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The housing finance system in Italy and Spain: why did a housing bubble develop in Spain - and not in Italy?
[working paper]
Abstract The international financial crisis, which started in the United States at the end of 2007, hit Europe soon afterwards. Its impact on the old continent has been enormous. A number of country-specific crises were triggered, especially in the European periphery. This essay will focus on two countries, ... view more
The international financial crisis, which started in the United States at the end of 2007, hit Europe soon afterwards. Its impact on the old continent has been enormous. A number of country-specific crises were triggered, especially in the European periphery. This essay will focus on two countries, which were affected particularly severely: Spain and Italy. In Spain, the global financial crisis was worsened by the burst of the housing bubble, which had inflated the cost of housing during the early 2000s. In Italy, in contrast, pre-existing problems with the management of high public debt, long-term stagnation in labour productivity and low government credibility made its economy vulnerable to the financial crisis. Though both countries had different experiences dealing with the global crisis, Italian and Spanish structural and economic features are largely comparable and both countries experienced an economic boom since the 2000s, especially in the housing sector. Yet, Italy did not witness a housing boom turning into a bubble and its consequences, a steep correction of housing prices - the "bust" -, whereas Spain is still recovering from it. This paper attempts to analyze the reason for this discrepancy.... view less
Keywords
EU; Italy; monetary union; tax relief; homeowner; price level; financial crisis; real estate; monetary policy; fiscal policy; lending; funding; national debt; bank; housing market; Spain
Classification
Economic Sectors
Economic Policy
Public Finance
Free Keywords
housing finance system; housing bubble
Document language
English
Publication Year
2016
City
Berlin
Page/Pages
25 p.
Series
PIPE - Papers on International Political Economy, 26
ISSN
1869-8468
Status
Published Version; reviewed