Spain, the European Union and the Global Economy

1. Spain, the European Union and the Global Economy

2. Modern Spain: • In 1813 Spaniards, with British help, booted the French out (Napoleon conquered in 1789) • Differences over how Spain should be governed fuelled civil war in the 19th century, with some demanding the establishment of a republic. After a false start in 1873, a second Spanish Republic was finally and enthusiastically welcomed in 1931, along with a modern, democratic and secular constitution. • But divisions between right and left over religion, land and social reforms sparked the Spanish civil war (1936-1939) in which some 500,000 Spaniards died. It was won by the right under General Francisco Franco, a Fascist dictator who annulled most Republican reforms, brutally suppressed regionalism and re-established the power of the Catholic church. • In 1969 Franco designated Juan Carlos, of the Bourbons, as the next head of state and maintainer of Franco’s authoritarian regime. But when Franco died in 1975 the new king instead helped stage-manage the re-establishment of parliamentary democracy. • A new constitution, approved in 1978, established modern Spain as a constitutional monarchy, restricted the Catholic church and army, and offered Spain's diverse regions limited autonomy. • Following the legalization of political parties, the first free election for 40 years was held in 1977. In 1978 a referendum approved a new democratic constitution and repealed many of the laws of the Franco era. • In 1986 Spain joined the European Community (now EU). Spain was one of the founder members of economic and monetary union (EMU) in January 1999.

3. Political structure • Spain is a constitutional monarchy. The king, Juan Carlos, will be succeeded by his son, Felipe. • The parliament, or Cortes, is bicameral, but effective power resides in the 350-seat lower house (Congress of Deputies). The upper house (Senate) has 208 directly elected members and 51 regional representatives. Parliament is elected for a maximum term of four years. • Spain, alongside Germany, is now the most decentralized large country in the EU after Belgium, but demands for greater autonomy by Catalonia and the Basque Country are a source of political tension. • There are 17 autonomous community (regional) parliaments within Spain. • For the national government the Council of Ministers is headed by the president (prime minister), who is appointed by the king, but must win investiture vote in parliament. Jose Luis Rodriguez Zapatero, the leader of the Spanish Socialist Workers' Party (PSOE), was re-elected president in March 2008. • Main political parties: Spanish Socialist Workers' Party (PSOE); Popular Party (PP); United Left (IU), including the Communist Party (PCE); Convergence and Union (CiU), a centre-right Catalan nationalist federation; the centre-right Basque Nationalist Party (PNV); HerriBatasuna (HB), an outlawed separatist Basque coalition with links to the paramilitary EuskaditaAskatasuna (ETA); Catalan Republican Left (EsquerraRepublicana de Catalunya—ERC), a left-wing Catalan separatist party; Canary Island Coalition (CC); Galician Nationalist Block (BNG); Union, Progress and Democracy (UPyD), a centre-left anti-nationalist party.

4. Let’s look at some graphs and statistics reflecting the state and recent trends in Spain’s major economic indicators:

5. But this snapshot doesn’t give us a sense of how Spain’s economy has been changing…so we need to look at the change in GDP: Okay, this dip in GDP growth look bad yet this is what happens in a recession. So why has Spain been in the news so much lately and said to now be in a state of contracted crisis?

6. PIIGS

7. So why is this particular state of things a “crisis”? • After examining data from dozens of countries over the past two centuries, economists Carmen Reinhart and Kenneth Rogoff found a connection between high debt and reduced economic growth. Specifically, they found that when a nation's gross debt reaches 90% of its economy, it often loses about one percentage point of growth a year. • One percentage point lower growth may not seem huge. But it's equal to roughly a third of the average annual GDP forecast over the next decade. • And slower growth can reduce the number of jobs created, which in turn can hold down household incomes. • The more debt the government accrues, the more it will pay in interest and the less it will have to spend on the basic services Spaniards expect from their government. • Reinhart has said the relationship between high debt and low growth is "self-feeding." Low growth ravishes government revenue and increases the need to borrow. More borrowing builds more debt. Higher debt increases pressure to tighten fiscal policies in order to reduce the risk that investors lose confidence in the country. But tighter policies can slow economic growth. • Before we move on lets look at the things Spain sells to the rest of the world and what they buy as well…

