Economic history of Spain

After defeating Carthage in the Second Punic War, the Romans governed all of the Iberian Peninsula for centuries, expanding and diversifying the economy and extending Hispanic trade with the greater Republic and Empire.

Meanwhile, in the countryside, where most people had always lived, life went on much as it had in Roman times, but with improvements due to the repair and extension of irrigation systems, and the introduction of novel crops and agricultural practices from the Islamic world.

Gold and silver bullion from American mines were used by the Spanish Crown to pay for troops in the Netherlands and Italy, to maintain the emperor's forces in Germany and ships at sea, and to satisfy increasing consumer demand at home.

The sale of titles to entrepreneurs who bought their way up the social ladder (a practice commonly found all over Europe), removing themselves from the productive sector of the economy, provided additional funds.

"[2] Despite the fact that the Spanish economy in this period had obtained cheap inputs from the colonization process which provided different advantages, it had not led to sustainable economic growth.

In some sense this prevented the effective investment process, especially because overtime state participation had started to increase in order to meet rising expansion costs.

Country was moving along the path of absolutism and the crown had continued to utilize its power and increase taxes for global expansion, including unsuccessful wars.

At the beginning of the 20th century, Spain was still mostly rural; most of the large-scale, modern industry existed as textile mills around Barcelona in Catalonia and in the metallurgical plants of the Basque provinces and some shipyards around the country.

The Bank of Spain (Banco de España) was still privately owned, and its public functions were restricted to currency issuance and the provision of funds for state activities.

A General, Miguel Primo de Rivera, was appointed prime minister by the king after a successful coup d'état and for seven years dissolved parliament and ruled through directorates and the aid of the military until 1930.

Protectionism, the Spanish neutrality during World War I (which allowed the country to trade with all belligerents) and state control of the economy led to a temporary economic recovery.

According to recent research,[10] growth is harmed during civil wars due to the huge contraction on private investment, and such was the case with the Spanish divided economy.

Then, after a decade of economic stagnation, a tripling of prices, the growth of a black market, and widespread deprivation, gradual improvement began to take place.

In return for permitting the establishment of United States military bases on Spanish soil, the administration of President Dwight D. Eisenhower provided substantial economic aid to the Franco regime.

[11] During the 1957-59 period, known as the pre-stabilization years, economic planners contented themselves with piecemeal measures such as moderate anti-inflationary stopgaps and increases in Spain's links with the world economy.

These bodies immediately became involved in helping Spain to abandon the autarkical trade practices that had brought its reserves to such low levels and that were isolating its economy from the rest of Europe.

The resultant economic slump and reduced wages led approximately 500,000 Spanish workers to emigrate in search of better job opportunities in other West European countries.

The principal lubricants of the economic expansion, however, were the hard currency remittances of one million Spanish workers abroad, which are estimated to have offset 17.9% of the total trade deficit from 1962 to 1971; the gigantic increase in tourism that drew more than 20 million visitors per year by the end of the 1960s, accounting by then for 9% of GNP; a car industry that grew at a staggering compound rate of 21.7% per year from 1958 to 1972; and direct foreign investment, which between 1960 and 1974 amounted to an impressive US$7.6 billion.

[15] Many anarchists, communists and leftists turned towards insurgent tactics as Franco implemented wide reaching authoritarian policies, with the CNT and other unions being forced underground.

Finally, he chose Carlos Arias Navarro, who originally announced a partial relaxation of the most rigid aspects of the Francoist State, but quickly retreated under pressure from the búnker.

Nonetheless, the interim centrist government of Adolfo Suarez Gonzalez, which had been named to succeed the Franco regime by King Juan Carlos, did little to shore up the economy or even to reduce Spain's dependence on imported oil, although there was little that could be done as the country had little in the way of hydrocarbon deposits.

Government budgetary deficits swelled, as did large social security cost overruns and the huge operating losses incurred by a number of public-sector industries.

[11] When the Spanish Socialist Workers' Party government headed by Felipe González took office in late 1982, inflation was running at an annual rate of 16%, the external current account was US$4 billion in arrears, public spending was large, and foreign exchange reserves had become dangerously depleted.

The government launched an industrial reconversion program, brought the problem-ridden social security system into better balance, and introduced a more efficient energy-use policy.

[11] A prime force generating rapid economic growth was increased domestic demand, which grew by a steep 6% in 1986 and by 4.8% in 1987, in both years exceeding official projections.

He also lobbied successfully for Spain to join the European Economic Community (EEC) and to remain part of the North Atlantic Treaty Organization (NATO).

The single market and European funding offered a chance to bring the Spanish economy up to the standards of the rest of Western Europe, along with the support of Spain's wealthier neighbors.

However the economy began to recover during the first José María Aznar administration (1996-2000), driven by a return of consumer confidence, increased private consumption and liberalization and deregulation reforms aiming to reduce the state's role in the market place.

The Spanish economy was being credited for having avoided the virtual zero growth rate of some of its largest partners in the EU (namely France, Germany and Italy) in the late 1990s and at the beginning of the 21st century.

[33] A Eurozone official told Reuters in July 2012 that Spain conceded for the first time at a meeting between Spanish Economy Minister Luis de Guindos and his German counterpart Wolfgang Schaeuble, it might need a bailout worth 300 billion euros if its borrowing costs remained unsustainably high.