Spain flag

Spain country brief

Bilateral relations

Overview

Relations between Australia and Spain are steadily expanding. Spain offers significant potential as a partner, both in business and in international relations. While Spain's foreign policy traditionally focuses on the European Union (EU), the Mediterranean and Latin America, it is 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 interest.

Defence Cooperation

Cooperation on large-scale military projects (worth $A13 billion) has created a foundation for expanded bilateral engagement between Australia and Spain. The launch of two Royal Australian Navy LHD (landing helicopter dock) ships in Ferrol in February 2011 and July 2012 provides a clear tangible example of this deepening defence relationship. This follows the award of three major Australian naval  acquisition contracts, for two amphibious vessels,  three air warfare destroyers and twelve landing craft vessels where the  Spanish company Navantia, the world's ninth-largest shipbuilder, is deeply involved as either designer, builder or section supplier. When commissioned, the LHDs will be Australia's largest-ever warships in Royal Australian Navy service, with impressive helicopter and amphibious capacity and surgical facilities, which can be configured for humanitarian, disaster relief or combat missions. The Spanish-designed air warfare destroyers will also be among the most capable ships of their size in the world. The Navantia contracts complement that won in 2004 by EADS-CASA, the Spain-based division of Airbus Military, to provide the Royal Australian Air Force with five multi-role tanker transport aircraft. These projects are also providing commercial flow-on to Australian firms.

Cooperation on defence acquisition projects has led to increasingly close links between the Royal Australian Navy and Spain's Armada, which have gradually evolved into a strategic partnership. A manifestation of this strengthening relationship is the agreement between the two navies for the deployment of the Spanish logistic supply ship, SNS Cantabria, to Australia in 2013 to exercise and train with Australian naval ships for eight months. The deployment also allows the Cantabria to represent Spain at the Australian International Fleet Review to commemorate the centenary of the arrival into Sydney Harbour of the first ships of the Royal Australian Navy in 1913. In preparation for the induction into Australian service in coming years of Spanish-designed ships, the Armada has also provided considerable training and operational assistance to the Royal Australian Navy.

People-to-People Links

Around 30,300 Spanish-born travelers arrived in Australia in the twelve months ending June 2012, continuing  a modest upward trend. Nearly 17,000 tourist visas were granted to Spanish nationals in 2012-13.  

Spanish enrolments in Australian education institutions have grown over the past five years, a trend sustained through the financial crisis. The number of Spaniards enrolled to study in Australia on Student Visas grew by 47.5% from 2011 to 2012 reaching a total of 3127.  It is estimated that an equal number of Spanish students travel on Tourist Visas for English Language Courses (ELICOS) which  are often shorter than 3 months and therefore do not require a Student Visa.  Spain is a significant ELICOS market being one of the countries with strongest growth in terms of student numbers.

In the 2011 Census, 92,959 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, but includes the descendants of nineteenth-century, primarily agricultural, immigrants. New South Wales has, by far, the largest number of Spain-born persons in Australia.

The Spanish government opened a branch of the Cervantes Institute in Sydney in 2009, which is contributing to the expanding knowledge in Australia of modern Spain, its language and culture.  In the most significant bilateral cultural exchange to date, the Queensland Art Gallery in Brisbane hosted an exhibition of masterpieces from the Prado Museum, 'Portrait of Spain', in July-November 2012.

Bilateral Agreements

Bilateral agreements 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 and a Defence Cooperation Memorandum of Understanding (2013).

High-level Visits

The strength of the relationship has been enhanced by a significant number of high-level visits. The Governor-General, Ms Bryce, visited Spain in June 2011, the then Minister for Defence Materiel Jason Clare visited in August 2011,  the then Minister for Foreign Affairs Stephen Smith visited in February 2010, and the then Minister for Infrastructure Anthony Albanese visited in April 2013.

