The problem of the research confined to analyze how the Spanish financial crisis led to the sovereign debt crisis.As Spain recently experienced the worst financial situation since it joined the EU. This paper analysis how the Spanish banking crisis caused by high exposure to construction sector during the housing bubble that turned to a sovereign debt crisis as consequence of both the Global financial crisis and the EU debt crisis. As the Spanish government interfered to save its financial sector so government debt increased to an extent it became difficult to manage. Then the paper explains how the crisis was handled by the Spanish government and EU institutions and the consequences of the reforms implemented by the Spanish authorities. As major banking reforms were implemented for both commercial and saving banks This  study to aims to identify the major deficiencies in the Spanish economy the led to the financial crisis and the action taken by the Spanish authorities that led to the sovereign debt crisis and how the crisis was handled . Lesson learned from the study that banks should not concentrate their portfolio in one sector, and central banks should intensify their supervision to the banking activities and governments should adopt balanced economic growth strategy driven by diversified sectors