Updated: Sept. 28, 2012
In Spain, after two decades of dizzying growth, the party is over.
For most of the last decade, Spain kept its fiscal house in strict order, running small deficits or even surpluses. The country enjoyed a long boom after joining the euro zone, as low interest rates fueled a surge in construction. The boom, while it lasted, gave Spain the world’s highest rate of homeownership — with more than 8 of every 10 Spanish households owning the places they lived.
But it came to an end with the 2008 financial crisis, and the resulting recession sent Spain’s unemployment rate soaring. Spain has also seen its deficits swell and has been forced to pay high interest rates as investors worried about its solvency. Given the size of the Spanish economy and the weakness of its banks, Spain has become the biggest worry facing the European Union.
Since 2010, Spain has pushed through a series of austerity measures meant to rein in its deficit. Unhappiness over the economy brought down the center-left government of José Luis Rodríguez Zapatero, and in November 2011, the conservative Popular Party, led by Mariano Rajoy, won a parliamentary majority in new elections.
Mr. Rajoy had the benefit of a freshly elected, single-party majority behind him, which his counterparts in Greece and Italy h