Integration, spurious convergence, and financial fragility: a post-Keynesian interpretation of the Spanish crisis

ABSTRACT The Spanish crisis is generally portrayed as resulting from excessive spending by households associated to a housing bubble and/or an excessive welfare spending beyond the economic possibilities of the country. We put forward a different hypothesis. We argue that the Spanish crisis resulted, in the main, from a widening deficit position in the non-financial corporate sector and a declining trend in profitability under a regime of financial liberalization and loose and unregulated lending practices.