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Political and legal environment facing a business in spain

The pain in Spain: During the years 1995-2007, Spain recorded a long period of strong growth which was partly based on a credit-driven domestic demand boom resulting from the creation of the Euro. Very low real interest rates triggered the accumulation of high domestic and external imbalances as well as an unprecedented real estate bubble. At its peak in 2007, the construction sector accounted for 16 percent of GDP and 12 percent of Spanish jobs.

The sharp correction of that boom as of 2008 in the context of the international financial crisis has led to a double-dip recession and a spectacular increase in unemployment, which has tripled in five years from 8 percent in 2007 to 24 percent in 2012. Youth unemployment those aged 16 to 24 reached a staggering 51 percent in mid-2012 though this figure does not take into account those who are studying and others not actively seeking work. Private sector deleveraging implies subdued domestic demand in the medium term.

Furthermore, sizeable external financing needs have increased the vulnerability of the Spanish economy. A shift to durable current account surpluses will be required to reduce external debt to a sustainable level. Public debt is increasing rapidly due to persistently high general government deficits since the beginning of the crisis, combined with the shift to a much less tax-rich growth pattern.

  1. After growing a very modest 0.
  2. The main provisions of the 450 pages long document covering 28 separate agreements are according to "The Economist" December 1993 1; as follows. Rod Batiz, president of the 20 thousand member Confederation of Agriculture Association, was quoted in the "Wall Street Journal" as saying, "The whole of Mexico feels stabbed in the back".
  3. The BTN groups articles mainly according to the material from which they are made.
  4. From a Spanish perspective, this has not come as a surprise, however.

The challenges facing large segments of the banking sector continue to bear negatively on the economy as the credit flow remains constrained. In particular, unhealthy exposure to the real estate and construction sectors have eroded investor and consumer confidence.

As the linkages between the banking sector and the sovereign have increased, a negative feedback loop has emerged. Consequently, the restructuring and recapitalization of banks is the key to mitigating these linkages, increasing confidence, and spurring economic growth.

The new Spanish government, which came to office in December 2011, has initiated numerous reforms in an attempt to deal with the crisis. On the fiscal front, two major reform packages were announced by the Spanish government, in December 2011 and July 2012. The most controversial measure adopted by the new government was undoubtedly its February 2012 labor reform, which made it easier and cheaper to fire workers, including those employed in the public sector.

The government is also seeking to restrict access to early and partial retirement, and to accelerate the raising of the legal retirement age from 65 to 67, already contemplated in the 2011 pension reform adopted by its Socialist predecessor. Furthermore, the executive has introduced a number of liberalizing measures aimed at stimulating domestic consumption; for example, supermarkets will be free to determine their opening hours.

  • The growth of economic unions like the EU which are limited multilateral organisations have undermined the strength of GATT agreements but only in so far as non-tariff barriers are concerned;
  • The treaty provides that if a filee files in a signatory country within one year of the first filing, the filee will be afforded the date of the first filing for priority purposes;
  • These are specific limits and controls.

Plans are also underway for further, potentially far-reaching reforms, such as the liberalization of railway transport. Overall, these reforms could lead to a significantly better medium-term outlook. After growing a very modest 0. This will make it difficult if not impossible for the government, which inherited a budget deficit of 8. On 25 July, ten-year government bond yields reached a record 7.

The European Central Bank responded in early September by announcing that it would buy unlimited amounts of Spanish bonds if the government applied for help from the Euro zone rescue fund, bringing yields down below 6 percent for the first time since April.

The Spanish authorities, however, were in no hurry to submit an application. One reason for this was the widely-held view that it is virtually impossible for a government to survive the political fallout resulting from a bailout. Most importantly, perhaps, it was widely feared that a bailout would entail further austerity measures requiring additional painful budget cuts that could well prove counterproductive.

