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. Similarly, Australia's economic size and strength, and its global and regional role, are increasingly being recognised by Spain as it seeks to play a more substantial role in the Asia Pacific region. In recent years, the Australian and Spanish Governments have reinforced growing trade and investment links by developing a substantial policy dialogue on areas of shared interests.
The Australia-Spain Joint Action Plan signed on 24 June 2009 during the visit of King Juan Carlos I and Queen Sofia, provides a strong framework for future cooperation on global, regional and bilateral issues.
Defence Cooperation
The bilateral defence relationship was strengthened by the 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. This complements the contract won in 2004 by EADS-CASA, the Spanish-based military transport division of “Airbus”, to provide the Australian Defence Forces with air-to-air refuelling aircraft.
During the November 2008 visit of the Australian Minister for Defence, Australia signed a Memorandum of Understanding with Spain on Defence Cooperation, furthering enhancing the relationship. The attachment of a Defence Attaché in our Embassy in Madrid in January 2009 reflects the growing representational requirements associated with the three major defence capability projects currently underway in Spain.
People-to-People Links
Larger numbers of Spanish tourists are visiting Australia (currently around 26,000 per annum) while approximately 80,000 Australians tour Spain each year. An increasing number of Spanish students travel to Australia to undertake study and several Spanish and Australian universities have agreements to facilitate academic and student exchanges.
According to the 2006 Census of Population and Housing in Australia, 84,322 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 a Social Security Agreement (1991 and 2003), Extradition Treaty (1988), Treaty on Mutual Assistance in Criminal Matters (1991), an Agreement on Cultural, Educational and Scientific Cooperation (1991), a Double Taxation Agreement (1992), a Social Security Agreement (1991 and 2003) and an Air Services Agreement (signed in June 2009).
High-Level Visits
The strength of the relationship has been enhanced by a number of high-level visits between Australia and Spain. Most recently visits to Spain have been undertaken by the Minister for Climate Change, Senator Penny Wong, in October 2009, the Minister for Agriculture, The Hon Tony Burke MP, in January 2009, the Minister for Defence, The Hon Joel Fitzgibbon, in November 2008 and the Minister for Superannuation and Corporate Law, Senator the Hon Nick Sherry, in May 2008. A parliamentary delegation led by the then-President of the Senate, Senator Calvert, visited Spain in April 2007. Earlier high-level visits to Spain by former Ministers include Mr Phillip Ruddock, Attorney-General (2005), Senator Robert Hill, Minister for Defence (2004 and 2005), Senator Reid, President of the Senate and Mr Kevin Andrews, Minister for Ageing (2002), Mr Alexander Downer, Minister for Foreign Affairs (2001 and 2002), and Mr Phillip Ruddock, Minister for Immigration and Multicultural and Indigenous Affairs (2001).
King Juan Carlos and Queen Sofia made a state visit to Australia in June 2009, visiting Canberra and Sydney. In February 2009 senior Spanish officials visited Australia for bilateral talks. The former Spanish Secretary of State for Trade and Tourism, Mr Pedro Mejía Gómez, visited Australia in May and September 2007, leading two business missions. Visits were undertaken in March 2007, by the Spanish Chief of Navy, Admiral Sebastian Zaragoza, who visited Sydney and Canberra, and former Prime Minister, José Maria Aznar, visiting Melbourne, Sydney and Canberra. The former Spanish Secretary of State for Sport, Juan Antonio Gómez-Angulo, attended the Davis Cup tennis final in Melbourne in 2003, and Popular Party’s Deputy Spokesman, Mr Gustavo de Arístegui, visited Australia in 2001.
Political overview
System of Government
The Kingdom of 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 José Luis Rodríguez Zapatero. 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 seventeen 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), in power since March 2004; 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
The Spanish Socialist Workers' Party (PSOE) was returned to power in elections in March 2008.With just 169 seats, the PSOE was seven short of an absolute majority and, as in its first term (2004-08), relies on support from the minor parties.
In June 2006 Catalan voters backed a new statute to give their region more independence from Spain’s central government. Catalonia now has greater tax collection powers in its own region (one of Spain’s wealthiest), participation in the appointment of judges and prosecutors to courts run from Madrid, and policy control over areas such as rail and road infrastructure, housing, education and immigrant permits. The statute also further consolidates Catalan, rather than Spanish, as the first language of the region, and gives the Catalans nation status within Spain. In February 2007, voters in Andalusia voted in favour of reforms to further devolve power from the national to the regional government. The statutes in several other autonomous communities are also at various stages of review, including Aragon, Castilla-La Mancha, the Balearic Islands and Valencia.
