Spain’s Economic and Political Shifts: 1980s to 2004
The Socialist Government’s Economic Reforms
The socialist government addressed the economic crisis and undertook pertinent reforms, drawing inspiration from Sweden and Germany, which were ruled by Social Democrats during those years and enjoyed a high standard of living. The economic policy was led by Boyer and Solchaga.
To modernize the economy, the socialist government took three key steps:
- Redevelopment of the economy: Some companies that were expropriated, facing bankruptcy or serious difficulties, employed 65,000 workers. This included RUMASA and several banks (Banca Catalana).
- Industrial restructuring: Closure of public enterprises that had huge losses and were not internationally competitive, including shipyards, steel, and mining. This led to two general strikes in 1985 and 1986, with workers refusing layoffs and salary cuts. However, it allowed the state to release the heavy financial burden of these companies dependent on the INI.
- Tax reform: Initiated by Suarez, this aimed to increase direct taxes and distribute the burden of tax collection more equitably.
The 14 years of socialist rule saw three cycles of economic expansion until 1990, followed by a slowdown from 1990 to 1992. In 1993 and 1994, Spain experienced a severe recession.
A significant portion of tax revenues was earmarked for social spending:
- Renewal of the pension system, health and welfare assistance, and unemployment benefits.
- Investment in public works: highways, expressways, removal of outdated railways, and construction of the AVE high-speed rail.
- Implementation of the LODE (Organic Law of the Right to Education), the LOGSE (Organic Law of the General Organization of the Education System), and the LRU (University Reform Law). Education was made free and compulsory from 6 to 16 years old. Significant investments were made in schools, colleges, and universities.
Spain’s Integration into International Organizations
Spain joined several international organizations, access to which had been closed during the dictatorship:
- NATO: Calvo Sotelo had already decided on accession, but Felipe González, as the new president, had to decide on staying or leaving. The PSOE changed its opinion and referred the matter to a referendum in 1986, with 52.5% voting in favor.
- European Union: After six years of negotiations, Spain became a full member in 1986. This led to the amendment of many laws and economic regulations (VAT, tariffs, etc.) and boosted the modernization and rationalization of Spanish democracy.
The Government of the People’s Party (1996-2004)
The People’s Alliance underwent a rejuvenation, with José María Aznar representing a shift away from Franco, previously represented by Fraga. This move toward the center allowed the PP to gain the youth vote and higher economic levels, winning the election by a simple majority.
To govern, the PP was supported by CIU, PNV, and the Canary Coalition. The PSOE suffered an internal crisis, manifested in the resignation of González from the General Secretariat, a position that was occupied in 2000 by Zapatero.
The 2000 elections were won by an absolute majority for the PP. Among the PP’s legislative works were new education laws that were not applied and reforms to the penal and civil codes.
Economic Growth and Challenges
Spain joined the European single currency, per capita income grew by 4%, and unemployment and inflation decreased. This situation began to change in 2001.
ETA and Political Tensions
ETA continued its policy of attrition with attacks on socialists and representatives of the PP. Clashes between the Basque government and the Spanish government became increasingly intense due to differing approaches to solving the ETA problem. The Islamist attack on March 11 in Madrid, days before the general election, was one of the reasons for the return of the Socialists in 2004.