Australia was represented at the level of Chief of Navy at the February 2011 and July 2012 launches of the two landing helicopter docks being built by Navantia for the Royal Australian Navy (see 'Defence Cooperation' above).

Then King Juan Carlos and Queen Sofia made an official state visit to Australia in June 2009, visiting Canberra and Sydney.

Bilateral Economic and Trade Relationship

Trade

In 2012, Spain was Australia's 23rd largest merchandise trading partner. Trade in 2012 reached A$3.51 billion. Australian merchandise exports to Spain were around A$625 million, including coal, zinc ores and concentrates. Australian imports from Spain in 2012 stood at around A$2.8 billion, with the biggest import items being ships, boats and goods vehicles.

See also the section on 'Defence Cooperation'.

Investment

Spanish infrastructure companies are increasingly significant players in the Australian infrastructure, water and renewable energies sectors. They are prominent participants in the internationalisation of the Australian construction sector. Most of Spain's infrastructure companies now have a presence in Australia. Sacyr Vallehermoso and Tecnicas Reunidas won a major desalination project in Western Australia in 2008 and have since been contracted to double the capacity of the original plant. In 2008 Acciona won a desalination contract in Adelaide; it is also the lead partner in the consortium selected to build the A$1.5 billion Legacy Way tunnel in Brisbane. OHL and Acciona have won projects for post-flood reconstruction in far North Queensland. Spanish builder ACS won significant contracts in 2013 to excavate Sydney’s North West Rail Link and to extend its work at Fortescue Metals Solomon hub iron ore project.

Spanish firms have also won contracts to build renewable resource infrastructure, including Gas Natural Fenosa and Acciona with investments in windfarms. The Waubra windfarm, operated by Acciona was the largest in the southern hemisphere at the time of construction. Australian investment in Spain was worth A$3.8 billion in 2012. The Australian geothermal company Petratherm is involved in the Madrid Geothermal District Heating project. Worley Parsons is partnering 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 local infrastructure players, including construction of a new airport terminal in Barcelona, redevelopment of Barcelona's bullring, and oil company Repsol's new headquarters in Madrid. Macquarie Bank has a number of varied investments in Spain and maintains an office in Madrid, to promote both its investment and advisory functions.  In June 2013 RMIT’s post-graduate architectural school opened in Barcelona.  Berkely Resources (headquartered in Perth) has established an office near the town of Salamanca.

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 Spanish-Australian Chamber of Commerce, La Camara, is very active.   

The Australian Trade Commission (Austrade) is the Australian Government’s trade, investment and education promotion agency. Through their global network, they help Australian companies succeed in international business and attract productive foreign direct investment into Australia.  Austrade has an office in Madrid and is also responsible for the Portuguese market.

Political Overview

System of Government

Spain is a parliamentary monarchy. The head of state is His Majesty King Felipe VI, 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 Mr 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 two North African enclaves, 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 Socialist Party (the PSOE), the centre-right People's Party (PP); the left wing United Left (IU) ; and Union, Progess and Democracy (UPyD). Other significant parties include, in Catalonia, 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.

Political Developments

In general elections held on 20 November 2011, the People's Party (PP) led by Mariano Rajoy won a resounding victory. It now controls both houses of parliament, taking power from the Socialists, who had been in power under José Luis Rodríguez Zapatero since 2004. The PP was considered to have benefited from the Socialist government's failure to address the fragile economic situation and the sovereign debt crisis. Mr Rajoy was sworn in on 21 December 2011 and subsequently announced a 14-member, largely technocratic cabinet. The government's focus is overwhelmingly on the economy. Mr Rajoy personally chairs the Executive Committee for Economic Affairs.

Terrorism

The high-profile terrorist group Basque Homeland and Liberty 'Euskadi ta Askatsuna' (ETA), declared a unilateral cease-fire in January 2011 and, in October 2011, the 'definite cessation of its military activity'. It appealed for a direct dialogue with the Spanish and French governments, however the Rajoy government has repeatedly said it will not open discussions with ETA until the group disbands and outlines plans for a surrender of arms.

