Spain country brief
Bilateral relations
Overview
Bilateral relations between Australia and Spain are steadily expanding. Spain offers significant potential as a partner for Australia, both in the business sphere and in international relations. While Spain's foreign policy has traditionally focused on the European Union (EU), the Mediterranean and Latin America, it is now broadening its diplomatic and commercial presence in the Asia-Pacific. In recent years, the Australian and Spanish Governments have reinforced growing trade and investment links by developing policy dialogue on areas of shared interests.
The Spanish Government's Asia Pacific Action Plan set out practical areas for increased Spanish engagement in the Asia-Pacific region. Under the plan, Spain opened a branch of the Cervantes Institute in Sydney in 2009, a development which will make a major contribution to expanding knowledge in Australia of modern Spain, its language and culture. In June 2009, Australia and Spain signed a Joint Action Plan which provides a framework for current and future cooperation on global, regional and bilateral issues.
Defence Cooperation
Cooperation on large-scale military projects has played a prominent role in boosting bilateral engagement. The launch of the first of two Royal Australian Navy LHDs (landing helicopter docks) in February 2011 was a significant milestone in strengthening defence relations and followed a decision in June 2007 to award two major Australian defence acquisition contracts – for two amphibious vessels and three air warfare destroyers - to the Spanish company Navantia. When commissioned, the LHD will be Australia's largest-ever warship with impressive helicopter and amphibious capacity and surgical facilities, configured for humanitarian and combat missions.
The Navantia contract complements the contract won in 2004 by EADS-CASA, the Spanish-based military transport division of the European Aeronautic, Defence and Space Company, to provide the Australian Defence Forces with air-to-air refuelling aircraft. These projects are progressing and providing commercial flow-on to Australian firms.
People-to-People Links
There is generally an upward trend in the number of Spanish tourists visiting Australia (around 22,700 in 2010) while approximately 86,000 Australians visited Spain in 2010. An increasing number of Spanish students travel to Australia to undertake study (1700 in 2010) and several Spanish and Australian universities have agreements to facilitate academic and student exchanges. Most Spanish students in Australia are enrolled in English language courses.
According to the 2006 Census, 84,000 Australian residents claimed Spanish descent. The Spanish community in Australia comprises principally those who migrated to Australia in the 1960s under a government-to-government assisted-migrant-passage program, and their children. New South Wales has, by far, the largest number of Spain-born persons in Australia.
Bilateral Agreements
Bilateral agreements between Australia and Spain include an Extradition Treaty (1988), a Social Security Agreement (1991 and 2003), a Treaty on Mutual Assistance in Criminal Matters (1991), an Agreement on Cultural, Educational and Scientific Cooperation (1991), a Double Taxation Agreement (1992), and an Air Services Agreement, which entered into force in April 2011.
High-level Visits
The strength of the relationship has been enhanced by a significant number of high-level visits between Australia and Spain. The Governor-General, Ms Bryce, visited Spain in June 2011, inspecting the Navantia dockyards and meeting Prime Minster Zapatero. Minister for Foreign Affairs Stephen Smith visited Spain in February 2010 holding discussions with Foreign Minister Moratinos, Prime Minister Zapatero and Defence Minister Chacon. Mr Smith also had an audience with His Majesty King Juan Carlos.
Australia's Chief of Navy, Vice Admiral Russ Crane, attended the February 2011 launch of the first of the two landing helicopter docks being built by Navantia for the Royal Australian Navy (see above).
Their Majesties King Juan Carlos and Queen Sofia made an official state visit to Australia in June 2009, visiting Canberra and Sydney.
Political Overview
System of Government
Spain is a parliamentary monarchy. The head of state is His Majesty King Juan Carlos I, who is also Commander-in-Chief of Spain's Armed Forces and head of the Supreme Council of Defence. The head of the government is the Prime Minister, currently His Excellency Mariano Rajoy. Legislative power is vested in the Cortes Generales, comprising two Houses, elected by direct universal adult suffrage for four years. The Congress of Deputies has 350 members, elected by proportional representation. There is also a less powerful but nevertheless important Senate, with powers of legislative amendment. It comprises 259 members (208 directly elected and 51 appointed as regional representatives).
