Spain dodges problems of joblessness, EC entry
Like a bullfighter who dodges his opponent with light-footed speed, Spanish leaders hope to avoid the horns of two problems pawing the ground before them. One is rising opposition to the country's expected entry into the Common Market by 1983, and the other is an unemployment rate climbing so fast that some economists wonder why havoc does not mainly reign in Spain.
Unemployment has quickly topped 14 percent, and still the economy dances along like a flamenco. This year, for instance, Spain is enjoying its second best year in tourism (the main foreign exchange earner), with almost as many visitors as there are Spaniards (38 million). And the gross national product chugs along at over 2.5 percent growth, one of Europe's highest rates in a period of stagnation.
But next year's public spending deficit is projected to grow 27 percent. This is caused mainly by rising unemployment benefits given to emigrant workers returning from recession-hit Western European nations. The government's chief concern had beeninflation which, with union help, dropped from an official 27 percent to 14.5 percent in just four years. But now joblessness is the target.
To create jobs, the main long-term answer is development of Spain's poor, rural regions, which provide many of the emigrants. Such a solution also helps attack another problem.
In the few years that Spain has tried to graft a parliamentary democracy onto a Fascist economy, the greatest source of political tension has been regional conflicts, the most noticeable being Basque terrorism.
In Catalonia, the Basque country, and Madrid - the area known as Spain's industrial triangle - personal incomes are an estimated 25 percent higher than other regions, and development is considered saturated.
In June, the ruling Democratic Center Union (UCD) of Prime Minister Leopoldo Calvo Sotelo made an agreement with the Socialist Workers' Party of Felipe Gonzalez to set up a ''solidarity fund'' for regional development. The largest chunk of this $1.9 billion interregional kitty will go to Andalusia (home of the flamenco). Per capita, however, Extremadura will receive the most.
By 1983, Spain is committed to granting local parliaments to each region, the latest being Galicia where elections were held for the first time on Oct. 20.
''In a country that has been absolutely, historically centralized, this is a big step,'' says Jose M. Vizcaino, a leading Spanish industrialist and chairman of Ramon Vizcaino, a refrigerator manufacturer.
Only a few companies are moving into depressed areas, says Mr. Vizcaino. They do so mainly because of high tax breaks. The firms must contend with lower quality in basic public services and worker skills, he adds.
(And as for that 14 percent of workers who are unemployed - ''They may not be so bad off,'' he says. He estimates that 20 to 30 percent of income beyond the official $300 billion Spanish economy is underground and untaxed.)
Building up business in rural areas, however, may take massive bank reform. The next two years, says Frederick E. Tetzeli, vice-president for international affairs at Morgan Guaranty Bank, will see many changes in Spain's financing system. Presently, companies are all too dependent on short-term credit. Loans for three to six years are rare. Investments with delayed profits are difficult. ''To think ahead two to three years is difficult,'' says Mr. Vizcaino.
If there is hope for change, it comes through the competition from about 20 foreign banks, most of which recently opened offices in Spain under tight control, but all bringing the practice of long-term credit. Another aid to bank reform would be adoption of international auditing standards, says Mr. Tetzeli. And in January, banks will be allow to set their own loan rates more freely.
Besides rural uplift, Spain hopes to attract more foreign investment, says Ignacio Comin y Ollarzabal, director general of foreign transactions for the Spanish Ministry of Economy and Commerce. The nation's oil import bill has reduced domestic savings by 3 percent a year. Common Market countries have an average 4 to 5 percent of total investments from foreign sources. In Spain, only 2 percent of capital comes from abroad.
In April of this year, Spain opened the door a little more for foreign investors. Projects up to $250,000 in value, for instance, need almost no government approval. Subsidies are available for up to 20 percent of projects, and 40 percent for ''traditional crafts'' ventures.
Capital of over $3.4 billion flowed into the Mediterranean nation from 1975 to 1980, one-quarter of which came from American investors. (Switzerland was second with 17 percent of foreign capital.) About half of the investments were in real estate - a sign of hope for the country.
Spain hopes investors will see the country as a springboard for sales into the Common Market, once entry is accomplished. Spanish wages are $7 to $8 an hour compared with the EC average of about $12 an hour.
But negotiations in Brussels on Spain's entry in the EC are only halfway complete - the easy half. Still to tackle are the tough issues of migrant workers and agricultural products. Entry would likely not start before 1984 or 1985 at the earliest, and may take seven to ten years in transition to ease the Spanish economy into full integration through rigorous stages.
EC pressure on Spain to open up its markets and remove protection for industry, such as import taxes, has flamed resistance among local businessmen. The Federation of Business Organization is pushing for very slow transition.
''We have had too easy growth under the old paternalistic, protected economy, '' says Mr. Vizcaino. ''We are now paying the consequences of this policy.''