ETA had, since the late 1960s, sought full independence for all the Basque-speaking territories in both Spain and France. It had mainly, but not exclusively, targeted Spanish political figures, business figures, judges, military, and security personnel and moderate Basques for assassination. Over 50 years, it was responsible for the deaths of some 860 people. The most recent ETA bomb attack in Spain was in Mallorca in 2009. Spain remains a target for Islamic extremists, who in 2004 perpetrated a series of bomb attacks on Madrid's train network, killing 191 people and injuring more than 2,000 others.

Foreign Policy

Since emerging from relative international isolation during the Franco era, Spain has assumed a growing role in international affairs. It joined the European Community in 1986 and is strongly pro European.

Spain became a member of the North Atlantic Treaty Organization (NATO) in 1982, with its full integration into the military structure of NATO completed in 1997. It has around 1,500 personnel involved in the NATO-led ISAF operation 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.

In 2004, then prime minister Zapatero launched the Alliance of Civilizations (AoC), an initiative formally taken up by the United Nations and co-sponsored by the Turkish Prime Minister in 2005. The Alliance encourages dialogue principally between the western and Muslim worlds, with activities in the areas of politics, media, education, youth and migration. Australia has been a member of the AoC Group of Friends since 2007.

Relations with the US are a priority. Spain has close relationships with Latin American and Spanish-speaking countries, based on history, a common culture, language, religion and strong investment and trade ties.

A further priority is the Mediterranean rim, where a number of countries have important political and economic links with Spain. The Union of the Mediterranean has its headquarters in Barcelona. Relations with Morocco have often 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. Spain continues to dispute British sovereignty over Gibraltar.

Economic Overview

Following its accession to the EU in 1986, Spain's economy grew rapidly and it adopted the euro on 1 January 2002. The EU, United States, OPEC countries, Latin America and China are its most important trading partners.

In the period leading to the global financial crisis, the Spanish economy boomed and attracted appreciable levels of foreign capital. While other sectors have suffered since 2008, services, particularly tourism, continue to play an important role. Manufacturing has been dominated by textiles and apparel, motor vehicles, shipbuilding, machinery and pharmaceuticals. Spain is a significant producer of agricultural products, including grain, poultry, olives and olive oil, grapes and wine. Fishing is a major industry; Spain's fishing fleet is one of the largest in the world.

Economic Developments

The Spanish economy was hit hard by the late 2007 collapse of a speculative housing boom as well as by the global financial crisis. The economy formally went into recession in 2009 as Spain's pre-crisis budget surplus of 3 per cent of GDP became a deficit of 11.1 per cent. Spain posted -0.1 per cent growth in 2010 and 0.7 per cent growth in 2011. The economy once again entered recession in 2012, with only modest prospects for recovery forecast for 2013 and 2014. Unemployment has soared to over 25 per cent, and is not expected to decrease significantly in the next few years. Youth unemployment has reached over 50 per cent.

Responding to the crisis, the Government embarked in 2010 on a substantial program of reforms and austerity measures aimed at correcting imbalances in the economy and encouraging recovery, improving public finances, and reassuring international markets. These efforts have intensified under the Rajoy administration.  Eurozone finance ministers (the 'Eurogroup') have set the government a budget deficit target of 6.5 per cent of GDP for 2013 and 5.8 per cent in 2014, falling to the desired target of under 3 per cent by 2016. The Eurogroup has also provided a euro 100bn line of credit to recapitalise Spain's banking sector, weighed down by problematic property assets, of which some 40bn euros has been disbursed. Successive austerity measures, which have become the subject of popular protests, aim to cut the deficit through spending reductions to public administration and public sector wages, social security payments, healthcare and education, and increases to corporate and high-income tax rates and indirect taxes.

Updated June 2014