...a political system in which institutions are excessively politicized and where nobody feels responsible for their actions because nobody is held accountable. Nobody within the system questions the rent-seeking that conforms the particular interest of Spain's political class. This is the background for the real estate bubble and the failure of most savings banks, as well as other "natural disasters" and "acts of God" that our politicians are so good at creating. And they do so not so much out of ignorance or incompetence but because all these acts generate rent.
The Spanish real estate bubble was, in relative terms, the largest of the three that are at the origin of today's global crisis, the US bubble and the Irish bubble being the other two. There is no doubt that, like the others, it fed on low interest rates and macroeconomic imbalances on a global scale. But unlike the US, in Spain decisions regarding what gets built where are taken at the political level. In Spain, the political class inflated the real estate bubble through direct action, not omission or oversight. City planning is born out of complex, opaque negotiations which, besides creating new buildings, also give rise to party financing and many personal fortunes, both among the owners of rezoned land and those doing the rezoning. As if this power were not enough, by transferring control of the savings banks to regional governments the politicians also had power of decision over who received money to build. This represented a quantum leap in the Spanish political class' capacity for rent-seeking. Five years on, the situation could not be more bleak. The Spanish economy will not grow for many years to come. The savings banks have disappeared, mostly due to bankruptcy.
The other two bubbles ... are a result of the peculiar symbiosis between our political class and Spanish capitalists who live off government favors.Government tells banks to whom to lend...what could go wrong.