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 e normous. 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 s ince 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
