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In the last twenty years Spain has experienced a period of rapid growth followed by a very deep crisis. Until 2007, it was named ‘the Spanish economic miracle’ and now it is the country with the highest unemployment rate in the EU amongst many other very serious troubles. The present economic crisis has brought severe problems to the economy and society of the country which are proving to be rather intractable. Spain has become a very relevant part of the European periphery and the problem of its indebtness, especially external debt, is being adduced as a key element for today’s policies. All this process has been developed around, and cannot be dettached from, Spain’s integration to the European Union and the Eurozone. The purpose of this paper is to explore the reasons for that evolution, especially dealing with the events of the last ten years, the policies that have been implemented to deal with the crisis, the influence of the EU upon them and, in particular, the consequences of those policies for the population. A very tentative view about what are the economic and social prospects of the country for the near future will also be intended. Boom and (deep) crisis in the Spanish economy 3 1. A brief snapshot of the Spanish economy Spain has historically been a poor country in relation with the rich countries of Europe. But after the development initiated in the sixties and having gone through all the process of full incorporation of the country into developed capitalism even if cut across by many specific elements and with its integration in the European Economic Community, gradually Spain started to feel a full member of the rich part of the world. At the beginning of the 21 Century we find a country with a level of income and an economic structure similar to the second rank countries of the EU. Indeed, Spain became the fifth industrial power in Europe. No longer Spanish leaders considered themselves part of a poor country but members of an important industrialised country, even if in the opinion of European and World leaders it has never attained at best more than a second rank classification. It seems Spain had ‘developed’ at least in economic growth and industrial structure. (see Figure 1.1 and Figure 1.2). Figure 1.1GDP Growth rate, Spain, 1971-2010 -6 -4 -2 0 2 4 6 8 10 19 71 19 72 19 73 19 74 19 75 19 76 19 77 19 78 19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 % Source: Own elaboration based on OECD, 2011 Figure 1.2.Relative evolution of the GDP per capita, Spain, (EU=100) Source: Own elaboration based on OECD, 2011 The evolution of the Spanish economy since the sixties of the past Century may be briefly described as follows: There is a first industrialisation and urbanisation drive in the sixties. Internal demand was growing due to industrialisation, urbanisation and the corresponding increased incomes and the country could export thanks to low wages and a submitted labour force. During the eighties, Spain is integrated into the EU with 1 As the dictatorship in the XX century, the intend of a new coup in 1981 and so on. For a detailed account of this process and its evaluation see: M. Etxezarreta, (editor). La reestructuración del capitalismo en España. Editorial Icaria. Barcelona, 1991 Boom and (deep) crisis in the Spanish economy 4 a productive model based in low labour costs and low level technology (automobile, food industries) and compelled to compete with European industries under the pressure of the Single Act. Increasingly the country became an interesting market for the central countries of the Union. This productive model deteriorated with increasing world and European competitiveness (East European and Asian countries) and in 1994 unemployment was at 24,1% of the working population. Pressure upon wages increased and especially working precariousness was used (submerged economy, temporality, short term labour contracts that accounted for more than 33% of labour contracts according to official statistics and to more than 50 % according to other estimates) that decreased internal demand. The economy recovered a little due to four devaluations between 1992-94, increasing labour precariousness and the beginning of the building bubble. In 2000 unemployment was 20,4% and in 2004 12,2%. But to participate in the eurozone because of the Treaty of Maastricht another adjustment program was established and, without devaluation, competitiveness (internal and external) became more difficult. Nevertheless the euro permitted to keep a greater external trade deficit. In front of the problems of this model, capitals looked for non tradable sectors where competition was not relevant (building industry, commercial big areas) or oligopolic sectors being privatized (energy, communications) or financial speculation. On the side of demand, the willingness to reach the ‘European level of consumption’ was maintained and even increased through cheap credit, especially to buy apartments and the building industry boom was established. During the period from 2000-2007, the Spanish economy was booming. Alongside the “Irish Tiger”, the Spanish economy grew fast; it was admired for its liberalization processes, its new openness to international markets, with new emerging global players such as Telefonica, Ferrovial or Banco Santander. Obama’s Transport Secretary visited Spain to check on the impressive new high speed train lines. Unemployment in 2007 was at the lowest since democracy even after absorbing more than 4 million economic immigrants in a decade. The housing market was highly dynamic and prices surged. After advancing Italy in GDP per capita terms in 2007, the president of the government, J.L Rodriguez Zapatero was feeling so confident that announced that in few years time, Spain will overpass France. Spain was pushing hard since Aznar administration to be recognised as an economic power and lobbying to enter in G8. Again Spain had an ‘Armada Invencible’ (or Spanish Armada). This time, composed by business men, financiers and investors. However, despite a ‘decent’ average figures for income per capita (see Figure 1.3), an important income increase for most of the population and a very significant improvement in their qualitative ways of living – moving from a mainly rural and poor country to a industrialising and urbanised country -, the social picture is not so favourable, as can be seen in Figure 1.4. and Tables 1 to 4. 2 “Del pleno empleo a la plena precariedad”. Report from Seminario de Economía Crítica TAIFA No. 3, Nov. 2006 3 The Spanish Armada (or ‘Armada Invencible’ as it is named in Spanish) was the Spanish fleet that sailed against England in 1588. Despite the name, Spanish Armada was defeated. Boom and (deep) crisis in the Spanish economy 5 Figure 1.3.GDP per head, Spain and EU-15 (1971-2010) 0 500

Boom and (deep) crisis in the Spanish economy: the role of the EU in its evolution