THE ECONOMIC MIRACLE GOES ON

From 1960 until 1974 Spain’s economy grew an average of 6.6% per year: faster than any country in the world except Japan. Spain’s economic miracle took place during a period of high western prosperity and was largely dependent on favourable external circumstances. Three factors were especially important:

• Investment. Foreign investment in Spain increased rapidly once the economy had been liberalised. The United States was the most important source, followed by West Germany.
• Tourism. General prosperity made foreign travel a reality for large numbers of Europeans and North Americans. Spain, with its many beaches, warm climate and bargain prices, became an attractive destination and tourism quickly became the country’s largest industry.
• Emigrant remittances. From 1959 to 1974 millions of Spaniards left the country. The vast majority went to Switzerland, West Germany and France, countries whose growing economies were creating a massive demand for unskilled labour. There they joined Portuguese, Italians, Yugoslavs and Turks as ‘guest workers’. These emigrants sent large sums of money back to Spain: more than £ 1.5 billion in 1973 alone.

The great dependence on external conditions made Spain’s economic growth vulnerable to economic changes elsewhere. The oil crisis of 1973, which initiated an extended period of economic uncertainty in the Western world, brought Spain’s economic growth to a halt. The clearest sign of change was the dramatic increase in unemployment. The unemployment rate stood at 4.3% in 1975 but by 1980 it was at 11% and in 1985 it peaked at 21.5%.

Economic growth returned during the late 1980s. Although growth rates were well below those of the 1960s, they were still among the highest in western Europe. Unlike the earlier boom, this one was accompanied by high inflation and continuing high unemployment. Inflation was 6.6% in 1989 and 6.4% in 1990 – below the figure for earlier years but still significantly higher than the EU average of 4.9 and 5.2%. Unemployment also began to drop from the official figure of 21.5% reached in 1985, but it remained extremely high – 17.3% in 1989 and 16% in 1990, almost double the average for the EU. Particularly hard hit by unemployment were young people trying to join the work force for the first time.

Spain’s early industrialisation took place behind high tariff walls, and most industries remained small in scale. The liberalisation of the economy in the 1960s and the influx of foreign investment, however, added a number of large firms. It also made Spanish industry much more varied than it had been. The most striking example of this change was the automobile industry. Before 1960 Spain built few motor vehicles, but by the end of the 1990s it was producing 1.5 million annually in factories owned by Ford, Renault, General Motors, and SEAT (largely owned by Volkswagen).

Iron, steel, and shipbuilding continued to be important heavy industries in Asturias and the Basque Country, but in the 1980s they became subject to downsizing. Cotton and woollen textiles and clothing industries remain significant in Catalonia, as they have been since the early 19th century. Other leading manufacturing industries include chemicals, toys, shoes, and electrical appliances (televisions, refrigerators, and washing machines).

Spain’s foreign trade grew rapidly during the 1990s, but the long-established pattern of imports outweighing exports continued. The largest share of Spain’s foreign trade is conducted within the EU; its two largest trading partners are France and Germany. Outside of Europe the largest and most important trading partner is the United States. Spain also conducts significant trade with the United Kingdom, Italy, Portugal, Mexico, and Japan.

In the mid-20th century Spain was an exporter of agricultural products and minerals and an importer of industrial goods. This pattern has now changed, reflecting the increasing sophistication of the country’s economy. At the start of the new millennium Spain’s imports were dominated by crude oil, which accounted for about one-eighth of all imports. Other key imports were transport equipment, spare parts, computers, and coffee. The most important export was automobiles and mopeds, which accounted for more than one-sixth of the total. Other exports included fresh fruits, vegetables and nuts, chemicals, petroleum products, footwear, iron and steel bars, alcoholic beverages, electronic data-processing products and pearls.

Spain’s economic issues are different now. A US survey of Spain, the UK, the powerhouse Irish economy and that of near neighbour France follows.

How wealthy is Spain?

Earlier it was stated that Spain has a Gross Domestic Product per capita of around 80% of the leading western European economies (UK, France, Germany and Italy). Another similar comparison, more favoured in Brussels, is Spain’s GDP per capita compared to the average of other EU countries.

