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Spain's Transition to the European Union

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Introduction

Spain's Transition to the European Union Over the last 35 years Spain has developed from an agricultural and rural country into a flourishing nation with a diversified economy made up of a strong manufacturing and service sector. During the 1960's and the early 1970's the growth of the Spanish economy was 7% per annum with a per capita income of on average $500. This altered Spain's image more towards a developed nation. Spain's entrance into the European Union has largely boosted Spain's success and prosperity. After decades of dictatorship, Spain wished to achieve credibility in the political spectrum and saw EU membership as a means of solidifying its shift to democracy. Furthermore EU membership represented a new chapter in the history of Spain, making a clear distinction from the country's past. On the economic side, joining the EU meant access to the EU's agricultural market as well as potential gains from attracting foreign direct investment. Additionally Spain's decision to apply for EU membership was also driven by the large amounts of structural funds that Spain would receive once membership was granted. ...read more.

Middle

One of the party's main objectives was to make tremendous efforts in changing the situation of Spain in aims of attaining EC membership through modernization. The Gonzalez government had made an aggressive move to sell off its state-owned enterprises. This dramatically reduced Spain's public sector borrowing requirement and helped trim inflation. Spain was in the process of major national restructuring in order to create privatized newly reoriented and recapitalized enterprises that could eventually become corporations capable of world-class economic performance. In the past the majority state ownership of economic enterprises had crowded out private sector enterprises and initiative, raised costs for goods and services, and created manufacturing and service industries that were in capable of competing efficiently and effectively in international markets. Many of these state controlled enterprises date back to the 1930s. Franco had founded a massive agglomeration of state-owned commercial entities, the Instituto Nacional de Industria (INI). This hugely diverse enterprise consisted of over 150 industrial and service companies which were active in many fields such as electronics, steel, shipbuilding, aerospace and defence production and dominated for decades various sectors of the Spanish economy including manufacturing, mining, and transport. However by the 1980's INI was outdated and largely inefficient. ...read more.

Conclusion

As a result for a decade now, Spain's performance has been impressive. GDP growth increased to 2.7% in 2004 and is expected to rise to 3% in 2006, enabling a real convergence with other EU members. This is highlighted by the fact that the initially huge lag in Spain's standard of living compared with other EU countries has narrowed from 20% below the average to less than 13% during 1995 to 2003. The public debt to GDP ratio and inflation has also diminished along with reduced unemployment from 23% to 15% in 3 years. The main challenges remaining for Spain now include further reducing the public sector deficit, reforming labour laws and investment regulations. Though Spain's per capita income has to be further boosted since it is still low compared to the EU average, it is far above countries like Greece, Portugal and Ireland. Unemployment which is significantly lower than previously still remains a problem at 10.5%. And inflation which still stands above the euro area average is eroding Spain's competitiveness and must be reduced. Specifically, maintaining economic stability and competitiveness while advancing further convergence signifies a difficult task, as this demands speeding up structural reform. ...read more.

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