European Economic and Social Committee
Consultative Commission on Industrial Change (CCMI)
"Going local" in the framework of Europe 2020
EESC round table on industrial policy – Madrid, 20-21 October 2011
SUMMARY REPORT BY THE CCMI DELEGATION
(Mr van Iersel, Mr Gibellieri and Mr Jírovec)
1.
Introduction
On 4 May 2011, the European Economic and Social Committee (EESC) adopted an opinion on the
European Commission Communication on industrial policy, one of the flagship initiatives of Europe
2020. The adoption of this opinion is linked to a number of follow-up measures. One of these
measures was to organise a day-and-a-half-long round table in Madrid on industrial policy, to gather
contributions from the economic and social stakeholders most representative of Spanish industrial life,
as well as senior representatives of the Spanish government, in order to assess local actors'
commitment to the reform process.
Spain was selected for local monitoring for a number of reasons: essentially, it is one of the major
Euro area economies, but has been particularly hard hit by the fallout from the economic crisis.
Moreover, it offers the benchmark of a specific industrial policy plan as a basis for launching a
competitive industrial policy.
The round table was organised in three sections, focusing respectively on the institutions, the social
partners and other stakeholders. Each of the three sections was in turn divided into a series of
interviews between a delegation of three EESC members - the rapporteur, the co-rapporteur and the
president of the relevant study group - and one or more stakeholders (see the attached programme). A
questionnaire had previously been sent to participants, along with the Commission Communication
and the EESC opinion, to provide guidance on the issues to be addressed at the meeting. Each
organisation was given the freedom, however, to state its position on industrial policy in its own way.
This document is a summary report on the results of the discussions and should not be considered to
be the official minutes of the meetings.
Prior to this round table in Spain, a similar event had taken place in Warsaw on 27 and 28 June 2011.
.../...
EN
-22.
Economic context
Since the early 1990s, the Spanish economy had experienced a decade of growth, leading to a period
of expansion. From 2008 onwards, however, with the stock market crash in conjunction with the
bursting of the housing bubble, the economy suffered a fall in its macroeconomic indicators and the
effects of the global financial crisis heightened markedly in Spain. Although Spain did see some weak
growth in 2011, with an increase of 0.7% year on year, the Spanish economy will probably suffer in
2012 due to tensions caused by the sovereign debt crisis
The contraction of the economy following the first financial crisis worsened in Spain as a result of the
housing bubble burst, since from the late 1980s, this sector had been the major driver of growth in the
country. The housing boom had been exacerbated by credit liquidity and the stability of the single
currency. The immediate result was a) a shrinking of the economy due to a shortfall in liquidity and b)
a dramatic increase in unemployment, which rose from around 11% in 2000 to the current figure of
23% (50% for young people) in 2011.
At first glance, this process and these data seem to reflect the context of global crisis, which has been
compounded by the sovereign debt crisis in the Eurozone. Some might think that Spain is simply
joining the group of countries paying the price for excessive expansion and lack of monitoring of the
Euro zone's economic convergence criteria over the past twenty years. This view is far from accurate,
however, since in the recent decade of economic expansion, Spain was one of the few countries that
faithfully met the criteria for economic convergence, with a stabilising anti-cyclical fiscal policy and a
budgetary surplus that brought public debt down to 37% of GDP. What is more, the Spanish banking
system, although not entirely blameless, did not have to be rescued by the state.
What happened to an economy that had been experiencing full growth since the 1990s until the
beginning of the crisis in 2008, with excellent results and which exceeded the economic convergence
criteria laid down for the Euro zone? How could such a massive decline in economic activity occur
and how could unemployment levels reach three times those of some European countries?

Firstly, the Spanish economy suffers from structural imbalances caused by decades of low
productivity, poor competitiveness and a fragmented industrial fabric. These shortcomings were
temporarily "remedied" during the economic recovery that accompanied Spain's accession to
Economic and Monetary Union and the increase in foreign investment, which was fuelled by low
bank interest rates and the growth of industrial sectors linked to the construction of residential
housing, which grew exponentially, reaching 17.9 % of GDP in 2007, although the real effect on
the economy was much greater, reaching 39%, including service sectors directly related to
housing.