The Spanish Constitution recognises the right of the various regions of Spain to autonomy while emphasising the indissoluble unity of the Spanish State. Spain is divided into 17 autonomous communities, each with its own elected assembly and executive government, together with the two North African enclaves of Ceuta and Melilla, called autonomous cities. The powers of the autonomous communities vary considerably, with the Basque Country, Catalonia and Galicia having special status and extensive powers, including over regional policing.
Major Parties
Spain's major political parties are: the centre-left Spanish Socialist Workers' Party (PSOE); the centre-right Popular Party (PP); and the United Left (IU) - a coalition of left wing and green parties, dominated by the Spanish Communist Party (PCE). Other parties include, in Catalonia, the Catalan Convergence and Union (CiU) - a coalition of two Catalan nationalist groups, the populist centre-right "Convergence" and the Christian Democratic Union; and in the Basque country, the Basque Nationalist Party (PNV), made up of moderate democratic nationalists favouring self-determination for the Basque region.
Political Developments
General elections were held on 20 November 2011, in which the Popular Party (PP) led by Mariano Rajoy won a resounding victory. The PP now controls both houses of Parliament, taking power from the Spanish Socialist Workers' Party (PSOE), which had been in power under José Luis Rodríguez Zapatero since 2004.The PP is considered to have benefited from the Socialist Government's failure to address the fragile economic situation, the debt crisis and the high unemployment rate. Prime Minister Rajoy was sworn in on 21 December 2011 and subsequently announced a 14-member, largely technocratic cabinet. The new government's focus is overwhelmingly the economy and Prime Minister Rajoy personally chairs the Executive Committee for Economic Affairs.
Terrorism
The high-profile terrorist group Basque Homeland and Liberty 'Euskadi ta Askatsuna' (ETA) has been active in Spain since the late 1960s seeking full independence for all the Basque-speaking territories in both Spain and France. ETA has mainly, but not exclusively, targeted Spanish political figures, business figures, judges, military, and security personnel and moderate Basques for assassination. Over the past 50 years, ETA has been responsible for the deaths of some 860 people. The most recent ETA bomb attack in Spain was in Mallorca in 2009. ETA declared a unilateral cease-fire in January 2011 and in October 2011 announced the 'definite cessation of its military activity' and appealed for a direct dialogue with the Spanish and French governments; however the Zapatero government said it would not negotiate until ETA agreed to a total cessation of violence and a surrender of arms.
Spain remains a target for Islamic extremists, who in 2004 perpetrated its worst-ever terrorist attack when a series of bombs exploded in Madrid's train network, killing 191 people and injuring more than 2,000 others.
Foreign Policy
Since emerging from its relative international isolation during the Franco era, Spain has steadily become an important figure in international affairs. It joined the European Community in 1986 and is strongly pro European.
Spain became a member of the North Atlantic Treaty Organisation (NATO) in 1982, with its full integration into the military structure of NATO completed in 1997. It has around 1500 personnel involved in the NATO-led operation ISAF in Afghanistan, and has sent troops on peace-keeping missions in Afghanistan, Bosnia, Kosovo, Haiti and Lebanon, and as observers in the former Yugoslavia, Ethiopia, Eritrea, the Congo, Kosovo, Burundi and Sudan. Spain is also a significant international aid donor.
In 2004 Prime Minister Zapatero launched the Alliance of Civilizations, an initiative formally taken up by the United Nations and co-sponsored by the Turkish Prime Minister in 2005. The Alliance encourages a dialogue principally between the western and Muslim worlds with activities in the areas of politics, media, education, youth and migration.
Relations with the US, which have improved since the election of US President Barak Obama in 2008, remain a priority. Spain has close relationships with Latin American and Spanish-speaking countries. These relations are based on long historical associations, a common culture, language, religion and strong investment and trade ties.
A further priority is the Mediterranean rim, a number of countries of which have important political and economic links with Spain. The Union of the Mediterranean has its headquarters in Barcelona. Relations with Morocco have been dominated by the issues of sovereignty of the two Spanish enclaves of Ceuta and Melilla, illegal immigration, drug-trafficking, fishing rights and countering terrorist activities. The future of Gibraltar is the subject of ongoing discussions between Spain and the UK. Spain enjoys good relations with Arab states and Israel, and has offered to act as mediator in the Middle East conflict.
Economic Overview
Following its accession to the EU, Spain's economy grew rapidly and it adopted the Euro on 1 January 2002. The EU, United States, OPEC countries, Latin America and Japan are its most important trading partners.
