Spain and the United States - Real Instituto Elcano

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LOOKING AHEAD 125 lifting of the EU sanctions against Cuba, but only 37% viewed the support for Chávez as positive. In other Latin American and Caribbean countries – Bolivia, Ecuador and Haiti – Spain has been helpful in crisis situations. Spain’s Foreign Ministry coordinated with the US State Department on ways to resolve the political crises in Bolivia and Ecuador, which saw the departure of both countries’ presidents in 2005. In Haiti, Spain is part of the Brazilian-led UN peacekeeping force. Spain also has a capacity to act as a kind of broker in crisis situations in the Middle East, as its image is generally good in Arab countries and also in some quarters of Israel. Spain’s two main political parties are now widely in disagreement over foreign policy, particularly that towards the United States. According to Elcano’s June 2005 barometer, 86% of respondents believe the Socialists and the PP are in disagreement over the United States. Foreign policy has become much more of a domestic political issue. FAES, the PP’s think tank, is very active in aggressively denouncing the Socialists’ foreign policy. A victory by the PP in the next general election, to be held by 2008, could well see a swing back towards a more pro-Atlanticist foreign policy; however, given the profound opposition to the war in Iraq and the electoral setback for the PP in 2004 (largely because of its support for the war), a future PP government would probably not go as far as the last one did in the event of further military incursions. By moving closer to the United States, the PP was striving for “major player” status for Spain, but opinion polls suggest that most Spaniards do not want to move in this direction. This means that however good an understanding there is between the Spanish and US governments, as long as it is rejected by the majority of Spaniards, Madrid will always be in a position of weakness in the face of Washington and will not be fully trusted. On the economic front, the future of US direct investment in Spain, indeed of all foreign investment, is closely linked to the long-term direction of the Spanish economy and to demographics, a factor that tends to be overlooked but which is very important because of its implications for the supply of labour, demand and consumption in the domestic market. Foreign direct investment in Spain as a whole is on a downward trend. Inflows amounted to $35.9 billion in 2002, $25.6 billion in 2003 and $9.9 billion in 2004, according to the OECD. Excluding the investment in special-purpose entities (SPEs, financial companies set up to act as a conduit for investment), Spanish inward investment in 2004 was less than $1 billion, compared with inflows in the range of $7-9 billion in the years immediately before. Spain is one of the EU economies that has grown the fastest over the past decade, in stark contrast to the relative slackness of the area as a whole. Real
126 SPAIN AND THE UNITED STATES Exhibit 7.1 Real GDP Growth in Spain, the EU-25 and the United States, 1996-2006 GDP growth between 1996 and 2004 averaged 3.5%, slightly above that of the US economy and compared with 2.2% for the EU-25 (see Exhibit 7.1). The boom is fuelled by buoyant private consumption, particularly a dynamic construction sector. Employment has risen strongly: 400,000 new jobs in 2004, one-third of all new jobs in the Euro zone. As a result of the huge influx of immigrants (who are doing the jobs that Spaniards are no longer willing to do), the National Statistics Office had to revise Spain’s 2004 gross domestic product figure upwards by almost 40 billion to 837.5 billion. Household wealth (and indebtedness) has also risen significantly, largely linked to the surge in real estate values (145% between 1997 and 2005, only surpassed by South Africa, Ireland and Britain). 2 However, there are several structural shortcomings, most notably a steady decline in competitiveness, which is manifested in all international surveys. Spain slipped from 31 st to 38 th position out of 60 nations in the 2005 competitiveness ranking of the IMD, just ahead of India and behind Hungary. Since 2001, Spain has fallen 14 places. The country declined in all four of the competitiveness factors, particularly in government and business efficiency (see Exhibit 7.2). Externally, Spanish products are facing growing difficulties in maintaining their market share. Spain’s share of exports in foreign markets, which have held steady since the launch of the euro in 2002, tended to decline in 2004, even in the European market. The current account deficit in 2004 (with no signs of a change of trend in 2005) was a record 40 billion (5% of GDP) because of low export growth, ballooning imports and a tourism sector, the economy’s mainstay, which is beginning to suffer from more competitive prices in other countries. External, as opposed to domestic, demand is making an increasingly negative contribution to GDP growth. 2. See “In Come the Waves” (The Economist, June 18, 2005).
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Spain and the United States The Que
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Published by the Real Instituto Elc
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ACKNOWLEDGEMENTS This is the third
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CONTENTS Preface ..................
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PREFACE Once again, our long-time c
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CHAPTER 1 OVERVIEW Had it not been
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OVERVIEW 13 French of more than two
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OVERVIEW 15 committed Protestant, a
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OVERVIEW 17 money was used to purch
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OVERVIEW 19 Later, the runway at Ro
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OVERVIEW 21 a much more balanced re
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OVERVIEW 23 The position of the Eis
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OVERVIEW 25 The first such school i
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OVERVIEW 27 significant proportion.
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OVERVIEW 29 3,631 in 2003 (the four
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OVERVIEW 31 forces were not happy a
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OVERVIEW 33 It is fair to say that,
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OVERVIEW 35 sovereign Basque state)
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OVERVIEW 37 by those countries for
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OVERVIEW 39 was the main instigator
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OVERVIEW 41 magnitude needed in a
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OVERVIEW 43 The Spanish decision in
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OVERVIEW 45 There was a flurry of v
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54 Some US companies in Spain SPAIN
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