I/ The Catching up A/ Financial aspects B/ The Openness of economic relations C/ Labour market II/ The current situation of Spain A/ Facing the enlargement B/ The environmental issue C/ The impact of the crisis

1. 13th November 2008
Ling-en HSIA
http://www.slideshare.net/lingen

2. CONTENTS
Introduction _____________________________________________________________________ 3
I/ The Catching up ________________________________________________________________ 4
A/ Financial aspects ___________________________________________________________________ 4
B/ The Openness of economic relations ___________________________________________________ 6
C/ Labour market _____________________________________________________________________ 8
Conclusion __________________________________________________________________________________ 12
II/ The current situation of Spain ___________________________________________________ 13
A/ Facing the enlargement ____________________________________________________________ 13
B/ The environmental issue____________________________________________________________ 13
C/ The impact of the crisis ____________________________________________________________ 15
Conclusion _____________________________________________________________________ 17
Annex ______________________________________________________________________________________ 19
Bibliography: ________________________________________________________________________________ 23

3. Introduction
Spain joined the European Union (EU) in 1986 and from this date, many economic changes
have occurred.
Firstly, we will see some of those structural changes during the last two decades: the financial
aspects, the international relations and the labour market. According to these modifications, we can
say that there has been a catching up.
Secondly, we will take a look at the economy of Spain through the present environment: the
enlargement of the EU, the awareness of the environment issue and the impact of the financial crisis.

4. I/ The Catching up
A/ Financial aspects
Since 1986 Spain has received a net total of EUR 78,131 million from the EU (contributions
minus receipts). These transfers have been essential for the transformation of the Spanish economy
in financing a large number of social and regional cohesion projects.
Nonetheless, with the enlargement process of poorer countries, Spain will become a net contributor
to the Community budget in 2010.
Moreover, in order to access to the Economic & Monetary Union (EMU), Spain have managed to
decrease the inflation rate and the interest rate

6. B/ The Openness of economic relations
Concerning the direct investment, the last two decades have been a huge change in the
economy of Spain. Following the privatisations of the major Spanish public companies, Spanish
businesses made huge investments abroad. During the last ten years, on average the yearly foreign
investment in Spain has been 40, 000 million euros, ten times more than the precedent decade.
The Spanish investments abroad increase, as well, mainly since the privatisations of the major
Spanish public companies in the 90’.
In 2005, even if more than 70% of Spain’s external trade took place with EU states, the share in the
EU trade has been stable. Meanwhile, the trade deficit got worse from 34,916 million US dollars in
1992 to 112,697 million US dollars in 2006.
Since the 80’, Spain has needed external financing practically every year because of the growth of
the Spanish economy, the impossibility of devaluing the currency following the introduction of the
euro and the decline in the competitiveness of Spanish exports.

7. Source: INE

8. C/ Labour market
Temporary contracts has been generating a high level of rotation of staff in Spain, which
prevents them from undertaking the necessary training to become more productive. The low
productivity also reflects the insufficient use of new technologies. The reasons are mainly the very
poor expenditures on the Research and Development (R&D) in comparison with the EU-15, even if
there has been an increase. Moreover, the women employment rate was only 80% of the EU rate in
2003 as well as the people having completed the secondary education in 2004.
Even if the unemployment rate has decreased a lot, it still is one of the highest in the EU. The
paradox is that the need in unskilled workforce in the agricultural or construction sector is very high
but Spaniards don’t want to work in these sectors. Indeed, these sector resort to immigration of
workers from poorer countries of South America and Africa.

9. In 1998, the immigration from those continents was around 30,000 persons. In 2007, the number of
immigrants rose to 400,000. Furthermore these figures don’t take into account the illegal workers
which mean that the amount of foreigners living in Spain has become much more.