Strategic and international studies

In spite of its surprisingly successful delaying tactics, it is generally assumed that the government will be forced to request the ECB to start purchasing Spanish debt in the secondary markets in the course of 2013.

In the longer term, a determined effort at the European level, aimed at improving the incomplete governance structure of the Euro, will be essential to ensure that the reforms and adjustments implemented in Spain and in other southern European countries are effective. This effort should include a full banking union, a more dynamic European Central Bank capable of acting consistently as a lender of last resortand some form of limited debt mutualization.

The PP, on the other hand, won 44 percent of the vote and 186 seats, ten more than it needed to secure an absolute majority 176 in the Spanish lower house, its best result ever. In short, Prime Minister Rajoy came to office in December 2011 with considerable popular support. Whether or not he also enjoyed a clear mandate from the Spanish people is debatable, particularly given his reluctance to provide details as to his economic programme during the election campaign.

Some analysts have claimed that, given the magnitude of the economic crisis, the two major parties which jointly account for 72 percent of the vote and 290 out of 350 parliamentary seats should try to reach a broad consensus on major policies, and in particular, on the major reforms that the EU expects Spain to implement in order to meet its obligations as a Euro zone member.

Others, however, believe it preferable for a recently-elected government that enjoys a comfortable parliamentary majority not to seek to share responsibility with other parties, since this would deprive the electorate of a viable alternative should political and legal environment facing a business in spain policies prove unsuccessful. To complicate matters further, the major opposition party is experiencing significant difficulties of its own. This is not entirely surprising, given the magnitude of the defeat it suffered in the recent general election.

Inevitably, Rubalcaba, who was elected party leader in February 2012, is tainted by his former association with Zapatero, whom many voters hold at least partly responsible for the depth of the current crisis.

In the regional elections held in Asturias on the same day, both the PSOE and IU did significantly better than they had done in the 2011 general election. However, the Socialists did not fare well in the regional elections held in the Basque Country and Galicia in October 2012; in the latter, the PP was able to attract an impressive 45 percent of the vote, while the PSOE came a very distant second, with only 20 percent of the ballots cast.

The untoward behaviour of the president of the Supreme Court, who was forced to resign in June 2012 after a month-long scandal concerning his use of public funds, brought public support for the judiciary, which was not very strong to begin with, down to an all-time low. The crisis has also affected the monarchy. In the past, the popularity of the king and the institution he embodies increased in times of crisis, presumably because they were perceived as being above the political fray.

Strategic and international studies

This became a serious political issue as a result of the accident suffered by King Juan Carlos during a hunting trip to Botswana in April 2012, which later resulted in a hip operation.

Although the king publicly apologised for his behaviour, many Spaniards obviously disapproved of him going on expensive holidays at a time when his countrymen were suffering the consequences of recession and unemployment.

  1. Furthermore, sizeable external financing needs have increased the vulnerability of the Spanish economy. Selective monetary controls and discriminatory exchange rate policies Discriminatory exchange rate policies distort trade in much the same way as selective import duties and export subsidies.
  2. After failing to meet two deadlines in 1990 and 1991, many thought the Uruguay round would never be concluded. Such a checklist should include the following.
  3. The impact of the crisis on foreign policy The current economic crisis is having a significant impact on Spanish foreign policy in at least three ways. Furthermore, the crisis has led them to concentrate their efforts on improving investment and commercial ties in the region, to the detriment of other, longer-term concerns.

Furthermore, this came at a time when his son-in-law was under investigation for tax fraud and embezzlement of public funds. Citizens blame them, whatever their ideology, for their poor handling of the crisis, for not having regulated the financial sector adequately, for undermining the credibility of hitherto highly-respected institutions such as the Bank of Spain, for politicizing the management of savings banks cajas de ahorrowhich were traditionally held in high esteem by the population at large, and for a housing boom which is partly attributed to corrupt practices at the local government level.

