Mercados emergentes / Emerging markets. Blog Elcano

Click ‘Download PDF’ to read the full document.


The overall pattern of Spanish history has been described, crudely, as a graph shaped like an upside-down version of the letter ‘V’. That is, the graph rises –bumpily at times– through 600 years under the Romans, 700 years under or partly under the Moors and a century of empire-building, to the peak of Spanish power in the 16th century. After that, the nation’s history goes downhill until the 1970s. A vast empire was gradually lost, leaving Spain poor and powerless. And there was much political instability: Spain suffered 43 coup d’états between 1814 and 1923, and a horrendous civil war between 1936 and 1939, followed by 36 years of dictatorship under Generalísimo Franco.[1]

After Franco’s death in 1975, the graph turned upwards again. King Juan Carlos, Franco’s heir, oversaw the country’s return to democracy. A negotiated transition period, presented as a model for other countries, paved the way to the drawing up of a new Constitution and then the first free elections in almost 40 years. These developments were followed by Spain’s progressive return to the international arena –where it had been relatively isolated during the dictatorship–. The following decade also witnessed the Socialist party’s election to actual power in 1982, bringing the country a new aura of modernity. The 1980s further witnessed Spain’s integration into NATO (1982) and the European Community (1986). The following two and a half decades were a period of phenomenal growth and modernisation.

Indeed, before the global crisis that hit Spain in the spring of 2008 it had become one of Europe’s most successful economies.[2] While other European countries had been stuck in the mire, Spain was much better at reforming its welfare systems and labour markets, as well as at improving their flexibility and lowering unemployment. Over the decade and a half that preceded the 2008 global financial crisis the Spanish economy was able to break with the historical pattern of boom and bust, and the country’s economic performance was nothing short of remarkable. Yet all this came to a halt when the global financial crisis hit Spain in 2008. As a result, it is suffering one of the worst crises since the 1940s.

Following its transition to democracy and European integration, Spain was, prior to the 2008 crisis, a model country. But then the dream was shattered and the country’s economy imploded after 2008. How did it happen? Policy choices and the structure of decision making, the role of organised interest, the structure of the state and institutional degeneration all played important roles in explaining the severity of Spain’s economic crisis, as did the country’s membership of an incomplete monetary union. Spain is currently (as of 2014) exiting a treble crisis: financial, fiscal and competitiveness. This working paper seeks to provide an overview of the country’s evolution since its transition to democracy and to explain its economic collapse after 2008.

The paper’s first section outlines the main features of Spain’s growth model and the challenges it faced. Section two describes the scale of the shock it underwent from 2008 onwards and analyses the treble crisis in the financial, fiscal and competitiveness spheres. It concludes with some lessons to be learnt from the Spanish experience.

Sebastián Royo, PhD
Professor of Government and Vice-Provost at Suffolk University, Boston, MA, affiliate and co-chair of the A Center-Periphery Europe? Perspectives from Southern Europe Study Groupat the Minda de Gunzburg Center for European Studies at Harvard University, Cambridge, MA, and Senior Research Fellow at the Elcano Royal Institute

[1] ‘After the Fiesta’, The Economist, 25/IV-1/V/1992, p. 60.

[2] This article draws upon S. Royo (2000), S. Royo (2008) and S. Royo (2013).