SPAIN - ECONOMY

Spain’s mixed capitalist economy supports a GDP that on a per capita basis is 87% that of the four leading West European economies. The center-right government of former Prime Minister Aznar successfully worked to gain admission to the first group of countries launching the European single currency, the euro, on 1 January 1999. The Aznar administration continued to advocate liberalization, privatization, and deregulation of the economy and introduced some tax reforms to that end. Unemployment fell steadily under the Aznar administration but remains high at 9.8% as of August 2005. Growth of 2.4% in 2003 was satisfactory given the background of a faltering European economy. The Prime Minister Rodríguez Zapatero, whose party won the election three days after the Madrid train bombings in March 2004, plans to reduce government intervention in business, combat tax fraud, and support innovation, research and development, but also intends to reintroduce labour market regulations that had been previously scrapped by the Aznar government. Adjusting to the monetary and other economic policies of an integrated Europe - and reducing unemployment - will pose challenges to Spain over the next few years. According to World Bank GDP figures from 2004, Spain has the 8th largest economy in the world. There is general concern that Spain’s model of economic growth (based largely on tourism, the construction industry, and manufacturing sectors) is faltering and may prove unsustainable over the long term. The first report of the Observatory on Sustainability (Observatorio de Sostenibilidad), published in 2005 and funded by Spain’s Ministry of the Environment and Alcalá University, reveals that the country’s per capita GDP grew by 25% over the last ten years, while greenhouse gas emissions have risen by 45% since 1990. Although Spain’s population grew by less than 5% between 1990 and 2000, during that time period, urban areas expanded by 25%. Meanwhile, Spain’s energy consumption has doubled over the last 20 years and is currently rising by 6% per annum. This is particularly worrying for a country whose dependence on imported oil (meeting roughly 80% of Spain’s energy needs) is one of the greatest in the EU. Large-scale unsustainable development is clearly visible along Spain’s Mediterranean coast in the form of housing and tourist complexes, which are placing severe strain on local land and water resources.