On 1 March 2009 voters in Galicia and the Basque Country went to the polls in important regional elections. In an historic vote, the Basque Nationalist Party (PNV) and its allies, for the first time in almost three decades, failed to secure a majority in the Basque Parliament. The new Basque government is headed by the Basque Socialist Party and is supported by the PP. In Galicia, the conservative PP candidate Alberto Nunez Feijoo succeeded in securing an absolute majority, winning 39 seats in the 75-seat Assembly.
Terrorism
The Basque terrorist group ETA (Basque Homeland and Liberty "Euskadi ta Askatsuna") has been active in Spain since the late 1960s and seeks full independence for all the Basque-speaking territories in both Spain and France. ETA has mainly, but not exclusively, targeted Spanish political figures, judges, military and security personnel and moderate Basques for assassination, leaving close to 900 people dead. In May 2005, the Zapatero Government opened a dialogue with ETA following indications from some sections of ETA that it was willing to give up "armed struggle" in favour of a negotiated settlement. In March 2006, ETA announced a permanent ceasefire, which was broken by ETA’s bomb attack that killed two people at Madrid’s airport in December 2006. ETA formally called off its ceasefire in June 2007.
A series of key arrests over the past 12 months, generally attributed to good policing and effective cooperation with France, appears to have put pressure on hardline elements and weakened its command structure. Despite these successes, ETA continues to target government officials and tourist locations.
On 11 March 2004 Spain suffered 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. While responsibility for the attacks was claimed by an Islamic extremist group with links to Al-Qaeda, persistent theories about possible ETA involvement in the attacks sharpened political divisions between the two major parties. Seven suspects, thought to be the key actors in the attacks, blew themselves up in the Madrid suburb of Leganes one month after the attack. The trial of 28 mostly Moroccan men accused of the bombings was held during 2007 resulting in 21 convictions and the acquittal of seven.
Spain remains under threat of Islamic extremists with terrorist groups making repeated calls to “reclaim al-Andalus” (a reference to the Spanish region of Andalucia governed by Muslims until the 15th century) and to “liberate” the two Spanish enclaves of Ceuta and Melilla located in North Africa. Spanish police continue to arrest suspected militants accused of recruiting and training terrorists, financing terrorism and having connections with known terrorist groups.
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 Europe is now the central focus of Spanish foreign policy. 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.
Spain has around 800 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. With its withdrawal from Kosovo in April 2009, Spain has announced that it will increase its role in Afghanistan. Spain is also a significant international aid donor.
Prime Minister Zapatero launched an Alliance of Civilisations initiative in the United Nations General Assembly in 2004 which aims to encourage a dialogue principally between the Western and the Muslim worlds. The initiative was formally taken up by the United Nations and co-sponsored by the Turkish Prime Minister in 2005. Former Portuguese President Jorge Sampaio was appointed as High Representative for the initiative in April 2007 to oversee implementation of a proposed plan of activities in the areas of politics, media, education, youth and migration. Current activities of the Alliance are funded principally by Spain, Turkey and the United Arab Emirates.
Relations with the US, which have improved since the election of US President Barak Obama in 2008, remain a priority. Spain shares a close relationship with Latin America, and Spanish-speaking countries. These relations are based on long historical associations, a common culture, language, religion and strong investment and trade ties. Another priority region for Spain is the Mediterranean rim, a number of countries of which have important political and economic links with Spain. The new Union of the Mediterranean will have 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 the Spanish and the UK. Spain enjoys good relations with the Arab states and Israel and has offered to act as mediator in the Middle East conflict.
Spain will assume stewardship of the rotating EU Presidency from January to June 2010. The Spanish EU Presidency will be a transitional Presidency as responsibilities for foreign and security policy, previously the responsibility of the rotating EU Presidency, transfer to the High Representative of the Union for Foreign Affairs and Security Policy in line with the Lisbon (EU Reform) Treaty. Spain joined the then European Economic Community in 1986 and has held the rotating EU Presidency twice before, in 1995 and 2002.
The Zapatero government has implemented and twice updated an Asia-Pacific Action Plan, developed by the previous government in 2000, which outlines a policy designed to enhance Spain's profile and influence in the Asia-Pacific region. Under the Spanish Government’s 2005-2008 Asia Pacific Action Plan, which set out practical areas for increased Spanish engagement in the region, 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.
Casa Asia (Asia House), a state-owned incorporated enterprise, opened in Barcelona in May 2001, has established itself as the main focal point for cultural, social and economic activities involving Spain and the Asia-Pacific region.
Economic overview
The Spanish economy has grown rapidly following its entry into the EU in 1986 and the Economic and Monetary Union (EMU) in 1999. Spain, along with other EMU members, adopted the Euro on 1 January 2002. Spain's economy is the 5th largest in the EU and the 8th largest in the OECD, and is around 70 per cent larger than that of Australia. The EU, United States, OPEC countries, Latin America and Japan are its most important trading partners.
