High corporate and family debt led to the financial crisis that Spain has endured for several years. A swelling deficit and national debt, which is nearing 100% of the nation's GDP, has also rocked Spain following the burst of a real estate bubble and systemic problems that undermined our economy despite the government's attempts to fix them.
Companies and families have made an enormous effort to cut their debt levels. At the peak, companies owed 1.3 trillion euros in 2009 and families owed 916 billion euros in 2008. The debt has been slashed by 553 billion euros, but the total debt amount should still be trimmed by another 4.59%.
Although the statistics are starting to show small quarterly improvements in family wealth (the spread between savings and debt), private-sector debt is still 82.7 billion euros more than where it was in 2006.
This amount of private debt is going to take years to stabilize, and it is weighing down economic recovery in Spain. As the IMF warns, the deleveraging process could last many more years. This situation, if economic growth does not return soon, could cause even more problems for creditor banks that are in the midst of a stiff cleanup process, which would keep credit from flowing to homes and businesses for even longer.