11. Immigration of foreigners from the foreign countries classified by countries. 1998-2007.
Countries of
Provenance 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
TOTAL 57.195 99.122 330.881 394.048 443.085 429.524 645.844 682.711 802.971 920.534
Europa 25.735 40.327 85.994 112.619 154.589 165.037 234.218 247.112 289.721 373.241
Alemania 7.233 9.500 10.546 10.912 11.348 11.114 11.789 13.508 15.434 16.177
Andorra 64 59 102 108 109 152 231 377 446 486
Bélgica 1.327 1.856 2.262 2.340 2.254 2.199 2.346 2.641 2.624 2.832
Bulgaria 241 658 6.493 11.761 15.842 13.648 17.898 15.453 17.664 26.889
Francia 2.663 3.426 4.285 4.928 5.464 5.994 8.023 9.912 12.165 12.777
Italia 1.652 2.073 2.924 3.800 4.579 5.366 6.637 9.376 12.022 14.635
Paises Bajos 1.061 1.682 2.162 2.390 2.847 3.045 3.883 4.951 5.388 5.199
Polonia 435 810 3.815 3.632 3.838 3.456 6.118 7.165 13.751 15.126
Portugal 1.364 2.015 2.968 3.080 3.634 5.050 8.000 11.966 18.742 25.186
Reino Unido 4.514 7.932 11.007 16.233 25.632 32.148 44.315 41.633 39.497 35.930
Rumanía 503 1.773 17.435 23.276 48.292 54.998 49.487 93.976 111.920 174.149
Rusia 563 1.132 3.544 4.729 4.509 4.578 5.766 6.577 6.652 6.289
Suecia 525 1.248 1.400 1.651 1.626 1.431 1.461 1.719 1.974 2.042
Suiza 740 945 1.233 1.153 1.159 1.130 1.303 1.464 1.728 1.805
Ucrania 184 582 6.271 10.857 10.799 9.065 10.277 8.633 8.635 9.299
Otros Paises 2.666 4.636 9.547 11.769 12.657 11.663 56.684 17.761 21.079 24.420
Africa 13.118 20.248 54.241 55.797 55.156 58.807 89.991 101.295 91.158 109.615
Argelia 652 1.174 3.893 5.172 3.821 3.443 4.634 5.137 5.334 6.301
Guinea Ecuatorial 331 683 1.676 1.118 930 1.265 1.204 1.787 2.373 2.527
Marruecos 10.534 14.843 38.178 39.256 39.930 40.865 58.839 69.288 60.830 71.397
Nigeria 172 893 2.568 2.636 2.453 3.061 4.387 5.259 4.074 4.924
Senegal 290 486 1.827 1.914 2.015 2.821 5.761 5.718 5.659 10.261
Otros Paises 1.139 2.169 6.099 5.701 6.007 7.352 15.166 14.106 12.888 14.205
Asia 2.549 3.587 10.127 11.041 11.559 13.915 25.618 31.725 29.821 39.754
China 1.012 1.622 4.745 5.146 5.606 7.293 14.400 14.729 13.170 16.437
Filipinas 385 483 1.092 1.177 1.201 1.134 1.060 1.653 2.781 3.866
India 233 285 635 819 862 1.272 2.337 3.566 3.558 4.841
Japón 132 182 246 245 276 346 383 519 702 630
Pakistán 272 350 1.642 1.784 1.758 1.703 4.317 7.427 5.428 8.122
Otros Paises 515 665 1.767 1.870 1.856 2.167 3.121 3.831 4.182 5.858
América 15.724 34.863 180.316 214.349 221.580 191.577 170.055 198.091 268.482 284.772
Argentina 1.291 2.163 7.401 18.086 40.628 24.759 23.237 23.664 23.044 21.216
Bolivia 147 500 3.318 4.835 10.562 18.119 35.339 38.349 69.467 46.055
Brasil 879 1.598 4.113 4.283 4.582 7.349 13.017 20.771 28.249 31.838
Canadá 99 141 185 250 297 293 372 455 526 626
Colombia 2.298 7.451 45.868 71.014 34.042 10.888 16.610 20.541 27.864 35.690
Cuba 1.887 3.094 5.284 5.039 4.886 3.903 4.692 5.215 6.936 7.865
Chile 445 744 2.213 3.034 3.933 4.364 5.696 7.301 8.453 8.404
Ecuador 1.954 8.973 91.120 82.571 88.732 72.581 11.936 11.588 14.292 24.647
Estados Unidos 658 1.077 1.502 1.805 2.353 2.561 3.017 3.644 4.402 4.676
México 350 658 1.412 1.798 2.782 2.699 3.268 4.535 4.969 5.371
Perú 2.054 2.898 5.893 7.057 7.884 13.310 12.968 17.095 18.884 24.637
República Dominicana 2.145 2.868 5.552 5.383 5.458 6.558 8.167 10.506 12.291 16.036
Uruguay 221 399 1.350 3.062 7.002 9.266 9.845 7.234 8.059 7.721
Venezuela 921 1.618 3.587 4.257 5.789 10.401 10.208 11.082 10.540 12.096
Otros Paises 375 681 1.518 1.875 2.650 4.526 11.683 16.111 30.506 37.894
Oceanía 69 97 203 242 201 188 270 513 658 526
Australia 55 68 106 141 142 132 180 322 343 382
Otros países 14 29 97 101 59 56 90 191 315 144
País desconocido 0 0 0 0 0 0 125.692 103.975 123.131 112.626
Source: INE