The economy is now heavily dominated by the services sector, particularly tourism, telecommunications, finance and banking, and transport. Spain also has highly developed industrial and manufacturing sectors, and is the world's fifth largest producer of motor vehicles. Its agricultural, forestry and fisheries sector now accounts for less than four per cent of Gross Domestic Product (GDP), although agriculture is still important politically and socially. Fishing remains a major primary industry and Spain's fishing fleet is one of the largest in the world.
In 2005, the Zapatero Government announced a wide-ranging economic reform plan, the Dynamization Plan. The reforms centre on liberalising Spain's capital markets and energy sector as well as markets for telecommunications, rail and sea transport and postal services. The plan introduced new anti-trust measures and initiatives to improve transparency in public finances and new incentives (primarily tax breaks) for exporters, foreign investors and investors in high-technology.
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 more than 17 percent, easily the highest in Europe, and is expected to surpass 20 percent in the coming year. While the closely regulated banking sector is relatively strong, manufacturing output, consumer spending and GDP continue to fall as the crisis continues.
The current economic downturn followed a sustained period of economic reform and adjustment, with GDP growing at an average of around 4 per cent per annum. In 2007, Spain's economic growth rate slowed slightly but remained near the top of the EU tables at 3.8 per cent. By 2008, Spain’s GDP reached a low of 1.2 per cent, and in 2009 it formally entered recession. The government has announced a number of stimulus packages aimed at improving banking liquidity and undertaking public spending to provide economic stimulus and put a brake on unemployment.
Spain's current account balance has worsened significantly since 1998, moving from a surplus position to a deficit estimated at around 10.1 per cent of GDP in 2009.
Bilateral economic and trade relationship
Trade
Spain is Australia's 26th largest merchandise trading partner, and seventh largest export market in the EU. In 2008-09, Australian merchandise exports to Spain were around $A618 million, and were dominated by exports of coal and ores. Recent export successes include Australian wine, crustaceans, iron ore, outdoor furniture and sophisticated internet technology. Potential demand exists for Australian goods and services across a wide range of sectors.
Australian imports from Spain in 2008-09 stood at $A1.75 billion, with the biggest import items being medicaments and goods vehicles. Other major Australian imports from Spain include rubber tyres, treads and tubes and vegetable fats and oils.
Investment
Bilateral commercial linkages have expanded. A growing number of Australian companies are conducting business in Spain. Lend Lease, Amcor, Brambles, Billabong and Fosters all maintain a strong presence in Spain. Macquarie Bank and QBE Insurance have also significant investment in Spain. Spanish investors in Australia include Ferrovial, ACS, Acciona, Sacyr Vallehermosa, Union Fenosa and Indra in the construction, infrastructure, energy, water management and ICT sectors. There has also been Spanish direct investment in Australian agribusiness, hospitality and real estate sectors, with sustainable energy a promising area for the future.
Opportunities in areas such as transport, infrastructure, logistics and wind energy remain attractive to Spanish companies. In 2007, the leading Spanish conglomerate, Grupo ACS, took a 25 per cent stake in the German construction company Hochtieff, which in turn is the majority shareholder in the Australian construction company, Leighton’s. In 2009 a consortium led by Tecnicas Reunidas and Valoriza won a contract to build Perth’s second desalination plant, and Acciona Agua won a similar contract to construct a desalination plant in Adelaide.
The Australia-Spain Business Association is headquartered in Madrid and has 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.
Export opportunities
The Spanish Government's focus on strengthening entrepreneurship and encouraging foreign investment under its Dynamization Plan complements an increasing awareness in the Spanish business community of the need to move rapidly to develop commercial links in the Asia-Pacific region.
Spain continues to be a growing market for Australian education providers. Most Spanish students in Australia are enrolled in English language courses.
The Spanish Government finance
agency, the Instituto de Credito Oficial (IFO) is keen to promote Spanish
investment in Australia and believes it can offer Spanish companies
favourable financial terms for new investments in Australia since issuing
a AUD$600 million "Kangaroo Bond". A key issue for the IFO
is finding suitable investment projects to finance in Australia and
it is keen to work with Australian agencies to promote Australian investment
opportunities amongst Spanish companies.
In June 2009 a successful high-level business forum was held as part of the official visit to Australia by King Juan Carlos and Queen Sofia. A European Australian Business Council (EABC) delegation visited Spain in May 2008 to promote opportunities for increased trade and investment with Australia. Australian engagement in Spain would also provide for further opportunities with other EU countries and Latin America, while Spanish engagement in Australia would provide a platform to the new and emerging markets in Asia and the Pacific.
TradeWatch contacts
If you would like more information on the trade and economic conditions in Spain, please email the Department of Foreign Affairs and Trade.
Last reviewed date: 21 December 2009