In the 1980s, when Spain was catching up on its European neighbours, the idea got around that it had been doing so, if only gradually, ever since the 1950s. This is not in fact the case. Its GDP per capita relative to the average in the countries which make up the European Union at that time fluctuated quite a lot. During the 1960s, it rose steeply, until by 1975 it was 80% of the EU average. But then it fell back sharply. 10 years later, when the recession in Spain ended, its GDP per capita was only 72% that of the average. By 1991 the figure was still only 79%. Since then things have slowly and steadily improved and while a straight line convergence between Spain and its western European neighbours may not be totally possible, progress is steadily being made.

Figure 2 tells it all. Based on these statistics the GDP per capita in Luxembourg was more than twice the EU25 average, while Ireland was nearly 40% above average, and Denmark, Austria, the Netherlands, the United Kingdom and Belgium around 20% above average. Sweden and Finland were about 15% above average, and France and Germany around 10% above average. Italy was about 5% above the EU25 average. Spain was just below the EU25 average, and Greece, Cyprus and Slovenia were about 20% below average. Portugal, Malta and the Czech Republic were around 30% below average, and Hungary 40% below. Slovakia, Estonia, Lithuania and Poland were around half the average, while Latvia was about 55% below the EU25 average.

So Spain has now closed the gap. It has a GDP per capita 90% of the leading western economies of the UK, France, Germany and Italy. Those of us who live along the Mediterranean coast have been aware for some time that we were living in a prosperous, expanding country. We witness the massive development of new industrial estates with hundreds of new business, new hospitals and schools, out of town shopping centres, hillsides covered yearly with new white houses and apartment blocks.

The economic miracle goes on, albeit with EU support. Things will however change again, for Spain accepts that it is far too wealthy to continue to qualify for EU development aid totalling a net 93bn euros in EU funds since joining the union in 1986, a cash injection that surpassed total US aid to Europe under the Marshall Plan after the Second World War. Since 1992 Spain has received a quarter of the EU budget. But from 2007 Madrid could lose up to 90% of its funding as money is diverted to help the EU’s new East European members. Spain will become a net contributor to the EU budget by 2012.

Spain’s new-found prosperity has resulted in other impressive statistics. Surprisingly, the number of passenger vehicles per 1,000 people is 390 in Spain and 370 in the UK. Unsurprisingly, the number of people per doctor is 320 in Spain and 560 in the UK.

OVERDEVELOPMENT

Many British, German, Scandinavian, Dutch, Belgian, Swiss, Irish and Russian people are now resident in Spain. Why? Ask anyone and they will tell you it is a desire to enjoy the sun and sea, a much more congenial climate, a much lower price for property, food, cheap alcohol and tobacco and an easy going, relaxed lifestyle. A growing number of retirees from the wealthy North European nations have sought out Spain’s natural beauty, hospitality and booming economy to settle permanently in the country. Others are happy to buy a holiday home, perhaps for investment or to rent out until they can live there themselves when they retire a few years later.

Additionally, Spain is the unrivalled number one tourist destination in the world with 50 million tourists entering a country with 40 million inhabitants. Its prosperity, excellent health services, new roads and spotless beaches have outdistanced the more expensive, traditional resorts in France and Italy.

The economic boom has changed the country almost from head to toe. As was stated in the Preface, don’t look for on old lady dressed in black carrying twigs on a donkey. She does not exist any more, except in old black and white photographs. Some commentators say the Spaniard has moved from donkey to BMW in one generation. Don’t try to find unspoilt fishing villages along the Mediterranean for they have long been covered in vast swathes of concrete. As for food and drink, paella and sangria can now come frozen or in cartons: such is the change in Spanish lifestyle.

What does all this mean? It means overdevelopment. Hotels and houses built at an incredible rate. Where fishing boats were once moored the largest hotel in Europe now stands. Spaniards now clean beaches daily but let orange groves decline. Has development gone too far? The whole of the Mediterranean coastline between France and Gibraltar is now seemingly for hotels and apartment blocks only.

Look at beautiful stretches of the Spanish coastline or rolling hillsides and you will find dozens of properties that no planning officer has approved. By the time the council had obtained an injunction the work was done. And since no one has the heart to order a demolition (especially if the owner wields some influence in the area) the most that is likely to happen is that he or she will have to pay a fine. In the length and breadth of Spain there are hundreds of homes, blocks of flats or even urbanisations which nobody has ever agreed should be there.