Secondly, this is a growth model which suffers from a number of identified imbalances and which
since the mid-1990s has focused on domestic demand and construction (a sector featuring low
productivity and innovation). As a result, a large number of industrial sectors and related services
are geared towards domestic demand in the housing market (cement, steel, ceramics, chemicals,
.../...
-3furniture, equipment, electrical appliances, etc.). The burst of the housing bubble caused by the
financial crisis is linked to the sovereign debt crisis and the lack of credit for businesses.

Thirdly, the set-up and expansion of large and highly-competitive global businesses in certain
sectors (tourism, banking, infrastructure, telecommunications, the environment, transport, etc.)
has not compensated for the low level of economic activity in other sectors that have a highly
fragmented industrial fabric, with small firms concentrated in traditional sectors that are largely
dependent on domestic demand.

Other factors that have contributed significantly to the worsening situation: direct contributions
from the European Union (the Common Agricultural Policy and Structural and Cohesion Funds),
declined substantially as of 2005, due to the accession of new countries that have large farming
sectors and much lower per capita GDP. In statistical terms, these have increased income levels in
under-developed Spanish regions.
It should be noted that in November 2011 a new government took office in Spain. This round table on
industrial policy was therefore held in a pre-election climate, characterised by a lack of activity and
substantive measures in the previous months and by uncertainty as to whether the measures adopted
by the outgoing government would continue.
The new government that emerged victorious from the elections on 20 November 2011 has built on
the measures initiated by the previous government in order to counter the sovereign debt crisis and
boost productivity and competitiveness. Its first steps are in line with the recommendations of the
European Council and are intended to restore public finances and continue the path already taken by
the previous government:

lower public spending for all public authorities. Setting targets for deficit reduction in the very
short term, the cuts are proving to be extremely tough, especially in some regions, leading in
particular to cuts in public sector jobs, investment and the provision of basic services such as
education and public health. Against this backdrop of cuts, the growth targets in key areas to
further the objectives of the Europe 2020 strategy will be revised downwards;

boost the public coffers by combating tax evasion and raising tax revenues: basically a tax on
income and capital. VAT remains at 18%, following a 2% increase in 2011. These measures are
coming under heavy criticism because they are shifting the tax burden onto the middle classes,
which reduces consumption and hence revenues;

a package of structural measures, which for the moment concern two main areas: the banking
sector and a major labour market reform.
.../...
-43.
Features of Spain's industrial policy: recent developments and how it fits in with the
Europe 2020 strategy
3.1
Developments in Spain's industrial policy since the country joined the European Community.
Main lines of action and the devolution of state powers to the regional governments of the
Autonomous Communities
During the 1980s and mid-1990s, Spanish industrial policy was shaped by the political circumstances
of the time: protecting and consolidating democracy and membership of the European Community.
There were basically three lines of action:

the implementation of industrial restructuring measures. Up to 14 of the economy's flagship
sectors such as steel, mining, shipbuilding etc. underwent adjustment and streamlining processes.
Industrial policy focussed on both direct industrial restructuring and the industrial redevelopment
of areas affected by restructuring;

the orderly privatisation of public companies that accompanied the process of opening up certain
previously state-controlled sectors (such as telecommunications, postal services, oil and tobacco
monopolies etc.). Measures to boost these processes by government agencies were key to creating
companies with sufficient critical mass to be able to expand outwards;