9. Types of Economic Systems Resource Allocation Market Command Centrally Planned Capitalism Market Private Capitalism Resource Ownership Centrally Market State Planned Socialism Socialism

10. Types of Economic Systems Resource Allocation Market Command Centrally Planned Capitalism Market Private Capitalism Resource Ownership Centrally Market State Planned Socialism Socialism United States

11. Types of Economic Systems Resource Allocation Market Command Centrally Planned Capitalism Market Private Capitalism Resource Ownership Centrally Market State Planned Socialism Socialism Spain, 1939-1975

12. Types of Economic Systems Resource Allocation Market Command Centrally Planned Capitalism Market Private Capitalism Resource Ownership Centrally Market State Planned Socialism Socialism North Korea

13. Types of Economic Systems Resource Allocation Market Command Centrally Planned Capitalism Market Private Capitalism Resource Ownership Centrally Market State Planned Socialism Socialism Spain Today

14. Understanding an Economic System: • Need some definitions before we go on... • Institution: Institutions are rules of the society that structure the interaction among people. • - Are made up of formal rules and regulations. • - And informal rules as well at times. • - They are the informed ways by which people deal with each other every day → norms of behavior. • Institutions, collectively, are the framework within which all of human interaction... political, social and economic... takes place. • Economy: The economy of a society is comprised of institutions that perform economic functions. These institutions are structured and behave according to established working rules. • Philosophical Basis for an Economy: A viewpoint which specifies the place of an individual within society; an ideal state of political, social and economic reality to serve as a set of ultimate goals for society; and a general program suggesting broad policy measures that will guide society from its actual conditions toward the ideal reality. This economic philosophy will be multidimensional in the sense that social, political, and cultural, as well as economic elements are contained therein.

15. Capitalism → Adam Smith - dominance of "the invisible hand" in guiding economic activity. Limited role of government (provide public goods and define the rules of the game). A “process” ideology. B. Institutional Economics: While there is no hierarchy of importance in the tenets of institutional economics, one of the most important for our purposes is that... [a] Economies are fluid rather than static. [b] The second tenet is that one can understand an economy only within its historical context. - The constellation of factors shaping an economy is unique. - A corollary to this tenet is that what might work for one nation might not work for some other due to historical inconsistencies. [c] Third, the values of a nation's people can be understood best by studying the philosophical/religious underpinnings of its culture. - Old and new philosophies alter attitudes that may subsequently lead to a change in work rules and therefore institutions.

16. [d] A fourth general tenet is that the values, institutions and work rules which operate in one nation will not necessarily function in another nation. • - A corollary tenet is that values, institutions and work rules which functioned in the past may not function in the future. G. C. Allen: "One of the most common fallacies in the minds of academics, or the citizenry of a nation, is that once a trend is established it will persist indefinitely." • [e] Finally, the basic structure and performance of an economy are influenced by the dynamics of the society's social and political structure. • 4. This broad theory is based upon the interrelationship between a society's beliefs, power structures, and working rules of institutions. • [a] The theory can be used to explain the nature and evolution of economic systems. • [b] Changes in working rules can modify institutions or create new ones, with the economy evolving in the process. • [c] The philosophical basis accepted by authorities and the economy's performance determines whether the working rules are retained, modified, or replaced. • 5. Working rules... • Establish the boundaries of economic activity between institutions. • 6. Principal institutions... • - Socially determined: not inherent.

17. [a] Instrumental in establishing and coordinating most production and distribution patterns of behavior, and giving meaning and durability to routine activities. • [b] Significant features: Origin, the activities participants perform, working rules governing them, their impact on the economy, and the philosophical basis for these activities and rules. • 7. Behavior of the economy... • Three components: How it is organized to resolve the economic problem (what, when, how, for whom), institutional change, and performance. • In describing how each society is organized to resolve its economic problem, three questions need to be addressed: • 1. How is the resource allocation decision organized... • [a] Centralized (state control) or decentralized (markets) or some combination. Decision making rules and institutions. • 2. What are the rules regarding ownership and control over productive resources? • In each economy the rules differ...even where similar, differing restrictions exist. • 3. What type of social process has been adopted for coordinating information and for making production and distribution decisions? • - Including markets, traditional mechanism, or some form of economic planning.