Spain’s new Socialist government has vowed to demolish illegally built houses and hotels in an attempt to preserve the parts of its coastline that remain unspoilt. Determined to prevent the Costas from disappearing entirely beneath concrete, a raft of measures has been announced to protect the country’s 8,000 mile coastline. Chief among them is a commitment to enforce a 1988 law that banned the construction of any building within 100 metres of the shore conveniently ignored by local planning authorities. This initiative would guarantee public access to the entire coast: its recovery and transformation in spoilt and built-up areas. The government appears to have been spurred into action by a series of reports decrying the toll taken by excessive development. One study claimed that unchecked construction of hotels, houses and marinas, but approved by local authorities, had helped to blight 90% of the coast.

Concern has also been growing over the effects of a controversial land law in the Valencia region which has not only fuelled overdevelopment but has financially crippled thousands of homeowners including many Britons. The law, known as La Ley Reguladora de la Actividad Urbanistica, was introduced in 1994, ostensibly to regulate the acquisition and development of land, and prevent excessive speculation.

However, a report by the European parliament stated it had been misused by unscrupulous developers to force homeowners to sell their homes at well below market prices or to make them pay excessive sums towards the cost of local infrastructure. ‘There is no doubt that the application of the land law has led to a serious abuse of the most elementary rights of many thousands of European citizens, either by design or by deceit,’ the report concluded. ‘They have had their land and their homes expropriated and had to pay for the experience, finding themselves in a surreal legal environment without any proper recourse to legal justice.’

The law was due to be amended as this book went to print.

MADRID V. BARCELONA

Manchester has few political problems with London. Edinburgh has few cultural issues with Glasgow. Perhaps old attitudes widen a gap between Belfast and Dublin. However the political, cultural and sporting rivalry between Madrid and Barcelona is something else.

The relationship between Madrid and Barcelona is a troublesome one. Swathes of literature exist on the subject but in none of it will you find any reference to strictly financial antagonism. One of the best descriptions of the Madrid-Barcelona syndrome is ‘A story of lack of love’.

To begin with, Madrid and Barcelona are historically very different as cities. Madrid has always been more patriarchal, more bourgeois, although its resistance to Franco’s troops in the Civil War has been played down in recent times, in favour of Orwell’s view of Barcelona as the heroic centre of resistance; the bleeding martyr of Spain’s republicanism. This is not to play down the Catalan cause, but a modern legacy of Spain’s political history as viewed by Europe is that Barcelona is the goodie and Madrid the baddie.

Barcelona feels very different from Madrid. Its position at the centre of the European universe has ebbed a little since the heady days of the 1992 and the Olympics, but it remains a fashion sensitive and self-conscious city, with a fast-moving and innovative atmosphere quite unlike the rest of Spain. The Catalans speak a different language from the Madrid types, but the differences are not merely linguistic. Both communities have their strengths and weaknesses, but they are culturally very different from each other.

Franco was from Galicia but his disdain of any cultural tendencies other than his own stodgy Catholicism was widespread. He harboured a particular dislike for the Catalans, regarding them as haughty and untrustworthy. But, like Hitler’s paranoia towards the Jews, he hated them most of all for their cleverness, for their ambition and for their success.

He was not the only right-leaning Spaniard to regard Catalans in this way. Well before he arrived on the scene, the relationship between Barcelona and Madrid was already uncomfortable. The political problem between the two communities was based on the fact that Catalonia was the country’s major earner, yet the capital Madrid was the country’s biggest spender.

From the Civil War and beyond, the antagonism between the two communities has also been reflected by hostility between the two cities’ major football clubs; one that now drives the engine of Spain’s politics and not vice versa. To understand today’s rival politics and culture you simply have to understand its football and the adversarial relationship between the two sides. Very few players have dared to make the politically charged move from one club to the other. A few minor players and reserves aside, it is a remarkable testament that the list comprises a mere six players, covering a period of a hundred years: Josep Samitier. Alfredo Di Stéfano, Bernd Schuster, Michael Laudrup, Luis Enrique and Luis Figo. Nearly all of these players have come to regret their decisions to cross the Great Divide.