the new regional governments (Autonomous Communities) were given full authority to design
and organise their own industrial policies and the national government was obliged to transfer
powers and resources to ensure that the new governments could implement them. The role of
national government gradually diminished.
Nevertheless, the macroeconomic policies of that time, aimed at controlling high inflation through a
restrictive monetary policy, did not produce all the expected benefits and a vicious circle developed,
dealing a harsh blow to employment and to an industry in the full throes of reorganisation. Industry
had improved its production structures but labour market structures and the lack of business standards
reflecting European standards hampered economic recovery and industrial competitiveness. Industry
had to compete in a climate of economic crisis and needed a series of monetary devaluations to boost
the competitiveness of Spanish industrial activity as a whole.
As decentralisation was gaining ground, there was a shift towards an industrial policy closer to the
idea of an "industrial district" that would be closer to the level of the ultimate stakeholders businesses. The Spanish central government has thus gradually adjusted to the active role developed
by the autonomous communities and local authorities and has focussed more on overall coordination
and on protecting and promoting Spanish industrial interests in the European and global contexts.
Most economic players, however, suggested that political decentralisation in Spain may not have
produced the expected results. In fact, some participants provided evidence that the transfer of full
powers to the autonomous communities has produced some unwanted effects arising from excessive
.../...
-5regulation and the diversity of legislative activity, which have a negative impact on production and
business management. The result is a greater administrative burden and increased legal uncertainty,
leading to a fragmentation of the internal market within the state itself. On this point, their views
chime with the announcement made by the new government, which stated in its election manifesto
that one of the key objectives to boost industrial activity would be to restore the market's unity.
While this is the general picture, the Basque Country is a case apart, given its approaches to industrial
policy in recent decades. It has managed to develop and modernise an industrial fabric that is separate
from construction and is geared towards producing industrial goods by establishing links between
SMEs, technology centres and the financial system, with high export rates.
3.2
Spanish industrial policy against the backdrop of the Europe 2020 Strategy: A specific plan
to provide structured support for industrial activity: Integrated Industrial Policy Plan 2020
It has been noted previously that Spanish economic activity/industry suffers from a number of
structural imbalances, which became all too clear with the emergence of the current economic crisis.
One of the biggest imbalances is based on the construction industry's excessive share of the
production structure since the 1990s, which has had the effect of focussing a large part of industrial
production on goods and services related to the building of new homes, a sector that is relatively
uncompetitive and which makes little use of innovation and technology. The feeling among
participants was unanimous: the growth model must be redirected towards a sustainable industrial
policy that is fully competitive and contributes more to GDP within the framework of the Europe
2020 strategy.
In 2009, the government adopted an action plan entitled "Plan to stimulate the Economy and
Employment (Plan E)" which basically provided a cash injection for the different regional and local
authorities, with specific measures for labour and public services. It was widely criticised by
economic operators, as it had the effect of increasing the public deficit, which took its toll in later
years once the sovereign debt crisis emerged.
No commitment to a sustainable economy was made until 2010, with the Sustainable Economy Act
(Law 2/2011), which contains measures to promote sustainable industrial development, including
measures to improve energy efficiency in line with the principles of the Europe 2020 strategy. In
tandem with these initial steps, a specific plan for industrial policy was drawn up, entitled the
"Integrated Industrial Policy Plan 2020" (PIN 2020), designed as a 10-year plan providing a
framework for adopting, reorienting and strengthening a new industrial policy. This plan represents a
qualitative advance in the recognition of industry as a key pillar of growth, giving it full support and
recognising the need for all actions aimed at its recovery to be specifically designed. It also requires a
long-term and organised vision.
.../...
-6PIN 2020 Objectives:




modernise the growth model;
raise industry's share of GDP to levels comparable with the European average;
make Spanish industry more competitive;
bring Spanish industrial policy into line with European guidelines and ensure their efficiency.
The PIN 2020 recognises and legitimises the existence of a broad industrial policy, i.e. including
processing and all related services, except financial services. The plan identifies the weaknesses of
Spanish industry that need to be addressed. These are essentially: industry's low share of Spain's total
production structure (15%, which is well below the EU average of 18%), poor use of technology,
production geared towards domestic demand, the gradual loss of competitiveness due to insufficient
growth in productivity, and the small size of SMEs. The plan also pinpoints the benefits of boosting
industrial policy, and government action is based around five key strands, each one with a five-year
plan for concrete measures in the various fields concerned. Most of these strands or priority action
lines contain horizontal measures, but also some specific powers or strategic priority sectors.
Priority Action Lines under the PIN 2020:





improving competitiveness;
improving innovation and R & D;
growth and dynamism of SMEs;
focus on International Markets;
strengthening strategic sectors such as automotive, aerospace, biotechnology, pharmaceutical and
health technology, ICT and digital content, environmental protection industries, renewable
energies and energy efficiency and agrifood.
These five priority areas are linked to some 124 highly varied measures of very different types, such
as taxation, business legislation, technology and materials, ICT, R&D and innovation, vocational
training and qualifications, logistical infrastructure, transport, environmental regulations, security and
industrial quality etc. The total direct economic impact would be EUR 83 billion in the first five years.
Most participants at the round table agreed that this plan should be welcomed. They endorsed the need
to boost industry's share of the Spanish economy and to strengthen aspects to make Spanish industry
more competitive and raise its international profile. They also agreed with the assessment of the
industrial situation in Spain and the main points to be worked on. Not everyone agreed, however, with
the method put forward and the measures identified.
Indeed, despite the efforts made by the previous government to design and implement measures to
support industrial policy, most of the economic and social stakeholders on the panel were critical of
the same points. In their view:
.../...
-7
The added value of this plan would be reduced to a text coordinating and steering various
measures affecting companies that were already present in different areas of activity. Its main
achievement would be greater transparency and information, collating all measures affecting the
industry, but according to this view, would lack innovative features with the power to effect
industrial change.

No reference is made to the problems arising from a lack of coordination between the various
authorities that have full powers to design and implement industrial policy in their territories (the
State, autonomous communities, local authorities) and nor is there any mention of overlapping
regulations, or suggestions of possible solutions.