18. Concepts to Define & Understand at the Beginning… • 1. Comparative advantage - def: A nation has a comparative advantage over a trading partner in the production of an item if it can produce that item at a lower unit cost than its partner. • Implications... • Any country can increase its real income by trading, because the world market provides an opportunity to buy some goods at relative prices that are lower than those which would prevail at home in the absence of trade. • The smaller the country the greater this potential gain from trade, but all countries benefit to some extent. • A country will gain most by exporting commodities that it produces using its abundant factors of production most intensively, while importing those goods whose production would require more of the scarcer factors of production. • The theoretical benefits of freer trade: • Theory of comparative advantage…focuses on relative labor costs (David Ricardo). • 2. Heckscher-Ohlin theorem (labor and capital): factor proportions determine the direction of trade….. A country relatively well endowed with capital should produce and export capital intensive goods, one well endowed with labor should produce and export labor intensive goods (relative costs).

19. Stolper-Samuelson effect: if a labor-abundant country produces cheap labor-intensive goods, over time the increase international demand for these goods will raise their price and by association the price of their key input: labor. • Stolper-Samuelson effect => trade will in time benefit the least well-off…. The poor workers. • Factor price equalization theorem: over time wages will rise in labor-abundant countries and fall in capital-rich countries => international prices of labor and capital will each converge (idea behind PPP & Convergence Hypothesis). • 5. Other theoretical work by Krugman suggests that once a country opens itself up to trade there will be a period in which inequality will increase, followed by a period in which the Stolper-Samuelson effect will assert itself and inequality will decline (importance of growing middle class with increasing political power). • 6. Empirical work conducted by the World Bank for the 1970-1990 period show that those countries with open trade regimes grew at a 5.0% per capita rate. Nonglobalizing developing countries struggled through this period with a 1.4% per capita growth rate (David Dollar)=> trade does seem to create higher growth (but not necessarily development [Rodriguez & Rodrik]).

20. 2. Balance of Payments - Exports (X) & Imports (M) • B of P = PxX – PmM • Px = vector of prices of exports • Pm = vector of prices of imports • Surplus = excess of exports over imports • Deficit = excess of imports over exports • Merchandise trade account, service account, capital account, reserve account. • 3. Exchange rates - def: The price of one nation's monetary unit in terms of the monetary unit of another country. • - Foreign exchange market: A market in which buyers and sellers of bank deposits denominated in the monetary unit of many nations exchange their funds. • - Exchange rates can be allowed to fluctuate freely, can be "managed" or can be pegged to the currency of a major trading partner. • => Graph (1€:$1.20) • Demand side - People who want to import European goods, invest in Europe, travel in Europe, or others who just want to hold Euros. • … When North Americans demand more European cars, wine, or whatever, (D curve shifts right) the price of the Euro will rise in terms of dollars.

21. Supply side - those who want to import goods into Europe from the US, invest in the US, travel in the US or just hold $. When Europeans demand more US cars or computers (S curve shifts right) the price (in $) of the Euro will tend to decline (S of Euros shifts r). Note: Size of the FOREX market: an average of $1.9 trillion crosses national borders each day. Appreciation and depreciation of a currency: When country A's currency becomes more valuable relative to country B's, country A's currency is said to appreciate relative to that of country B … and country B's currency is said to depreciate relative to that of country A. Determinants of Exchange Rates: 1. What determines the relative positions of S&D curves for currency? (a) Relative price levels - constantly changing (b) Relative rates of growth (c) Relative interest - rate levels (d) Expectations (Speculation)… (e) Random daily trade and financial flows…noise Note: Market exchange rates vs. PPP rates (purchasing power parity).

