Timeline: Spain's economic crisis

(Reuters) - Here is a timeline on Spain's economy since 2008 as the new government announced billion of euros of cuts on Friday in a foretaste of tougher austerity to come.

2007: -- Spain has a public account surplus of more than 2 percent of gross domestic product and the economy grows by 3.5 percent, largely due to a construction boom. By 2008, the property bubble has burst, the surplus has become a deficit and growth has fallen to 0.9 percent.

March 2008: - Prime Minister Jose Luis Rodriguez Zapatero wins a second term in office but fails to secure an outright majority in parliament, leaving his Socialist government reliant on regional parties to pass legislation. He implements a campaign pledge to give each taxpayer a 400-euro rebate.

Third Quarter 2008: - Economy officially enters recession as a decade-long property and credit bubble bursts.

Early 2009: - Standard & Poor's is the first credit rating agency to downgrade Spain in January 2009, cutting its treasured AAA rating by one notch to AA+.

- Elena Salgado takes over as economy minister after predecessor Pedro Solbes and Zapatero clash on how to stimulate the economy.

- Like other developed countries, Spain adopts an economic stimulus plan. It is worth an estimated 5 percent of gross domestic product, including 8 billion euros of infrastructure products and a 2,500-euro 'Baby Cheque' for each newborn child.

- The Bank of Spain bails out regional lender Caja Castilla-La Mancha, the country's first bank rescue in recent years.

May-June 2009: - Spain creates a bank bail-out fund, known as the FROB, with firepower of up to 99 billion euros and urges weaker savings banks to merge to improve solvency.

- Over the next year, the number of savings banks, which lent heavily in the property boom, will be cut to 17 from 45.

First Quarter 2010:

- Spain's unemployment rate tops 20 percent for the first time in nearly 13 years with a record 4.6 million people unemployed.

- Spain's economy emerges from an 18-month recession as exports pick up.

April 2010: - As talks intensify on granting Greece an economic bailout, attention turns on Spain amid worries over its massive public deficit -- 11.2 percent of GDP in 2009.

May 2010: - After initially denying Spain was in trouble, Zapatero announces a slew of austerity measures worth around 1.5 percent of GDP, including wage cuts for civil servants, the end of the "Baby Cheque" and freezing pension increases.

- Austerity measures passed over the following six months, including a two percentage point rise in Value Added Tax, are worth an estimated total of 5 percent of GDP.

- The Bank of Spain seizes CajaSur, a tiny savings bank run by the Roman Catholic Church, spooking investors and helping to hasten the consolidation of the system as a whole.

June 2010: - Spain's cabinet approves a labor market reform, which is criticized by unions as undermining workers' rights and by businesses for being too weak. The bill is passed through parliament in September.

July 2010: - Private investment in savings banks is allowed for the first time, to complement restructuring and merger processes.

September 2010: - Unions call a general strike to protest at the reforms and austerity measures, but the impact is limited.

December 2010: - The central government forces the country's 17 autonomous regions, considered the weak link in spending cuts, to publish more details of their accounts.

- Government raises the tobacco tax, slashes wind power subsidies and says it will sell stakes in its airport authority and the state lottery. Both partial privatizations are later scrapped due to bad market conditions and political pressure.

January 2011: - Spain passes pension reform that will gradually raise the retirement age to 67 from a previous 65.

June 2011: - Zapatero decides to bring forward national elections to November, before his four-year time was due to expire in March 2012. On the same day, the International Monetary Fund (IMF) warns Spain's economy still faces "considerable risks."

September 2011: - Parliament passes a constitutional amendment which forces future governments to balance budgets during times of normal economic growth.

Third Quarter 2011: - Economic growth slumps to zero and most economists see another recession on the horizon.

November 2011: - Mariano Rajoy's centre-right People's Party wins an absolute majority in November 20 elections as voters punish the outgoing Socialist government for the worst economic crisis in generations and the EU's highest jobless rate.

December 2011: - In his first comments since his election victory, Rajoy calls on all Spaniards to work together to overcome the debt crisis and promises a new economic policy.

-- Rajoy is sworn in on December 21.

-- Spain's new government says on December 30 the public deficit for 2011 would come in at 8 percent of GDP, well above a target of 6 percent. The government also announces new austerity measures on December 30 with a cut in public spending by 8.9 billion euros ($11.49 billion) in 2012 for all ministries.

-- Treasury Minister Cristobal Montoro announces tax hikes to focus on the wealthy, raising around 6 billion euros ($7.75 billion).