Madrid, Spain. The Independent: – The Spanish economy has made extraordinary progress in the past decades after its accession to the European community, although it still has various challenges to overcome. Today, Madrid is a large metropolitan city, with a plethora of museums, majestic avenues, world-class events and competitions, as well as universities and restaurants that rival any in the rest of the world. Its wide streets give it a stately appearance and walking through it in the less touristy times, without the sweltering temperatures prevailing in summer, is a lot of fun.
However, Covid-19 affected it and many companies drastically reduced their employees and many of them had to close, as happened in other countries. Different local and national governments have different subsidies to reduce unemployment and medical services accessible to anyone, which has made the health crisis more bearable, although in many cases there is saturation in their facilities. The economy is clearly recovering and GDP grew at an 8.3% rate in the last quarter, one of the highest in Europe.
The average citizen worries about his job and about the drought prevailing in the country, about his upcoming vacations, about the housing law, about rent controls, and about increasing inflation, among other things. The conflict with Mexico, of which he had great affection, sees it as something between governments and not among the inhabitants of our country. I was surprised by some people asking if Mexico would be the next Venezuela. It is common to see investors halting or halting various projects, until the Electricity Law proposal is determined.
This astonishing growth of the Spanish economy is clear and verifiable when it is noted that the GDP per capita before entering the European Union was close to half the average of other countries on the continent, reaching $4,700 per year in 1985. At constant prices for 2011 (that is to remove the impact of inflation during this period). By 2008, the per capita income in Spain had risen to $37,920 annually, which is 8 times higher in these years and equal to the European average. However, this progress has stalled in recent years.
In January 1986, the country’s integration into the so-called European Communities came into effect, after eight years of negotiations and many attempts accepted. It was previously rejected because it did not meet certain conditions, such as maintaining a low fiscal deficit, having and respecting a democratic political system, granting various types of support to various sectors of the economy, and many others. The support received by the agricultural sector was one of the most sensitive issues in the negotiations.
The competition that Spanish producers had to enter the European Union was similar to that faced by Mexican companies when the free trade agreement with the United States and Canada began. Domestic manufacturers had to reduce costs, increase their productivity and quality and today they have many companies of very competitive quality in various sectors, such as banks. The main difference between our economies was that the European Union gave Spain various funds to increase its competitiveness, which were used to create infrastructure, such as highways, airports, railways, etc. Initially, it earned about 0.8 percent of GDP annually from this revenue, much of it non-refundable or at low interest rates. Until today, they have just allowed the resources for the Economic Revitalization Program to overcome the Covid crisis.
Another difference between our economies is that Spain had to give up its monetary independence by abolishing the peseta and accepting the euro as its currency. This led to the removal of an important tool for natural protection from its local production plant against different species shock; As well as the fact that he cannot insulate himself from the expansionary or contractionary monetary policies that other members of Europe decide to pursue, even if they are at odds with what their own economy requires. This forced a greater adjustment of the companies of that country, while in Mexico many decisions were postponed, such as the abolition of many monopolies and measures to create companies, better tax reform and formalization of millions of companies and people working in the informal economy, etc.
Despite the above, there are great similarities between our economies, which can help us make better political-economic decisions.
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