22. The Big Mac Index (7/2009) The Big Mac index is based on the theory of “purchasing-power parity”. Under PPP, exchange rates should adjust to equalize the price of a common basket of goods and services across countries. Our basket is the Big Mac. Video Clip Econ. 4132

23. The European Union An international organization of 27 European states Members of theEuropean Council

25. Population Total (2010): 501,259,840 • GDP Total (2008): $18.394trillion (nominal US dollars) Note: Larger than US’s $14.2 trillion • Per capita GDP (2008): $30,513 • The EU economy is expected to grow further over the next decade as more countries join the union - especially considering that the new States are usually poorer than the EU average, and hence the expected fast GDP growth will help achieve the dynamic of the united Europe. • However, GDP per capita growth for the whole Union will lag behind the US. In the long-term, the EU's economy suffers from below-replacement birth rate and a rapidly aging population in the context of generous social welfare systems. • Good example of evolution of supranational institutions and working rules… Also a unique example of where institutions follow working rules. • Levels of economic integration: • Free trade area – each member has their own trade barriers (tariffs/quotas/regulations) with non-member nations yet have none between members. (e.g. NAFTA) • Customs union – uniform trade barriers with non-members. (e.g. EEC)…only covers finished and semi-finished goods. • Common market – free flow of factors of production between member nations.

26. Economic and monetary union – Supranational institutions power increases … common currency. (e.g. the Euro/EMU) • Full economic integration – unified government. (e.g. USA) • Economic effects resulting from economic integration: • Trade creation – elimination of trade barriers generate gains => increasing the volume of imports from member nations – each country concentrates more on producing the goods in which it has a comparative advantage relative to other member nations (trade and GDP expands). • Trade diversion – trade diverted away form lower-cost, non-member nation producers toward higher-cost member nation producers. Necessarily inefficient since purchase is made from a higher cost producer.

27. 2008

30. Two descriptions of the EU… • One economy - comprised of the combination of member nations' economic performances (growth of GDP, trade flows, rates of unemployment, inflation, investment, etc.) • Second pertains to the level of integration => 25 nations seeking to achieve the economic and monetary union level of integration. • EU is comprised of four separate organizations: • European Coal and Steel Community (ECSC) • European Atomic Energy Community (Euratom) • European Economic Community (EEC) • European Central Bank – 1999 (EMU …euro)

31. ... In reality the four are one entity. Members have surrendered some national sovereignty to supranational authorities. • Treaty of Rome – 1957 • Six signators: Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. • Cornerstone of EU: established the goals and formal working rules which provided the basic tenets for European economic integration.

32. History… A united Europe was first proposed in 1834 by a group known as Young Europe. After WWI another unification group began calling for the establishment of a Pan-European Union. Neither resulted in EU yet established "important precedents" and helped promote the idea across Europe. • More history - after WWII Europe was in ruins and in a weak position of global power vis a vi America and the USSR. Prominent European leaders began to push for the EU ('46 Churchill called for establishing a “United States of Europe”), Within a decade, formal means for unification came into existence (OECD, the Western European Union, the North Atlantic Treaty Organization (NATO), the Council of Europe, and the European Community). • A gradual emergence of formal rules beginning with the ECSC (1951) - considered a success - led to formation of… • …the EEC in 1957 - intent was to promote economic integration "by means of four progressive harmonization processes.“ [1] Elimination of internal barriers to trade through removing customs barriers. [2] Achieve of a customs union through applying a common external tariff toward nonmember nations. [3] Establish of a common market by permitting the free flow of factors of production plus goods and services. [4] Attainment of further integration by adopting common policies (e.g. agricultural, competition, social, transportation).

33. Goal was to have a common market by 1970 (common working rules and policies should be implemented that applies to all aspects of economic and social life of member nations). • Monetary Union (no provision for in the Treaty of Rome) - first proposed at the Hague Summit in 1969 with a proposed target date for full harmonization of macroeconomic and monetary policies. Proposed in response to a collective sense that they were still behind and that they had little control individually in the global economy. • Global oil crisis of 1973 + collapse of the Bretton Woods agreement => inflation and unstable exchange rates throughout Europe => 1979 the European Monetary System (EMS) established … designed to reduce currency fluctuations through an exchange-rate mechanism (keep exchange rates in bands). • In 1986: signing of the Single European Act - agreement to enlarge the scope of economic and social cooperation to the monetary sphere. • European Parliament established a commission to investigate and in Aug. 1990 presented proposal for an Economic and Monetary Union (EMU) … primary purpose: to tighten coordination of economic and monetary policies throughout the EU.