Some of the areas that would be affected by the plan touch on points that require long-term
planning (education and training, energy etc.) in order to ensure a degree of stability. This would
require agreements or arrangements between the various political parties and governments.
Some participants reiterated one very specific point: the goal is to make businesses more competitive
in order to raise their international profile. To achieve this, any policy that is drawn up should
emphasise reducing regulatory and administrative barriers of all kinds, which often result in excessive
legislation and represent an added cost in terms of time and money. This is compounded by the highly
diverse legislation amongst the different autonomous communities. This would give a decisive boost
to the unity of the internal market within the Spanish state.
Regarding the role played by the economic and social partners in drafting the PIN 2020, opinion is
divided. Government representatives indicated that they had all been consulted about their projects, as
had the autonomous communities, through the official channels established by law. Some participants
from the business sectors, however, did not feel that the government had sufficiently involved them in
shaping the plan.
The general feeling of all participating businesses was one of total support for European interests and
approaches. This rock-solid feeling had grown over recent decades and had been fully incorporated
into their approaches and strategies. The entrepreneurial mentality and policy had been taken fully on
board and had accepted the approaches adopted by the European Union.
4.
Foreign investment/big businesses' access to foreign markets
Over the last 15 years, Spain has gone from being a net recipient of foreign direct investment (FDI) to
being a net supplier of FDI in other countries. The reason for this shift is not only a greater volume of
capital outflows, but also the fall in inflows.
After three consecutive years of worldwide decline in FDI, in Europe this grew by nearly 19% in
2011, but Spain's share of the European total is just 6%. Of the total investment, the vast majority is
due to merger and acquisition (M&A) transactions, but "greenfield" projects or projects that generate
employment fell significantly (38.6%).
.../...
-8-
The Spanish economy is entirely open and during the 1990s a process of opening up various industrial
sectors began. This process achieved success, due to the excellent financing conditions of the time and
to businesses' own dynamism. Foreign capital flowed in continually from the mid-1980s onwards,
coinciding with Spain's membership of the European Union and later with the adoption of the euro,
reaching very high levels within extremely short timeframes. Some companies adopted a strategic
response to avoid being taken over: the response was simply to grow and remain on the offensive and
they thus decided to increase their presence abroad, taking advantage of the favourable credit
conditions in place since the mid 1990s and the process of business liberalisation .
With regard to direct investment abroad, Spain's share continues to grow. A large number of Spanish
companies operate in different markets across the world, and have thus been better placed to
withstand the economic crisis besetting the domestic market since 2008. Many of these companies
have become global leaders in their spheres of activity, which include banking, telecommunications,
energy, equipment, infrastructure, automotive components, textiles, food and agriculture, etc. some of
which were represented at the round table, including the Mondragon industrial cooperative from the
Basque Country.
The paradox is that although the Spanish economy has lost its competitive edge in recent years, there
is some good news: export performance has been surprisingly good, and has even become the driver
of economic activity. While the United States, the UK, France and Italy have in relative terms, lost
global market share to the emerging countries over the last decade, Spain's share of goods exports has
remained stable at 1.7%. The export sector has adopted more efficient strategies than local producers,
improving product quality and reducing profit margins. Furthermore, the foreign business of these
companies does not focus on Latin America: their largest share is in European countries and in
emerging countries in Asia, and North Africa. The challenge now is to continue with this approach
and transfer it to other sectors of the economy.
5.
SMEs
Spain's industrial fabric is characterised by a major fragmentation of businesses, which are mostly
very small. Of a total of 3 250 576 enterprises, 99.9% are SMEs, which generate more than 76% of
employment. Their main disadvantage, however, is their tiny size: half have no employees and of the
other half, 78.8% are micro-enterprises with fewer than 5 workers. Although these percentages are in
line with those of SMEs across Europe, the relationship between corporate structure and per capita
productivity is very low and constitutes the main structural weakness of Spanish SMEs. In addition,
two-thirds of the activity of these companies is concentrated in 6 sectors: commerce, construction,
transport, real estate, hospitality, architecture and engineering and services to other businesses
(consulting, legal advice, accounting, etc.).
Most industrial SMEs (manufacturers) are larger in size and are concentrated in the mid-sized and
large business segment in the medium-technology sphere (metal products, food, furniture, toys, etc.).
.../...
-9Although the size of the company is viewed as a "traditional" difficulty that hampers higher
productivity, this claim was challenged by several participants. Some feel that size is no longer so
critical to achieving optimal levels of competitiveness and that ultimately size is determined by the
degree of competition in a company's market segment. There is unanimity, however, that to be
competitive in foreign markets, sectors with highly fragmented corporate structures cannot produce
valid strategies on their own, and need common market research or production and marketing
strategies at least. Such strategies can only be achieved if companies are convinced of the need for
them, even at the cost of being fewer in number and of losing some decision-making power. An
industrial policy with effective instruments coordinated between the various levels of government
would be essential for many companies.
Following on from these discussions, the general feeling among participants was that at the present
time of budget cuts and lack of funding, it is companies themselves that will have to make the effort.
This means that the indirect support that the government could provide should take the form of
measures that are smaller in scale but more effective than those currently in place. Some participants
highlighted the useful aid provided by public bodies in other EU Member States, which they were
able to obtain simply because they owned businesses jointly with business partners in those countries,
and which offered "turnkey" information making it possible to set up and operate in the chosen
country from the outset, with all the information necessary to understand and overcome practical
difficulties.
In addition to the need to grow and to access foreign markets, the major problem facing SMEs is the
