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.
Australia welcomed the launch of the Spanish Government’s Asia Pacific Action Plan 2005-2008 which set out practical areas for increased Spanish engagement in the Asia-Pacific region. Under the plan, Spain will open a Cervantes Institute in Sydney, a development which will make a major contribution to expanding knowledge in Australia of modern Spain, its language and culture.
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. It complements the contract won by EADS-CASA, the Spanish-based military transport division of the European Aeronautic, Defence and Space company, in 2004 to provide the Australian Defence Forces with air-to-air refuelling aircraft.
People-to-People Links
Larger numbers of Spanish tourists are visiting Australia (currently around 18,000 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 a Memorandum of Understanding on Sporting Cooperation (1994) and an Air Services Agreement (2007).
High Level Visits
The most recent visit to Spain was by a parliamentary delegation led by the then President of the Senate, Senator Calvert, in April 2007. The former Minister for Foreign Affairs, Mr Downer, visited Spain in 2001 and again in 2002. The then Minister for Immigration and Multicultural and Indigenous Affairs, Mr Ruddock, visited in 2001. The then President of the Senate, Senator Reid, visited in 2002, and the then Minister for Ageing, Mr Andrews, visited in 2002. The then Minister for Defence, Senator Hill, visited Spain in 2004, and in 2005. The former Attorney General, Mr Ruddock, visited in 2005.
Senior members of the Spanish Royal Family, including the Queen and Crown Prince, visited Sydney for the Olympics in 2000. Popular Party’s Deputy Spokesman, Mr Gustavo de Arístegui, visited Australia in 2001. Former Spanish Secretary of State for Sport, Juan Antonio Gómez-Angulo, attended the Davis Cup tennis final in Melbourne in 2003. The Spanish Chief of Navy, Admiral Sebastian Zaragoza, visited Sydney and Canberra in March 2007, and the former Prime Minister, José Maria Aznar, visited Melbourne, Sydney and Canberra, also in March 2007. 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.
Political Overview
System of Government
The Kingdom of Spain is a parliamentary monarchy. The Head of State is HM 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 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 7 short of an absolute parliamentary majority and, as in its first term (2004-08), will have to rely 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.
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 political 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 with a view to engaging the Spanish authorities in peace negotiations and driving forward a democratic process in the Basque Country. The ceasefire was broken with ETA’s bomb attack that killed two people at Madrid’s airport in December 2006. ETA formally called off its ceasefire in June 2007.
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 in a purpose built high-tech courthouse in the outskirts of Madrid. In a verdict announced on 31 October 2007, 21 defendants were convicted and seven acquitted.
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 based in Northern 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 690 troops 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.
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. In September 2005, the UN Secretary-General announced the composition of a High Level Group of eminent persons which presented its report to the UN Secretary-General in November 2006. The Group proposed a plan of activities in the areas of politics, media, education, youth and migration. Former Portuguese President Jorge Sampaio was appointed as High Representative for the initiative in April 2007 and will oversee implementation of the report’s recommendations. Current activities of the Alliance are funded by Spain, Turkey and the United Arab Emirates.
Relations with the US remain a priority and 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. Relations with Morocco have been dominated by the issues of sovereignty of the two Spanish enclaves of Ceuta and Melilla on the northern coast of Africa, illegal immigration, drug-trafficking, fishing rights and countering terrorist activities. The future of Gibraltar is the subject of ongoing discussions between the Spanish and UK Government. Spain enjoys good relations with the Arab states and Israel and has offered to act as mediator in the Middle East conflict.
The Zapatero government has continued an Asia-Pacific Action Plan, developed by the previous government in 2000, which outlined a policy designed to lift Spain's profile and influence in the region. Casa Asia (Asia House), a state-owned incorporated enterprise, was opened in Barcelona in May 2001 and has established itself as the main focal point for cultural, social and economic activities involving Spain and the Asia-Pacific region. The former Minister for Foreign Affairs, Mr Downer, was the first foreign minister to visit Casa Asia in February 2002. As part of its Asia-Pacific Action Plan, the Spanish Government plans to open a Cervantes Institute in Sydney to promote Spanish language and culture.
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 7th 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.
Economic Developments
The five years to 2001 witnessed a sustained period of economic reform and adjustment, with GDP growing at an average of around 4 per cent per annum. Spain's economic growth rate has since slowed slightly but remains near the top of the EU tables at 3.9 per cent for 2006 and 3.8 per cent for 2007.
Spain's current account balance has worsened significantly since 1998, moving from a surplus position to a deficit of around 10 per cent of the GDP in 2007.
Spain's main long-term economic challenge has been the high rate of unemployment, although this has been falling progressively. It stood at around 8.3 per cent in 2007, which is one of the lowest recorded figures since 1979 but still above EU averages. The rate of inflation was 2.8 per cent in 2007.
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.
Bilateral Economic and Trade Relationship
Trade
Spain is Australia's 26th largest merchandise trading partner, and seventh largest export market in the EU. In 2007, Australian merchandise exports to Spain were around $A1 billion, 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 2007 stood at $A1.82 billion, with the biggest import items being goods vehicles and medicaments. Other major Australian imports from Spain include passenger motor vehicles and vegetable fats and oils.
Investment
Bilateral commercial linkages are expanding. 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 Babcock and Brown have also announced significant investments in Spain, especially in the renewable energy and infrastructure sectors. Spanish investors in Australia include Ferrovial Aeropuertos, which was heavily invested in owning and operating a number of Australian airports, including Sydney and Melbourne, and remains interested in new business opportunities in the construction, infrastructure, energy and water management sectors; and Acciona, which has committed over $400 million to developing a new wind farm in Victoria. There has also been Spanish direct investment in Australian agribusiness, hospitality and real estate sectors, with sustainable energy a promising area for the future.
A number of major Spanish companies are currently looking closely at new opportunities in areas such as transport, infrastructure, logistics and wind energy. 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. A stronger Spanish presence in these sectors of the Australian economy is likely to develop in the next two to three years.
The Australia-Spain Business Association is headquartered in Madrid and has branches in Barcelona and La Coruña (Galicia). The Spanish Government and the Catalan regional Government maintain trade promotion offices in Sydney, where there is also an active Spanish Chamber of Commerce. Austrade maintains an office in Madrid, headed by a Trade Commissioner, which 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 following the issue in 2005 of a three year 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. The Spanish Employers Federation (CEOE) sent a high-level investment mission to Australia in May 2007. Another business mission from Spain visited Australia in September 2007.
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: 12/06/2008