34. Called for a common currency, a central bank and a single monetary policy, close coordination of fiscal policy, prohibition of monetizing public deficits, and avoidance of large fiscal deficits for all members. • Approved by members in 1991 - Maastrict Treaty: set target of 1/1/99. • EMU went off without a hitch. More rapid adoption of the euro than expected – new bond issuance in euros initially (mergers and acquisitions). … Still, the euro was weaker than expected and fell below parity with the dollar in 2000 (in mid-2002 rose above parity and has stayed there since). Due almost totally to the fact that the European Central Bank kept interest rates relatively low. … While euros were initially used exclusively for government payments and financial markets in 1999-2000, they began to be substituted for national currencies on 1/1/2001 by being issued to the general public. 7. Need to turn our attention to outlining the major institutions of the European Union. First, let’s take a diagrammatic look at the evolution of the European Union:

35. Lisbon Treaty of 2009 = ?

36. The European Union has several major institutions: 1. The European Parliament… The European Parliament is one half of a bilateral legislature (the other half is the Council of the European Union). It has co-legislative power with the Council in most EU policy areas, able to accept, amend or reject proposals as it sees fit. Unique in that it is directly elected by the people and has legislative power. 2. The European Council… The European Council, sometimes informally called the European Summit, is a meeting of the heads of state or government of the European Union, and the President of the European Commission (picture at beginning of EU slides). 3. The Council of the European Union (or “Council of Ministers”)… Along with the European Parliament, the legislative arm of the European Union (EU). It contains ministers of the governments of each of the member-states of the EU. The Council of the European Union is sometimes referred to in official European Union documents simply as the Council, and it is often informally referred to as the Council of Ministers. 4. The European Commission… The European Commission (formally the Commission of the European Communities) is the “executive” of the European Union. The Commission is headed by a President (since 2004 José Manuel Barroso of Portugal). Its primary role is to propose legislation and to carry it out.

37. 5. The European Court of Justice… The ECJ is the supreme court of the European Union. It adjudicates on matters of interpretation of European law. 6. The European Court of Auditors… The Court of Auditors checks that all the Union's revenue has been received and all its expenditure incurred in a lawful and regular manner and that the EU budget has been managed soundly (their Treasury). There are several financial bodies, yet the most important is: 7. European Central Bank… • The main goal of the ECB is to focus on price stability. In order to keep prices stable, the ECB may cut or raise interest rates. • Decision-making procedures: … The decision-making procedure within EC institutions is significant, since working rules passed at the supranational level influence each member nation. … Prior to the Single European Act unanimity, was required for new initiatives or objectives, not majority rule. By the late 1980s, under the cooperation procedure specified in the Single European Act, qualified majority votes were to be taken when EC institutions passed certain measures, regulations or administration actions. The cooperation procedure has enhanced the efficiency and reduce time spent in decision-making at the EC level.

38. Important issues: • Enlargement process – (accepting a new member or members) is important, for … [1] It increases the opportunity for trade creation while changing the political face of Europe. • The Maastricht criteria establishes basic standards to be met by European countries if they seek to become full members of the EU. The economic criteria are: • 1. Candidate countries must have price stability and an inflation rate of no more than 1.5 percentage points above the rate for the three EU countries with the lowest inflation over the previous year. In terms of budget deficit, a candidate must have a rate below 3 percent of its GDP. Its public debt must not exceed 60 percent of GDP, but if debt levels are in steady decline, it may be allowed to adopt the euro as its basic currency even though its debt level may be higher than this rate. • The long-term interest rate should be no more than 2 percentage points above the rate in the three EU countries with the lowest interest rates over the previous year. • The exchange rate of the currency of a candidate country should have stayed within certain pre-set margins of fluctuation for two years. • The enlargement issue hinges on whether advantages to existing members in the form of trade creation, gains from greater specialization of labor, and a stronger political bond with European neighbors outweigh the disadvantages.