12. Conclusion
Since the entrance of Spain in the EU in 1986, there have been many changes in the structure
of the economy. The annual GDP growth rate has been very high in comparison of the EU-15.
Today, in terms of GDP, Spain is ranked 8th. The ranking of Spain of the Human Development Index
(HDI) which takes into account development parameters is 13th just behind the United States.
There is no doubt that there has been a catching up and even though it is not possible to know exactly
the impact of the entrance in the EU, it is evident that Spain has taken advantage of the EU.
However, from now on, Spain will be facing new challenges in the present environment.
Source: UNDP

13. II/ The current situation of Spain
The enlargement of 12 new countries since 2004 has had an influence and it is now the turn
of Spain to help those countries as well. The 21st century will also be the century of the awareness of
the environment. Finally, like all the countries, Spain is facing the current financial crisis and
managing that does not seem simple.
A/ Facing the enlargement
The enlargement process has been contributed to the trade deficit. The variation of
imports from the 10 countries that joined the EU in 2004 was 304.9 % when the variation of
the EU-15 rose of only 104.7% during the same period. But in the same time, the exports of
Spain to those countries rose only of 58.8% (in comparison of the 95.4 % for the EU-15).
Regarding the Foreign Direct Investment (FDI), it seems like the investors are more attracted
to the new less-developed countries in spite of Spain. Furthermore, the off shoring is more
frequent toward these countries.
As we have seen before, the European Union aids for development go more and more
towards those countries and less to Spain.
B/ The environmental issue
Spain has been making important efforts to reduce CO2 emissions but in comparison
with the other European Countries, there still is more effort to do.
Today, the challenge for Spain is to reduce its dependency on oil, diversify its energy
sources, making greater use of renewable energies, and improve consumption efficiency.

14. Protocol.
Greenhouse Gaz emisions (year base: 1990)
%

15. Source: eurostat
C/ The impact of the crisis
The long expansion of economic activity can be broadly attributed to a combination of positive
shocks, such as a sustained credit expansion and strong immigration, together with sound choices in
monetary and fiscal policies in the framework of the accession to the monetary union.
Significant imbalances emerged however during the expansionary phase: an oversized housing sector
a high indebtedness of private agents, households and firms, coupled with insufficient productivity
growth, has hurt the competitiveness of the Spanish economy.
Employment prospects reflect the picture for economic activity in general. According to
BBVA, in 2009, 750000 jobs will be destroyed and the unemployment rate will reach 15.4% when
the European Commission forecast the same rate for 2010.

16. Source: European Comision

17. Conclusion
“Within the European Union we want to lead initiatives and adapt, when necessary, the current
framework of multilateral institutions to make them serve these objectives. [support trade. adapt the
welfare state to suit new circumstances (globalization). Rather than deregulation, we want clear and
efficient rules so that the market will develop its potential without violating the principles of equity
and justice] “ (José Luis Rodríguez Zapatero).
The Spanish economy has developed very quickly during the last 40 years. Some structural weakness
remain but if the government manages to reduce the trade deficit and boost the productivity, Spain
could face the crisis in a few years. Moreover, Spain plays an important role in the EU today and
together with the other State Members, they can make the EU quot;the most dynamic and competitive
knowledge-based economy in the world capable of sustainable economic growth with more and
better jobs and greater social cohesion, and respect for the environment by 2010quot;.
Maybe not in 2010 but still…