urgent need to obtain credit. The Instituto de Crédito Oficial (ICO) [public credit agency] is
developing a series of special credit lines for SMEs and credit lines are also being put together for
venture capital. Priority is also given to credit for innovative businesses and public-private
partnerships. The issue of access to finance is of central importance to kick-starting a business's
activities, and this is the message businesses have conveyed.
Public authorities' failure to pay companies was a point raised by some participants, as this just adds
to businesses' problem of a lack of liquidity. This situation should settle in the course of this year as a
result of recent legislative measures, but the financial situation of some autonomous communities
does not offer an immediate solution to the problem.
Another difficulty affecting the business climate is the need to simplify and expedite business start-up
procedures and to reduce the total cost and number of the relevant legal requirements.
6.
R&D + innovation
A new legislative framework was adopted in 2011, laying down new lines of action: the new "Science
and Innovation Act" and the "National e2i Innovation Strategy" are the two major benchmarks for
measures in this field. The new policy focuses on key areas of heightened public action: offering
financing for innovative SMEs and venture capital, establishing bases for marketing scientific
.../...
- 10 inventions, boosting technological platforms and science and technology parks and increasing the
number of researchers.
Spain's public expenditure on R&D between 2004 and 2010 increased by more than 14%, but with the
policy of cutting public spending, this has started to decline (1.7% in 2010). Public spending on R&D
fell by 0.9% and corporate spending by 2.4%. This is the first decrease following substantial increases
in previous years. The percentage of R&D in relation to GDP (1.35%) is below the European average
and the number of people employed in R&D is also much lower than the European average.
The division between the public and private share is quite similar: the public share accounts for 46.6%
and the private sector 42.9%. Foreign investment and universities make up the total. The most
dynamic business segment consists of high-tech companies with fewer than ten employees, which
have significantly increased both spending levels and researcher numbers. The segment of companies
with over 250 employees has also maintained and increased levels of research, while medium-size
companies (10-250 employees) are those hardest hit by the crisis. The total number of companies
engaged in R&D has certainly decreased, although they are trying to keep going, holding on to their
researchers, but the real innovative capital lies in small companies.
The scientific capacity of the Spanish system of innovation is measured by two variables: publications
in prestigious international journals, which have increased (by 8.5% in 2009, while in other countries
the figure has remained static) and the number of patent applications, which has decreased at both
national and European levels. In contrast, the production of high-tech goods has fallen, and exports
and imports have waned.
One of the main challenges today is to commit to public-private partnership research projects and to
increase the corporate contribution, because business spending will remain a benchmark for the main
indicator of the country's approach to innovation. At the same time, university teaching needs to be
updated, establishing more active links with business than is the case today.
Prospects for public spending on R&D are clearly insufficient, because the planned budget cuts are
substantial in terms of both subsidies and low-interest loans. As a consequence, the share falling to
businesses and universities should be increased.
7.
Infrastructure: Transport and Communications Networks
Spain has a vast network of infrastructure (communications, energy, transport, etc.), which has been a
major driver of economic growth in the last twenty years, due to the high take-up of European
structural funds and access to preferential financing conditions and public works to build roads, high
speed rail lines and new airports.
In the case of railways, Spain has Europe's number-one network of high speed rail lines (in terms of
kilometres), but experts have serious concerns about its profitability and sustainability. The measures
proposed under the PIN 2020 Industrial Plan include a plan to promote rail freight, to make lines more
.../...
- 11 profitable and to improve road traffic flow, which would also have a positive effect on the quality of
the environment and on encouraging a sustainable economy.
Investment in motorways was extremely high during the economic boom, when there was also a high
take-up of European funds. The number of motorway kilometres built and the quality of the secondary
network that was developed has provided a backbone for the entire country and has ensured it is
properly connected, greatly favouring trade flows by road.
At the same time, investment in public works by municipalities has also been significant, especially in
terms of access to cities, metro lines, and cutting-edge sports facilities.
The economy's most physical infrastructure, the so-called "network industries" of transport,
communications and energy, are vital for generating wealth and have a direct impact on the social and
environmental situation in the regions, and this is certainly true where Spain is concerned. According
to some participants at the round table, however, the impact of some of this infrastructure on Spain's
economic growth has been doubtful, even questionable, in some sectors. Indeed, during the decade of
expansion (1995-2006), the contribution of investment in ICT as opposed to productivity (0.37%) is
much higher than the contribution from traditional infrastructure investments in transport (0.02%).
The general feeling is that Spain overvalued investment in the different traditional types of
infrastructure and at the same time that it must strengthen strategies for investment in ICT and its use.
In fact, in the latest annual report on global competitiveness, the World Economic Forum stressed that
Spain's use of ICT has increased markedly in the last year (from 29th position to 24th).
In the field of telecommunications, Spain has some of the world's leading corporations. However,
some participants at the round table wished to point out that Spain lags behind other world economies
in terms of high-speed broadband distribution infrastructure. In addition to poor broadband coverage,
telecommunications users face some of the highest prices in Europe. Some participants warned of the
need for support from the PIN 2020 Industrial Plan to create computer networks connecting different
areas (legal, educational, healthcare infrastructure, etc.) and to narrow the digital divide between
users, thus boosting the overall performance of the economy.
8.
Human capital: the education system, professional qualifications and the labour market
The stakeholders expressed great concern at the problems affecting labour in Spain. With average
unemployment rates above 23% and reaching nearly 50% for young people, the human and social
tragedy loomed large in discussions.
.../...
- 12 8.1
The education system
From a business standpoint, the training and qualifications of workers in Spain raises two issues:

