When Spain embarked on colonizing its colonies in central and south America at the end of the 15th century, it ruthlessly conquered the powerful and wealthy Aztec and Inca empires, employed slaves from Africa, tortured men into mining gold and silver. After these metals were shipped back to Spain, they were used to finance wars, trade, and expeditions by Spaniards across the world - enabling Spain to become the supreme power in Europe. To get an idea about the kind of wealth that was passing through Spain - in just one year 1564, the Spanish city of Seville recorded arrival of 154 ships - each carrying more than 200 tons of gold. 

In its enthusiasm to expand trade and political reach, its rulers committed a costly mistake. In the century that followed the discovery of North America by Christopher Columbus in 1492, the majority of the wealth that Spain generated was piped out of the country and into colonies, for expansion of Catholicism, to fight wars led by Spanish conquistadores, and to empower powerful traders whose collaboration made certain that the Spanish empire kept on ticking. The Kingdom of Spain, which it was called then, and the country still has this as its full official name, failed to expend money within the country to ensure that Spain always kept ahead of Prussia and Austria, two of the strongest contemporary empires, in terms of technological know-how and overall development. Spain had wealth but little money as due to skewed economic policies, Spain's internal trade suffered, and while the royals and feudal lords became richer - gold's sheen was never really seen or felt by the lower classes.

In 1590 Spain was shipping huge volume of goods to its colonies but 80 per cent of these goods were imported and not made in Spain itself - as against the British who used to send out British-made goods to India and other colonies. Spain soon began to neglect manufacturing and subsisted on past riches of gold or borrowing on gold. It used its gold to import useless stuff such as bangles and playing cards - hardly the kind of imports to vitalize an economy becoming lazy by the day. Further, the people of Spain did not have the habit to save and wasted money on exotic spices, clothes and arms.

Within less than 100 years of Spain's rise to economic and political eminence, it was being challenged by Great Britain, France and Holland in trade and colonization, and soon ran out wealth to fuel political power - all because it kept on borrowing from its wealth without securing and nurturing its domestic economy, which lead to economic stagnation, recession, more borrowing, and eventually Spain's 21st century identity - more as a tourist and food hub than a country of ambition, a trait that made it so unique and a global leader.

As the Spaniards ran out of gold in the 16th century, today's Spain has run out of credit. From early 2000s to 2007, Spain experienced a massive property boom, and millions got trapped in the real estate bubble, which burst when the 2008 sub-prime crisis ripped apart the US economy, and in due time took down with it the debt-heavy economies of Greece, Ireland, Spain, Portugal, Italy and in many ways the UK.

Spanish banks lent money to builders without protection or far-sight - very much like gold, demand for which boomed in the 15th century - without adequate re-funnelling of real profits back into the economy. The Spanish government kept borrowing to re-pay debt after the property market collapsed in the country - forcing banks to face a severe cash crunch - taking down with them consumer savings. Meanwhile, the government also neglected investing in boosting the overall factors of production within the country - relying heavily on tourism and private trade.

As 2012 gives way to 2013, Spain faces crushing economic statistics. Experiencing its second recession in three years, it's credit rating as on October 11, 2012 is just above Junk, which means the government has its task cut out - austerity or austerity plus spending? Madrid has said that it will be forced to raise taxes and cut down on government benefits with fiscal deficit close to 7 per cent - very alarming for a country short of money. Spanish government is asking for 100 billion euros just to re-capitalize the financial sector.

About 1.7 million families in Spain with working-age members don't have jobs. Tax revenue is falling and costs of unemployment are so much that Spain has little money to kick-start its economy. Spaniards are out on the streets and screaming to halt wage cuts and cutting down of spending on healthcare, education, and social benefits. 

Carmen Belmonte, a woman from Madrid, explaining her difficult circumstances, told the BBC, "I'm a 34-year-old single mum. I have been unemployed for over a year now, I've looked for work over and over again, from cleaning to a telephone operator but have found nothing...I get unemployment assistance from the government but that will end next month because the government has annihilated aid to the unemployed...We will end up on the streets, how will we eat? Where will we live? What hope is there?...There are so many people like me in Spain, with problems that are typical of an underdeveloped country. People do not have jobs and small businesses are plummeting which generates more unemployment and more poverty in general. Every month there are increases in taxes and the prices of basic supplies such as water and electricity, not to mention gasoline. Food is almost a luxury item. Politicians are corrupt and all protect each other. The government has vetoed our freedom of expression and detains people for demonstrating."

Spain is not facing just a liquidity crunch - its very fabric of governance has been torn part by corruption. "I am a civil servant and work in a ministry. In Spain, if you want to work in the administration you have to pass very hard exams to get the job. The system is supposed to be used to select people due to their competence but I see very closely how politicians use the administration to give very good jobs to their sons, brothers and sisters. I heard on the radio this week that a kid who brings his own food to school for lunch has to pay about five euros just for it to be looked after yet a member of parliament pays 3.55 euros for a full meal," said Maria, a civil servant.
 
Even if Spain wants to create jobs it can't - at least not in the numbers it wants to. If you are a graduate in Spain you will find it very difficult to get a job, as you need to be at least an MA or a PhD to land a decent-paying job. At the same time, education is very expensive - so how will jobs be created if there is non-availability of labour or if it's expensive? "I am chasing every vacancy going, like jobs as a waiter, carpenter or plumber on the "black economy", which is what enables many people to gain their bread day in, day out. Three members of my family are currently unemployed: myself, my father and my younger brother. Many people in my neighbourhood rummage through garbage bins looking for something to eat or sell in the black market," said Ignasi Jorro, an unemployed youth.
 
With job creation set to return only after two years, Spain is looking down at the barrel. Two attributes can lead Spain out of the deep tunnel it has dug for itself and could be buried in it - leadership and innovation - the very traits that powered Spain - the discoverer of the world in the 15th century and a trader par excellence. Meanwhile, it must first prepare to withstand a contracting economy in the near-term and personal hardship, before it again sees the glint of gold.