduce Covid measures ahead of Christmas to prevent this from happening?

Nothing is for certain, but as things stand Spain’s epidemiological situation is the most favourable in the EU and a sixth wave seems unlikely, but not impossible.

The Spanish government continues to push ahead with its vaccination campaign, reopening its vaccination centres, administering booster shots to its most vulnerable and considering vaccinating under 12s to meet an immunity target of 90 percent.