Camp Nou, one of Europe’s largest football stadiums, home to Barcelona’s famous football club with its fanatical, critical supporters and its magnificent sweeping structure, befits one of the world’s richest clubs. Barcelona FC, more than anything else, is a symbol of Catalan nationalism pitted against the central government of Madrid. To fail to win the league is one thing; to come behind Real Madrid is a complete disaster. With these two clubs it’s not so much a case of sport but mortal combat, dressed up as football.

CHANGING FACE OF AGRICULTURE

Centuries ago almonds, oranges and olives were a characteristic of rural Spain. Almonds growing on dry hillsides, olive trees growing slowly, planted in long straight lines on the rolling hills of Andalusia, living to a grand old age and harvested during the winter months for pickling, eating fresh or pressed for oil. Things are changing!

The decline of agriculture has meant the rural population has decreased and with that many farms have disappeared. Spanish agriculture has remained relatively backward by western European standards: capital investment per hectare is about one-fifth the average for Europe and the vast majority of farms are smaller than 10 hectares. Since it joined the EU, Spain’s agricultural sector has had to respect EU policies with the result that many small-scale traditional operations, especially in grape, almond, olive and citrus growing has ceased.

The face of agriculture first changed with the Huerta. One hundred and fifty years ago, the Valencia region was the wealthiest in Spain. La Huerta, together with the nearby freshwater lagoon L’Albufera, combined natural wild beauty with high agricultural yields in one of the main wetland habitats for bird-life in Europe. It was the market garden of Spain with its principal crops of oranges and rice, much of which was exported.

This region grew to prominence as a top producing region of citrus fruit in Europe during the latter part of the 19th century through the use of spring water and irrigation ditches on flat terrain surrounded by high mountains. Later the construction of rail links to the ports of Valencia and Castellon aided exports. The Huerta is man made and needs constant supervision to maintain its correct water level.

Many crops are grown in the Huerta; cauliflowers, artichokes, potatoes, peanuts, onions, tomatoes, green beans, peppers, lettuce, flowers, melons and wheat. But oranges and rice dominate. Acres and acres of oranges, their destination the supermarkets of Europe. Rice cultivation is automated as fields are drained, planted, the crop grows, fields drained again and the rice harvested. This crop stays in Spain, for Valencia is also the home of paella.

One other crop needs to be mentioned. Cultivation of the chufanut took off spectacularly as a result of the demand for a popular drink called horchata. Chufa is a non-alcoholic drink unique to Spain being the juice of a plant called chufa. In Valencia horchata (another name for chufa) is very popular and can be drunk in Horchaterias, served with cakes and pastries. It can also be bought in bottles from supermarkets. Marketed in a similar way to sterilised milk it is sold in ice cream shops as an alternative to branded, chilled soft drinks.

Since the 1950s, the importance of the Huerta has declined. Migration to the now highly industrialised city of Valencia is one reason but realistically a decline in demand and a rise in early season produce grown in the plastic covered fields of Almeria are the true reason.

Almeria, a province of Andalusia in southeastern Spain borders the Mediterranean. A dry arid area of 8,774 square km consisting of mountains crossed by sierras and valleys of the Adra. The Almanzora and Andarax rivers provide the only fertile land. Despite a low rainfall. several important irrigation systems have increased cultivation. The infrequency of cloud cover over the province has opened opportunities in agriculture and for unusual projects such as the siting of a major Spanish-West German astronomical observatory.

Fruit growing is the principal agricultural activity, with large exports of oranges and white grapes. Olive oil, cane and beet sugar, almonds and esparto are also produced. These crops are not grown in open fields but protected under the cover of thousands upon thousands of acres of white plastic. Driving along the main north-south road near the coast, one could be forgiven for thinking the whole of Almeria was under plastic.

This, too. is the home of the migrant worker; the Moroccan employed casually to pick the fruit to be dispatched to northern Europe. This is where fresh strawberries can be picked in February and where brightly coloured peppers are available all year. By concentrating on all year availability, northern European markets. reducing the importance of almond and olive crops have been the key to Almeria’s success in the changing face of Spanish agriculture.