In recent decades, the Spanish economy has attracted significant levels of foreign capital. While services, particularly tourism, continue to play an important role in the economy, there has been strong growth in manufacturing, including textiles and apparel, motor vehicles, shipbuilding, machinery and pharmaceuticals. Spain remains a significant producer of agricultural products, including grain, poultry, olives and olive oil, grapes and wine. Fishing remains a major primary industry and Spain's fishing fleet is one of the largest in the world.
Economic Developments
The Spanish economy has been hit hard by the late 2007 collapse of a speculative housing boom as well as by the global financial crisis. Unemployment (a long-term challenge for Spain) has soared to nearly 23 per cent, a figure that is not expected to decrease significantly in the short term. Youth unemployment has reached 45 per cent. Spain's banking sector has however proved to be one of the more resilient sectors of the economy to date, due largely to the government's close financial regulation.
Following a sustained period of economic reform and adjustment, and GDP growth averaging of around 4 per cent per annum, the economy formally went into recession in 2009. Spain's pre-crisis budget surplus of 3 per cent of GDP became a deficit of 11.1 per cent of GDP. Spain posted -0.1 per cent growth in 2010 and 0.7 percent growth in 2011.The IMF estimates -1.7 per cent growth in 2012.
Responding to the crisis, the Government embarked in 2010 on a substantial program of reforms aimed at correcting imbalances in the economy and encouraging recovery, improving public finances, and reassuring international markets. In 2010, a range of austerity measures, including cuts in public sector wages and increases in some taxes, were introduced. Spain achieved its deficit reduction target of 9.3 per cent of GDP for 2010 and aims to reduce the deficit to 3 per cent by 2013. The Rajoy Government has committed to a budget deficit of 5.3 percentof GDP in 2012, after inheriting a 2011 deficit of 8.5 per cent (2.5 per cent above target).The first tranche of austerity measures, announced on 30 December 2011, aimed to cut the deficit through spending reductions, public sector wage freezes and tax increases for high income earners, while maintaining state pensions in line with inflation. The 2012 budget, presented on 30 March, has prompted strong protests. Excluding regional and local governments, as well as the social security system, the budget projects spending falls by 9.6% to €122.1bn, with revenues rising 12.5% to €119.2bn.
Bilateral Economic and Trade Relationship
Trade
During 2010-11, Spain was Australia's 26th largest merchandise trading partner. Trade in 2010-11 reached around A$2.56 billion. Australian merchandise exports to Spain were around A$861 million. Australian export successes include coal, zinc ores and concentrates, nickel and paper. Potential demand exists for Australian goods and services across a wide range of sectors. Australian imports from Spain in 2010–11 stood at around A$1.7 billion, with the biggest import items being medicaments. Other Australian imports from Spain include goods vehicles, rubber tyres, treads and tubes, and vegetable oils and fats.
Investment
Spain's technology and industry achievements in renewable energies make it an attractive partner for Australia. Spanish firms have won contracts to build renewable resource infrastructure, including Gas Natural Fenosa and Acciona with investments in windfarms.
Spanish infrastructure companies are also significant players in a number of major projects in Australia. Sacyr Vallehermoso and Tecnicas Reunidas, in alliance with the Australian engineering company Worley Parsons, spearheaded entry into the Australian water sector in 2008 with a contract to build a desalination plant in Perth. Acciona followed with a A$1.8 billion contract for a desalination plant in Adelaide. Acciona is also leading the consortium selected to build the A$1.5 billion Legacy Way tunnel in Brisbane.
Several Australian developers have invested in projects in Spain. The Australian geothermal company Petratherm is advancing its Madrid Geothermal District Heating project with the Spanish and Madrid regional governments, and Berkeley Resources is proceeding with uranium exploration in Salamanca. Worley Parsons is an active partner to Spanish companies in solar projects in the Iberian peninsula and North Africa, and Bovis Lend Lease has managed major projects in Spain in partnership with Spanish infrastructure players, including construction of the Majadahonda Hospital and Barcelona's new Terminal One.
The Australia-Spain Business Association is headquartered in Madrid with branches in Barcelona and La Coruña (Galicia). The Spanish Government and Catalan regional Government maintain trade promotion offices in Sydney, where there is also an active Spanish Chamber of Commerce. Austrade has a resident Trade Commissioner in Madrid, and provides export assistance to Australian companies.
Updated April 2012