In some quarters, the existence of seventeen autonomous political and legal environment facing a business in spain is increasingly being seen as an expensive luxury that Spain can no longer afford assuming it ever could. It has thus become commonplace to accuse politicians at the regional and municipal levels of spending well beyond their means in their never-ending efforts to curry favour with voters. This type of criticism, which naturally feeds on the numerous corruption scandals involving local and regional politicians that have political and legal environment facing a business in spain the headlines in recent years, is of course most widespread in those regions and sectors of society in which support for political devolution was never particularly strong in the first place.

Predictably, the crisis has also fuelled centre-periphery tensions, which were already quite significant to begin with. Given that neither the Spanish Constitution of 1978 nor the Catalan statute of Autonomy revised in 2006 allow for a referendum of this nature, relations between the Barcelona and Madrid governments will presumably remain fraught in the foreseeable future.

Since coming to office, Rajoy has been extremely reluctant to meet UGT and CCOO leaders, let alone engage in serious discussion of his policies with them. To some extent, this reflects specific tactical dilemmas: The impact of the crisis on foreign policy The current economic crisis is having a significant impact on Spanish foreign policy in at least three ways.

More specifically, by seeking assistance from abroad in order to deal with its own economic difficulties, its leaders are acknowledging that they are no longer in a position to govern effectively by themselves. In spite of the above, it is important to note that the reputation and prestige of a modern, complex nation-state are neither built up nor destroyed overnight.

The Spanish Armed Forces had already lost 20,000 troops during the previous six years. Spain put an end to its 18-year presence in Bosnia-Herzegovina in November 2011.

This should at least allow the government to honour its commitment to ISAF; the Spanish contingent in Afghanistan, currently numbering some 1,500 troops, is scheduled to decrease by 10 percent in 2012 and by a further 40 percent in 2013, prior to its complete withdrawal in 2014.

The latest National Defence Directive is striking for its distinctly unilateralist tone. In August 2012, the Foreign Ministry announced it would be closing its embassies in Yemen and Zimbabwe, with the result that in future Spanish interests there will be handled by the EU delegations in these countries.

This type of measure should allow the ministry —which suffered an unprecedented 54 percent budget cut in March 2012- to concentrate its rapidly diminishing resources in countries and policies where they may be deployed to maximum effect.

It is also seeking to make up for the fact that 47 embassies and 54 consulates currently lack a commercial office by encouraging diplomats to take on new responsibilities in this sphere.

Strategic and international studies

Spending in this area has been reduced dramatically from 0. Although the government has yet to publish its ODA goals for 2013-16, it clearly aims to concentrate the limited resources currently available in those countries with strongest political and cultural ties to Spain, most notably in Latin America, the Caribbean and the Maghreb, to the detriment of other generally poorer regions, such as sub-Saharan Africa.

Nevertheless, it should be noted in this regard that an increase in ODA spending, however significant, does not necessarily result in more effective aid, political and legal environment facing a business in spain does it guarantee an immediate political return for the donor country.

Many experts have questioned the vision and effectiveness with which these vastly increased resources were allocated by Spanish ODA authorities in recent years, and the sharp decrease in funds should ensure that a serious attempt is made to disburse these scant resources more efficiently. Given that companies from other major Western nations have been treated in a similar fashion by the Argentine authorities in the past, however, this argument is far from water-tight.

To begin with, many analysts would argue that Spain had already lost visibility and influence within the EU in the course of the past decade, even when its economy was growing considerably faster than the EU average. If Spain was punching above its weight then, today the opposite might well be the case.

On the whole, however, both elite and popular commitment to the European project remains strong, in spite of the hardships incurred as a result of the austerity measures and structural reforms which are largely perceived as an external imposition. Unlike Greece, Spain does not have to worry about xenophobic far-right parties seeking to take advantage of the crisis to increase their popularity, and there have been no significant expressions of anti-German feeling, either at the elite or the popular level.

