The Spanish economy in EMU: The first ten years

This paper has been prepared to mark the tenth anniversary of Economic and Monetary Union (EMU). It seeks to give an overview of the Spanish economy’s experience in this new institutional setting. It should be viewed as the result of a joint effort by a sizeable group of researchers from the Banco de España Directorate General Economics, Statistics and Research to rationalise the implications of a structural change on this scale. To do this, the paper firstly defines the starting conditions of the Spanish economy, at the time when there was only a commitment to join the Monetary Union as a founding member; in this connection, it sets out the advantages of belonging to the euro area versus the possibility of having remained outside it. Next, it describes the main transformations made in converting this commitment into reality. Further, it reviews developments in the economic variables that best document the main events of the past decade, focusing both on the factors underpinning the expansion and the headway in convergence, and on the imbalances that triggered the start of the adjustment, and assesses the scope of these imbalances. Finally, it describes the basic features of the process of adjustment towards a new path of sustained economic growth, emphasising the difficulties added by the superimposition of the international financial crisis.