19. Annex

20. Unemployment rate by gender; Total Real GDP growth rate
% Growth rate of GDP volume - percentage change on previous year
geotime 1998 2002 2006 geotime 1998 2002 2006 2007 2008 2009
EU (27 countries) : 8.9 8.2 EU (27 countries)
3.0 1.2 3.1 2.9 2.0 1.8
Euro area 10.0 8.3 8.3 Euro area 2.8 0.9 2.9 2.6 1.7 1.5
Belgium 9.3 7.5 8.3 Belgium 1.7 1.5 3.0 2.8 1.7 1.5
Bulgaria : 18.2 9.0 Bulgaria 4.0 4.5 6.3 6.2 5.8 5.6
Czech Republic 6.4 7.3 7.2 Czech Republic
-0.8 1.9 6.8 6.0 4.7 5.0
Denmark 4.9 4.6 3.9 Denmark 2.2 0.5 3.9 1.7 1.3 1.1
Germany 9.1 8.4 9.8 Germany 2.0 0.0 3.0 2.5 1.8 1.5
Estonia 9.2 10.3 5.9 Estonia 5.4 7.8 10.4 6.3 2.7 4.3
Ireland 7.5 4.5 4.5 Ireland 8.4 6.4 5.7 6.0 2.3 3.2
Greece 10.8 10.3 8.9 Greece 3.4 3.4 4.5 4.0 3.4 3.3
Spain 15.0 11.1 8.5 Spain 4.5 2.7 3.9 3.7 2.2 1.8
France 11.0 8.6 9.2 France 3.5 1.0 2.2 2.2 1.6 1.4
Italy 11.4 8.6 6.8 Italy 1.4 0.5 1.8 1.5 0.5 0.8
Cyprus : 3.6 4.6 Cyprus 5.0 2.1 4.1 4.4 3.7 3.7
Latvia 14.3 12.2 6.8 Latvia 4.7 6.5 11.9 10.2 3.8 2.5
Lithuania 13.2 13.5 5.6 Lithuania 7.5 6.9 7.8 8.9 6.1 3.7
Luxembourg 2.7 2.6 4.6 Luxembourg .5
6 4.1 6.4 5.2 3.6 3.5
Hungary 8.4 5.8 7.5 Hungary 4.8 4.1 4.1 1.1 1.9 3.2
Malta : 7.5 7.1 Malta : 2.6 3.1 3.7 2.6 2.5
Netherlands 3.8 2.8 3.9 Netherlands3.9 0.1 3.4 3.5 2.6 1.8
Austria 4.5 4.2 4.8 Austria 3.6 1.6 3.4 3.1 2.2 1.8
Poland 10.2 20.0 13.9 Poland 5.0 1.4 6.2 6.6 5.3 5.0
Portugal 5.0 5.1 7.8 Portugal 4.9 0.8 1.4 1.9 1.7 1.6
Romania : 8.6 7.3 Romania : 5.1 8.2 6.0 6.2 5.1
Slovenia 7.4 6.3 6.0 Slovenia 3.6 4.0 5.9 6.8 4.2 3.8
Slovakia 12.6 18.7 13.4 Slovakia 4.4 4.8 8.5 10.4 7.0 6.2
Finland 11.4 9.1 7.7 Finland 5.2 1.6 4.9 4.5 2.8 2.6
Sweden 8.2 4.9 7.0 Sweden 3.8 2.4 4.1 2.7 2.2 1.8
United Kingdom 6.1 5.1 5.4 United Kingdom
3.6 2.1 2.8 3.0 1.7 1.6
Croatia : 14.8 11.2 Croatia 2.5 5.6 4.8 5.6 4.5 5.0
Macedonia, the former Yugoslav Republic :of
: : Macedonia,3.4 former 0.9
the Yugoslav Republic of 5.1
4.0 4.8 5.5
Turkey : : 8.4 Turkey 3.1 6.2 6.9 4.5 4.3 4.7
Iceland : : : Iceland 6.3 0.1 4.4 3.8 1.3 0.4
Norway 3.2 3.9 3.5 Norway 2.7 1.5 2.5 3.7 2.5 2.1
Switzerland : : : Switzerland2.6 0.4 3.4 3.3 2.2 2.2
United States 4.5 5.8 4.6 United States
4.2 1.6 2.8 2.0 0.9 0.7
:=Not available b=Break in series
Source of Data: Eurostat

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