...AND FISHING TOO

Spain has long had an important fishing industry with fishing grounds both in its coastal waters and far beyond. The main fishing ports are in the northwest, especially Vigo and La Coruna. The activities of the commercial fishing fleet have led to conflicts between Spain and a number of other countries, especially Morocco and Canada. On a number of occasions Spanish fishermen have been arrested for fishing illegally in these countries’ waters.

With more than 8,000 kilometres of coastline, Spain is the number one fishing nation in Europe. It has the largest fleet with 18,000 vessels capable of plying waters far from home and it accounts for the largest catches. Around 40,000 people are employed on ships and in the allied industries of canning, processing, storage, transport and marketing. Spaniards eat more fish per head than any other Europeans. The most popular are octopus, cod, elvers, trout, scallops, mussels, lobsters, mussels, prawn, squid and salmon.

The UK is no stranger to fishing wars. Three such events took place with Iceland over its declaration to extend its fishing zones. These wars however were minor in comparison to Spain’s long-distance fishing fleet which has involved the country in numerous disputes; such as wars over halibut with Canada, tuna with France, sardines and anchovies with Morocco, with the UK over access to waters around Gibraltar and around Britain itself.

Before Spain’s entry into the EU, it was frequently at odds with other countries over fishing rights. Since its entry into the EU things have changed little. Other EU countries had to adjust to Spain’s entry and the size of its fishing fleet by adjusting all their quotas. EU conservation measures designed to protect fish stocks from over-fishing have meant a drastic downsizing of the total industry. These measures are a greater burden for Spain than for any other member state. The EU has managed a Common Fisheries Policy to conserve decreasing stocks of fish for its member states by the use of fish quotas. Other measures are aimed at decreasing and decommissioning a part of the EU’s fishing fleets. Part of the difficulty about over-fishing is enforcing quotas, and regulations over net sizes at sea in waters that are hard to define into exact geographic zones.

EU countries realise it is in their common interest to reduce the size of their catches but, in the short-term, most of them are constantly fighting for a bigger share. Large Spanish boats ply waters as far as the Pacific and Indian oceans to provide the home market. It is no wonder that the Spanish fishermen fear that EU regulations will reduce their catches and further limit their activities in the North Sea.

Fishing is especially important in Galicia where families rely on mussel beds for their livelihood. Fresh mussels are one of the most appealing items on a menu of fish restaurants. Mussel growing is a special form of fishing in the rich inlets of the Galician coast where, from thousands of floating rafts, mussels are suspended and grown in the cool, clear, clean waters of the Atlantic. Harvesters pull up ropes on which clusters of black mussels grow; the larger ones are plucked and the smaller ones left behind to mature. This industry is at risk from frequent oil spills from tankers en route from the Gulf to Europe.

WATER

There is more water consumed per head of population in Spain than in any other European country: a remarkable statistic! However most water is used in agriculture, leaving drinking water in some coastal areas both scarce and impure. Desalination plants are constantly being built. City Mayors fight for more supplies as irritated voters register their displeasure at having to buy bottles of agua because tap water is undrinkable.

Conventional crop irrigation takes place by gravity feeding water from tanks to cultivated fields through a complex system of stone or concrete channels. A series of doors, open or close within the channels diverting water to various outlets. The system has remained unchanged for centuries. Orange and lemon trees are watered once or twice per week by flooding the groves. The hot sun immediately evaporates the water. It takes millions of litres of water to supply a field for one year.

On the plains of La Mancha things do get slightly better. Massive sprays bring water to the long rolling wheat fields. But evaporation there is also a problem.

Crop watering is a very inefficient system. Spain has a long way to go in conserving water. Perhaps they should copy the farmers in Arizona USA, another dry area. They have pipes located about 20 centimetres under the surface of the soil, drip feeding water to the roots of plants for a few minutes per day. Water is conserved as it does not evaporate.