39. … The latter include reduced political influence for each member, more social divergence within the EC, a larger agricultural sector (necessitating more funds to support the new member's agricultural sector), the possibility of trade diversion, and the threat of migration of labor if the applicant nation has high rates of unemployment plus lower wages than EC members. • Nations seeking to join the EC recognize the potential economic benefits they can enjoy while increasing their political influence in world matters. • New members must be committed to democratic political and economic institutions, and be accepted by vote of existing members. • Common agricultural policy … costly yet politically expedient. Affects price and production decisions for most agricultural products. … Some goals of the policy are to enhance the EC's ability to lessen dependence on outside sources for its agricultural needs, reduce the risk of food shortages, continue farming as away of life for many people currently engaged in the agricultural sector, stabilize food prices, and protect farmers’ incomes. Interventionist measures, such as regulating the volume of imports, are employed to manipulate market prices to desired levels. Such measures are costly, accounting for almost two thirds of all EC expenditures.

40. William Chislett: Spain: Going Places, Economic, Political and Social Progress 1975-2008, Chapter #1: Overview ¿ What are Ceuta & Melilla? ¿ Are per capita GDP between Morocco and Spain similar to that between Mexico and the U.S.? ¿ What happened on October 2005 in Morocco? ¿ What are the major immigrant groups and how much do they contribute to Spain’s GDP? ¿ What is the E.U.Schengen Treaty? ¿ Does Spain have a demographic problem? ¿ How does regional public spending compare to federal government spending? ¿ What can you say about the Spanish Welfare State? ¿When are they going to run out of money? ¿Is their university education system a high quality system?

41. ¿ Is their judiciary objective (separation of powers)? ¿What is the difference between Common Law and Civil Law Legal Systems? The Morning After, The Economist, November 6, 2008 ¿ Which country has been the single largest beneficiary of EU regional funds? ¿What happened to interest rates after Spain joined the Euro zone in 1999? ¿ In the current crisis have there been any financial problems with the big Spanish banks? ¿Why might Spain have an “L-shaped depression?” Zapatero’s Gambits, The Economist, November 6, 2008 ¿ How and why did Zapatero challenge the “pact of silence”, attempt to make peace with ETA and co-opt the Catalan Socialist Party? How Much is Enough?The Economist, November 6, 2008 ¿Café paratodos: 17 autonomous communities…is this a good idea and has it worked?

42. William Chislett: Spain: Going Places, Economic, Political and Social Progress 1975-2008, Chapter #2: The Economy ¿Between 1985 and 2007 by how much did Spain’s per capita GDP increase. And what does Chislett say is the cause of this? ¿How big is Spain’s current account deficit…and how does he suggest this being addressed in the future? ¿What is exchange rate risk and how did it change once Spain joined the EMU…and what was its immediate effect? ¿ How does the ECB determine interest rate policy and what effect has this had on Spain? ¿How high is household indebtedness in Spain…and what about corporate indebtedness? ¿And what about the central governments finances…are they in bad shape…what has driven this change? ¿What is the 2007 Law of Budgetary Stability? ¿What’s been going on with national debt?

43. ¿ What does he say has been driving Spain’s relatively higher rate of inflation? ¿ Has Spain benefited from the EU’s Structural and Cohesion Funds…and will this continue? ¿Is Spain a competitive economy…what needs to be done to change this? ¿How does Jaime Caruana (former head of the Bank of Spain) suggest a current account deficit might be resolved within a currency union? ¿ Does Spain trade much with the US…who are their largest trading partners and which firms do most of the exporting? Banks, Bricks and Mortar, The Economist, November 6, 2008 ¿ Spain has two giant banks, Sandander and BBVA, a handfull of smaller banks, and 45 cajas (largest is La Caixa). Which segment is in financial trouble? ¿The default rate is low…2.9%...why is unlikely to go higher? ¿What’s been the most visible effect of the global financial crisis within the Spanish economy?

44. In Search of a New Economy, The Economist, November 6, 2008 ¿What is Spain’s “new economic model”? ¿What green technology has Spain invested heavily in? ¿What has the rate of growth in Spanish productivity in recent years and what does the article say are the cause of its “plodding productivity”? ¿What does the article suggest is the best hope for recovery? A Cooler Welcome, The Economist, November 6, 2008 ¿Talk about the history of immigration/emigration in Spain…and what groups have been arriving on Spanish shores over the past 10 years? ¿Why hasn’t there been a backlash against foreigners? ¿Why wasn’t their an increase in Islamophobia after the 2004 bombings against the 1.1 million Muslims in the country?

