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Rajoy, 57, inherited a devastating economic downturn that caused unemployment to soar to more than 24 percent, and a savings bank sector saddled with bad loans, the legacy of a burst real estate bubble.
When he took office, Rajoy said he had no miraculous solutions to jolt Spain out of its economic misery, but promised the country would “stop being part of the problem and become part of the solution.”
Despite introducing austerity measures that hiked taxes, made it cheaper to hire and fire workers and cut government funding for education and health care, Spain’s woes continued.
By mid-May, Rajoy warned Spain risked being frozen out of capital markets because of the sky-high borrowing costs.
But throughout this, Spain and Rajoy insisted that the country did not need international assistance to prop up its struggling bank sector.
Indeed, in the run-up to last month’s informal European Union summit, the Prime Minister swiftly moved to dismiss suggestions from France’s new President, Francois Hollande, that Spain’s banks might need outside money. “Hollande does not know the state of Spanish banks,” Rajoy said.
As late as May 28 Rajoy insisted that “there will be no rescue of the Spanish banking sector.”
At the weekend, in an embarrassing admission for Rajoy, Spain finally agreed that it would need to seek European aid.
Although he left it to economy minister Luis De Guindos to make the announcement on Saturday, Rajoy spoke to reporters the following day about how Spain could recover now it has asked for assistance.
“This year is going to be a bad one: Growth is going to be negative by 1.7 percent, and also unemployment is going to increase,” Rajoy said.
http://www.washingtonpost.com/world...cked-economy/2012/06/10/gJQAvrHaSV_story.html