The River Ebro is the longest in Spain. Rising in the Cantabrian Mountains in northern Spain, it flows 910km in a southeasterly course to its delta on the Mediterranean coast near Tarragona, midway between Barcelona and Valencia. It has the greatest discharge of any Spanish river and its basin at 85,500 square km, is the largest in Spain. The river drains about one-sixth of the country. The Ebro receives water from more than 200 tributaries, the largest of which has been utilised for hydroelectric power and irrigation. A system of 35 major dams produces a significant proportion of Spain’s hydroelectric power. This river, if the politicians can bite the bullet, can solve Spain’s water shortage by bringing water via pipelines from the mountainous regions of the north to where it is needed most, along the Mediterranean coast and to the more arid southern part of the country.

There is no doubt that more water is needed in the south of Spain – for both agriculture and planned increases in population. This approach seems quite logical given the Mediterranean region has attracted enormous revenues through tourism and settlement from northern European immigrants. The largest single requirement is the massive construction of dams and canals to bring water from the Ebro River basin to the coastal regions of Murcia, Valencia, and the area around Almeria in Andalusia. Such a plan would however have ecological consequences for the Ebro delta.

The real social consequence of the plan is a growing resentment that too much consideration is been given to foreigners, to the detriment of Spaniards, who believe they are being called upon to assist at the expense of their own environment. The political scene is further muddied, for the water plan was proposed by one political party and with a change of government, opposed by the other party.

Pushing politics to one side; what about the economics, the real issues and the real alternatives? The capital cost of the water plan is around 25 million euros of which 40% would come from EU funding resulting in a cost of 0.3 euros per cubic metre of water. It’s expensive. There are many objections centring on an erosion of the Ebro delta, an increase in salt levels and its effect on offshore fishing.

Perhaps the real issue lies with water wastage. Why subsidise the irrigation of crops that are already subsidised and are often produced in excessive quantities? Irrigation water for agriculture is very cheap whereas the cost of water for domestic and industrial consumption is much higher. The price differential could be reduced to encourage water conservation and growing crops needing less water. This would make more water available for population increases.

The only practical alternative is more and more desalination plants. As we have seen before in Spanish politics – the status quo prevails, for the present.

CORRUPTION

In the world wide corruption league, Spain ranks 18th. Finland is best at number one and Bangladesh bottom at 133. The UK is 10th, Ireland 14th, France also 18th, and Italy 36th. Scandal and corruption in Spain lies just below the surface.

The first civilian head of the Guardia Civil was caught stealing from secret funds used to pay informants and widows of slain policemen. The director of the Bank of Spain was locked up for financial irregularities. Suspicious links were shown between the interior ministry and a group of off-duty policemen thought responsible for numerous deaths of suspected ETA terrorists, resulting in the interior minister going to jail.

The former Mayor of Marbella was required to report weekly to the local police. The former Mayor of Pego now languishes in jail for draining nearby wetlands. In a nation with a large underground economy, tax evasion is a national sport.

The latest scandal to erupt in March 2005 was a huge money-laundering scam in Marbella. Details of organised crime, local corruption, money laundering and fiscal fraud, all wrapped up in real estate speculation has flooded the newspapers. Solicitors known to many overseas buyers on the Costa del Sol were arrested and charged, along with foreigners. Three Spanish notaries, of all people, were also temporarily detained. And at the centre of this scandal is Marbella’s real estate market. Local corruption makes it the perfect vehicle for laundering dirty money. A side effect of this is that illegal developments of the lowest quality get built, destroying a beautiful natural environment and enriching some really unwholesome characters, including some British and Irish estate agents.

However several good things are emerging from this scandal. First of all it has galvanised the regional government in Seville to take action. The Minister for Public Works has made it clear that measures will now be taken to clean up the Costa del Sol’s real estate sector. Action will finally be taken to sort out illegal developments in the municipality of Marbella. There could be as many as thousands of properties in Marbella that in one way or another fail to comply with regulations.

The taint of corruption which has clung to politics in recent years will need to be dispelled if the image of Spain is to be improved. Laws regarding corruption are full of holes that governments are unwilling to plug. All of Spain’s major parties have been drawing funds from charging ‘commission’ to companies in exchange for promoting, or not obstructing, their projects. Construction firms are known to have been a prime target. Eventually, somebody has to pay for corruption. If the price of every property or public contract is inflated to allow for the cost of bribes someone has to find the extra to pay for it.