45. William Chislett: Spain: Going Places, Economic, Political and Social Progress 1975-2008, Chapter #3: Main Economic Sectors ¿ Is the agricultural sector of Spain large…and is it important? ¿ Name one Spanish carmaker…so is the automotive industry unimportant…and what development have there been of late in this industry? ¿What is Spain’s national bird?...the “crane”…the building crane. ¿How has this industry figured in Spain’s economic landscape over the past decade or so? ¿ What are the nine factors propelled the domestic property market? ¿Are real estate transactions cost high in Spain? ¿Has the government tried to slow down the inflation bubble? ¿What are the construction companies exposure to the domestic market and have they done anything to diversify operations? ¿Is tourism important to the Spanish economy…and what can you say about this sector’s competitiveness, changes over time and likely development in the coming years?

46. ¿ Does Spain have a water problem…and has the government done anything about it? ¿ Is Spain energy independent and are they efficient in their use of energy? ¿ Are they doing anything to diversity their energy dependency? ¿ Is the energy market competitive in Spain? ¿ What can you say about Spain’s telecommunications market. Is Telefónica a monopoly? ¿What are the names of Spain’s 2 largest banks and how has this industry developed over the past two decades? ¿What is the IBEX-35? ¿And what is Latibex? The Spanish Legion, The Economist, November 6, 2008 ¿What have been the three factors contributing to Banco Santander’s success? ¿ Have they been sitting out the current credit crisis?

47. ¿ What does the article suggest has been a common theme of all Spanish multinationals that have contributed to their relative success? The Perils of Parochialism, The Economist, November 6, 2008 ¿Is Spain an outward-looking country? ¿ How does the article suggest this might change? Spain’s Property Crash: Builders’ Nightmare, The Economist, December 4, 2008 ¿Does this sound familiar: “…, some still find it hard to grasp that prices can ever fall.”? ¿What factors are at work that are driving housing prices in Spain? Victor Mallet, Spain’s Recession: After the Fiesta, Financial Times, February 17, 2009. ¿ What level might unemployment hit this year, and the budget deficit and the fall in real GDP for 2010? ¿ What does every chief executive, orthodox economist and rightwing opposition politician conclude is the only way for Spain to emerge stronger from the crisis…and how likely will this happen?

48. ¿What is a “monoculture” and what does the tile industry of Villarreal have to do with this? Thomas Catan, Spain Largely Avoids Unrest Evan as Economy Slumps, Wall Street Journal, May 4,2009 ¿Weekly quotas for arresting illegal immigrants? Comment. ¿What is the reason the article cites for why Spaniards haven’t taken to the streets to defend their economic interests? ¿ How does the Spanish family figure into the lack of unrest? ¿ How big is Spain’s underground or “black” economy and what role does it play in downturn? ¿ What European nation has seen the most protests over the global economic crisis…and is noted as an exception?

49. William Chislett: Spain: Going Places, Economic, Political and Social Progress 1975-2008, Chapter #5: Spanish Direct Investment in Latin America (LA) ¿ What four major LA sectors have Spanish firms heavily invested in…and what percent of earnings come from the region? ¿ What Spanish firm has the largest operations in LA? ¿Why have Spanish firms moved into this particular region of the global economy? ¿ What country made more FDI than Spain in the early 2000s? ¿ Which LA country has the greatest amount of Spanish investment. Why? ¿ In what sector does Spain make little investment…and is this good or bad? ¿ When did Spanish FDI peak…and why hasn’t it risen to its former lofty level? ¿ What happened after the Spanish American War of 1898 regarding FDI in LA? ¿ Has the move into LA been good for Spanish companies? ¿Role of Latibex?

50. ¿ What worries Spanish multinational about the region? ¿How important is Spanish banking in the region? ¿ Does Spain have too many eggs in the Latin American basket…and are they doing anything about it? Two-tier flexibility, The Economist, July 9, 2009. ¿What can you say about Spain’s two tier labor market? ¿Why did it come about? ¿What is the “Red Line” Zapatero said his government would not cross? ¿Toni Ferrer is quoted as saying “The problem is not labor regulation”: what do you think? Spain's growing budget deficit: Taxing times, The Economist, September 10, 2009 ¿How does the article suggest Zapatero will raise taxes? ¿Has Zapatero shown much of an appetite for long-term spending cuts?