The Spanish crisis of the 80s
In the 80s, Spain experienced many changes in both the political and economic field. In the late 80s Spain prospered, housing prices rose, there was a lot of foreign investment and external emigration. All of Europe was in full economic apogee and Spain had the highest average economic growth of the European Community.
Those years of abundance did not last long. In the early 90s, several events marked the world economy. A global uncertainty panorama began to be seen although Spain was one of the European countries most affected by that period of crisis that failed to fight until 1996.
To be able to explain the crisis experienced in Spain in the 90s we have to return a few years ago. In 1982 the PSOE took the reins of Spain that was a country with a weak economy, very dependent on tourism and the services sector. During his first legislature, the PSOE decided to apply an economic stabilization plan carrying out a necessary industrial reconversion plan that led to the bankruptcy to important companies in the country that were obsolete. This process was essential to clean up the country’s economy.
In 1986 Spain became part of the European Economic Community (CEE) which gave an impulse and strengthened the Spanish economy. That same year the PSOE won its second absolute majority. The Spanish economy was in full economic growth. Spain’s entry into CEE resulted in a strong increase in foreign investments and the need for internal economic development to be able to modernize and compete with the foreign market. The cohesion funds allowed to give a great economic impulse that would reach until 1992, making public spending increase in teaching, health, pensions and infrastructure.
The socialist government took advantage of this situation to ensure that Spain had a level of health, education and social services comparable to that of its European neighbors. For the first time Spain had a welfare state. At the beginning of 1990 there was a stagnation of the Spanish economy moving to 3.8% and entering recession in 1993 with a 1% decrease. In 1990, a global economic crisis marked by the outbreak of the real estate bubble in Japan was evident that affected many countries and aggravated by the Gulf War, which caused great increases in oil prices. The strong public investment in infrastructure to prepare the country for two major events made the crisis in Spain take two years to demonstrate. The construction of the Madrid-Seville highway was carried out;The Madrid-Seville AVE and the infrastructure of the new rail access to Andalusia.
All these works culminated with the Universal Exhibition of Seville in 1992 and the Barcelona Olympic Games of that year. When these great events ended, the crisis was felt like in the rest of the world, with the increase in the price of oil and spectacular growth of unemployment generated by the end of investment in large infrastructure. Spain was a country very dependent on oil. Its high price increased the production and transportation costs of goods that directly had the products prices directly. As a consequence, investment and consumption were drastically reduced, and the country entered into recession.
Public accounts at that time recorded high levels of debt reaching 68% GDP in 1993 and unemployment rose to 24%. The conjunction of the lack of investment and demand, the great public spending and the imbalance between imports and exports made the economic crisis brief but especially serious in Spain. On September 16, 1992, the government was forced to devalue the peseta 5% and November 21 again 6%. Although that was not enough. On May 13 of the following year the government had to divest the peseta a third time, this time 8%. The devaluation of the peseta helped the growth of the industry and its exports.
On the other hand, this measure reduced the confidence of foreign investments in the stability of the currency. The Spanish crisis reached its summit in 1993, year at the unemployment rate it reached its highest level since the beginning of democracy. On February 7, 1992, the Maastricht Treaty was signed. Its objectives were very clear: unify the monetary policy of the members of the European Union;create a central bank and a common currency, the euro.
In order to be part of this economic and monetary union, EU member countries had to meet five requirements: control inflation at a level below 1.5 of the average of the three countries of the Union with the lowest rate;have a public deficit of less than 3% of GDP;a debt of less than 60% of GDP and, finally, maintain a stable exchange rate. The intense crisis was about to exclude Spain from the European project defined by the Maastricht Treaty. Spain was not able to fulfill the convergence criteria.
The ‘cohesion funds’ came to the aid of countries whose GDP per capita was below 90% of the EU average: Spain, Portugal, Greece and Ireland. In the case of Spain, the Autonomous Communities played an important role in the attribution of these funds. The Socialist Party supported the European project during the entire period of its government, even at the times of the bad economic situation and despite the possible political cost.
Little by little he left the recession. As of 1994, employment began to be created although unemployment was still very high;had to face the high public deficit and the social security crisis. During these years, the Socialist Party began to lose credibility and popularity among the Spaniards.
Not only for the crisis but also because of the serious cases of corruption in the Socialist Party, uncovered in the early 90s. Corruption affected the image and reputation of the PSOE in an important way. In 1996 the Socialist Party lost the elections for a narrow margin ending Felipe González after 14 years of government and giving its position to the Popular Party.
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