The onset of the credit crunch has affected countries all around the world in different ways. The UK is in the process of suffering a mortgage credit crunch which may well cause a house price crash.
As well as this, Spain has the Euro as a currency, which some of our Prime Minister's advisers' are recommending as a solution to our probelms.
It is worth reading an article such as this therefore. It makes for a very sobering tale. Spain suffered an even bigger asset boom than we did due to entering the Euro and immidiately reducing interest rates by 2%.
A crazed government also passed tax laws allowing foreign acquisitions (e.g. BAA) by large companies to avoid tax. the net result was a huge growth in debt and over-investment in reall estate and corporate take-overs.
Where has this taken them now? Well house prices are down 20% and falling, the banks are hiding as much of the debt as they can, but the economy as a whole is in a nasty recession. The Government can try and spend its way out as it has a relatively good debt level in comparison to ours; but overall the prognosis is pretty bad.
You would not want to be holding property in Marbella right now. What makes the situation worse, is that there is no end in sight. interest rates cannot rise, so effectively Germany and others are exporting their inflation to the likes of Spain. Meanwhile a strong Euro hampers Spain's exports just when it needs to re-balance the economy.
If the UK was in the Euro we would be in a very similar position, our house prices would be even more crazy than they are now and economy would be suffering the huge distorotions that are affecting Spain.