On the one hand, Spain has excellent highly-trained professionals, but paradoxically one-third of
its young people under the age of 25 have not gone beyond secondary education, with very high
rates of early school-leaving (which worsened in the boom period, with young people leaving
school to find well-paid jobs in services and construction). In other words, Spain has the
workforce and talent of a country divided in two, which makes it extremely difficult to lay the
foundations for a sustainable economy.

This aspect is also evident from the figures for secondary schooling (3rd in the world rankings)
and for university education (18th in the world rankings), but the quality of educational content
and/or its match to social and business needs are not properly established.

In higher education, the paradox is even greater: Spain has the world's top-ranked European
business schools, while its universities appear in much lower positions on the same rankings.
Apart from education/training, other aspects hinder competitiveness. Some consider that the labour
market suffers from easily identifiable structural weaknesses, which need to be tackled head on as a
matter of urgency.
8.2
Unemployment and the Labour Market
The greatest challenge facing the Spanish economy today is to reduce its sky-high unemployment
rates: given that they stand at a national average of 23% (with the rate in some provinces reaching
30%) and almost 50% for young people, the human and social tragedy featured heavily in this debate.
Labour market reform has started late. The first steps to make this market more flexible were adopted
in 2011, but have been insufficient to halt the decline in unemployment figures.
Although unemployment figures have reached staggering levels, what is amazing is that no social
divide has occurred. Some participants openly stated that this has not happened for two reasons. First,
the rise of the underground economy (estimated at between 15% and 20% of GDP), which allows
many unemployed people to earn undeclared income. The other factor is the solidarity between
generations: young people are surviving thanks to their parents' savings. This is a generation living on
the savings and incomes of the previous generation, which in turn runs the risk of having a lower
income at retirement age.
Some participants noted that while there is a direct link between the regulation of working conditions
and economic performance, in the case of Spain it must be remembered that Spain's unemployment
problem is structural in nature. The surplus labour during the period of industrial expansion in the
1960s was absorbed by emigration, later by the tourism industry and later still by housing
construction. In the early 1980s and well into the 1990s, the average unemployment rate was 20%,
.../...
- 13 falling in the last boom decade to a record 11%, and in recent years reaching an average of 23%. The
surplus that needs to be absorbed is directly linked to the housing bubble burst and the economic
crisis.
The prevailing opinion among participants was that Spain's labour legislation has contributed to the
economy's lack of competitiveness. As this report is being completed, the new government has
published a series of highly ambitious measures to increase labour market flexibility, which are
causing considerable controversy at the domestic level. Although they have been adopted under
emergency procedures and have to be approved by parliament, given the majority held by the new
government, they will certainly become a reality.
The protests of the social partners have not been long in coming. In short, the labour reform consists
of making labour relations more flexible, giving more leeway to SME owners in order to boost
recruitment and bring unemployment down. On the other hand, this reform significantly reduces the
labour rights of workers, who fear that even greater unemployment will ensue.
9.
Final considerations
All participants at the round table made excellent contributions. Government representatives,
businesses, social partners and other stakeholders that were represented all worked extremely well
with the EESC delegation, providing opinions and key data that helped paint an accurate picture of the
situation in Spain. Their determination to contribute to the positive outcome of this local action is all
the more impressive given the delicate pre-electoral climate surrounding the preparations for this
round table and the event itself.
The broad lines of Spain's industrial policy as described in this report and more precisely the General
Industrial Policy Plan, will now have to be assessed by the new government if it is to tackle the
changes needed to boost the growth and competitiveness of Spanish industry.
All stakeholders involved in Spanish industrial policy, especially businesses, have proved their full
support for European values and interests and their commitment to the goals of competitiveness and
growth for Spanish industry, in line with the objectives of the Europe 2020 Strategy.
Joost van Iersel
Enrico Gibellieri
Ludvik Jírovec