Interestingly, the crisis does not appear to have strengthened existing ties amongst the southern European member states, as might have been expected. From a Spanish perspective, this has not come as a surprise, however. Madrid has never enjoyed a particularly close relationship with Athens, either bilaterally or within the EU.

Given certain similarities between the two countries, they might have been expected to work well together both bilaterally and at the EU level, but this has not generally been the case. Spanish elites suffer from a curious superiority complex when it comes to dealing with their Italian counterparts, and the received wisdom in Spanish diplomatic circles is that, brilliant and creative though they may be, their Italian colleagues rarely deliver as promised.

However, Rajoy is a somewhat parochial politician, who speaks no foreign languages and has limited European experience, and his efforts to establish a good rapport have met mixed success. All of this may explain why Rajoy has seemed curiously content to allow Monti to fight his corner for him, even though Spanish and Italian interests are by no means identical.

Latin America and the Mediterranean Even before the economic crisis, Madrid was already experiencing difficulties in the two non-European regions of greatest importance to Spain. For well-known cultural, political and economic reasons, Spain has traditionally set great store by its relations with Latin America, a region which currently receives a quarter of its investments and more than a third of its development aid.

  • Increasingly, consumer and trading bodies like the EU are enforcing the disclosure of more and more information;
  • Countries will also find it harder to dissent from judgements;
  • Selective monetary controls and discriminatory exchange rate policies Discriminatory exchange rate policies distort trade in much the same way as selective import duties and export subsidies;
  • The establishment and enforcement of standards can reduce transaction costs by increasing the available information to buyers and consumers.

While this may have served a useful purpose twenty years ago, today it may represent more of a hindrance than an asset, for it has prevented Spanish policymakers from coming to terms with the major changes currently taking place in the region. This is partly a consequence of successive EU enlargements, which brought to the table new member states that either had no interest in the region or proved reluctant to accept Spanish leadership. Given all of the above, and taking into account the impact of the economic crisis, it is likely that in coming months and years Spain will devote less time and energy to EU-Latin America relations in order to concentrate on its strictly bilateral links with a handful of trusted political and economic partners, most notably Mexico, Brazil, Chile, Colombia and Peru.

Spain has traditionally been seen as a major player in the region, and its contribution to the Barcelona process in the 1990s was widely acknowledged. In spite of the above, the Zapatero government was quite warm in its reaction to developments in Tunisia and Egypt, which were greeted with enthusiasm by Spanish public opinion. At the same time, the Spanish executive was distinctly cautious about developments in Libya and Syria, and much less assertive than other EU member states in demanding a change of regime there.

More surprisingly, perhaps, Spain has not played a vanguard role in attempting to involve the EU more actively in the region. Policymakers understand that the new context offers an opportunity for Spain to recover some of its former influence, but have tended to favor bilateral rather than multilateral initiatives.

Furthermore, the crisis has led them to concentrate their efforts on improving investment and commercial ties in the region, to the detriment of other, longer-term concerns. This somewhat disingenuous attempt to justify a major foreign policy reversal on the flimsiest of economic grounds did not go down well with Spanish public opinion, however. Although the decision was well-received by the then leader of the conservative opposition, subsequent negotiations between Washington and the new Rajoy government concerning the details of the agreement proved laborious, though an agreement was finally reached in October 2012.

However, the deal has yet to be debated in parliament, where it may meet some opposition from left-wing parties.

As in other parts of Europe, in Spain political elites are under the growing impression that the US is distancing itself from Europe, and that the economic crisis has strengthened and accelerated this dynamic. More importantly, while they may still pay lip-service to the importance of the transatlantic relationship, Spanish elites are generally under the impression that the crisis is weakening economic transatlantic cooperation.

However, both elites and the public at large generally feel that there is little the US Administration can do to overcome the current impasse, which is perceived as an almost exclusively European stalemate which only European actors will be able to resolve if at all. In spite of the above, Spanish policymakers are well aware of the importance of the economic relationship with the US.