(Harvard style)

(Harvard style)

(Harvard style)

(Harvard style)

The economy of the entire universe has been experiencing a phase of market instability since the year 2007.  This market instability has ever been described by feedback effects between the production and financial sectors, the successive shocks, a drastic worsening in the fiscal position of various nations, the complications of these nations in creating employment opportunities and the deteriorating of the euro sovereign debt crisis.

However, as much the Spanish economy was also affected by such market instability – characterized by imbalances accumulated in the boom period and anticipations about the nation’s continuity of the upturn – the country enjoyed a vigorous recovery from the great depression, with a GDP growth averaging around 3.0% over the subsequent years.

This paper, therefore, gears the interest of an intensive economic recovery with regards to the significance of the structural reforms and strategies laid forward by Spain in providing the answers ranging from the continued strong and stable economic growth, economic recovery to a continental economic driver.

(Harvard style)

SUÁREZ, J., 2015. The Spanish crisis: Background and policy             challenges. London: Discussion Paper Series No. 7909,             CEPR.

OECD. 2014f, Skills Beyond School: Synthesis Report, OECD             Reviews of Vocational Education and Training, OECD             Publishing, Paris, http://dx.doi.org/10.1787/9789264214682-            en.

Ahn, N. and De Rica, S.L., 2015. The underground economy in Spain:             an alternative to unemployment. Applied economics, 29(6),             pp.733-743.

Alañón*, A. and Gómez-Antonio, M., 2005. Estimating the size of the             shadow economy in Spain: a structural model with latent             variables. Applied Economics, 37(9), pp.1011-1025.

Harrison, J. and Corkill, D., 2016. Spain: a modern European             economy. Routledge

In 2015, the European Central Bank projected that Spain’s economy will be among the economic drivers of entire Europe. However, Spain is among the countries that experienced an economic recession that eventually turned the crisis into an opportunity. But how did it adapt to the worldwide crisis to being an economic driver?

One of Spain’s reformers called Alvaro Nadal, once said, “We (Spaniards) are the first population-rich country that embarked on a large-scale depreciation within a currency union.” (SUÁREZ, 2015). This was the period Spain embarked on taking a more complex tread in countering the economic crisis.

First, it raised its taxes in 2011, which resulted in many citizens in being jobless, together with those holding offices in the public administration. The move resulted in massive unemployment, wage stagnation and sinking of prices. However, wages rose steadily during the crisis period as the country embarked on a dream liberalization program (Carcea, et al., 2015).

Spain also tended to emulate another country, Germany, during its upturn. During the recession period, Spain followed to the latter the German economic model, which positively placed its focus on exports. With the emulation, Spain saw an increment of around one-third of commodities and services getting shipped out of the country in 2014, nearly 30000 new job opportunities were created – especially in the car factories of Seat, Opel, Ford, Renault, and Nissan. Besides, the county’s unions agreed on creating a production of goods and services more flexible than ever. Spain managed to bring back the economic growth, besides surviving the economic crisis.

Since 2013, the Spanish economic recovery from a worldwide recession since has been among the greatest in the OECD thanks to a comprehensive agenda of structural reforms, highly expansionary policy, easier fiscal policy and, substantial repair of the banking system. With public debt nearly 100% of GDP and with the deficit still at 5%, the scope for fiscal expansion was limited (SUÁREZ, 2015). However, the country saw it very important to stimulate growth and productivity by shifting spending towards growth.

In the banking sector, the authorities restored financial stability through launching a reform programme with the support of the European Union, including an EUR 100 billion loan facility. The programme identified weak banks and shifted state-aided banks’ real estate loans to a newly created asset management company. In labor market, the market reforms reduced the stringency of job protection legalization for permanent workers aiming at defining a more clearly the criteria justifying fair dismissal and reduced the amount of compensation following unfair dismissal (Ahn, & De Rica, 2015).

In product market, The Market Unity Law was adopted to harmonize business regulation across all regions and create a single market. The law simplified business licensing requirements by increasing the use of notification procedures and reducing the need for prior authorizations. In the education sector, the Organic Law for Improvement of the Quality of Education was approved in 2013 to help in reducing early school leaving and improve educational outcomes. The law adopted new national external assessments of students and granted greater autonomy to schools in exchange for accountability (OECD, 2014f).

In 2014, a tax reform was adopted to reduce a statutory income tax rates, for low-paid workers and simplified various deductions on labor earnings, reducing the tax wedge and the tax burden on labor. To cater for quality pension services, in 2011 and 2013, the authorities raised the retirement age and reduced the replacement rate. Following the reforms, the pensionable earnings were revised and the number of pension benefits was still linked to life expectancy in the future (Alañón* & Gómez-Antonio, 2014).

The above reforms led to a dynamic growth and wage moderation that influenced strong employment gains, exports grew despite the weak global markets, wage competitiveness was relatively improved and the economic growth was leveled at a pace above 2.5% annually (Harrison & Corkill, 2016).

(Harvard style)

Higón, D.A., 2016. Which innovation strategy do internationalised             firms follow? Evidence from Spain. International Journal of             Multinational Corporation Strategy, 1(3-4), pp.313-336.

Alañón*, A. and Gómez-Antonio, M., 2005. Estimating the size of the             shadow economy in Spain: a structural model with latent             variables. Applied Economics, 37(9), pp.1011-1025.

Harrison, J. and Corkill, D., 2016. Spain: a modern European             economy. Routledge.

According to (BANCO, 2009), Spain is considered to have the 6^th largest FDI stock and it is also the 6^th largest investor in the EU. According to the FDI charm, Spain’s strength emanates from the boom in tourism, cultural proximity to Latin America, the existence of various Spanish multinational companies, a proficient infrastructure system, its advancement in the renewable energies and efficient exporting strategies.

The exporting strategies involve the notion of acquisition of the majority interest by a foreign country in a Spanish company that authorizes every export provided that the goods and services are not in the regulated sector of production and trade of weapons. For any business to export, the government also empower certain export investment portfolios from the EU member state that are exempted from all the declarations despite their amount. Such export businesses can acquire a prior declaration when the goods and services amount or the permitted loans exceed 40000 Euros for a foreign interest that may hold more than 55%. The request is made directly to the Register of Foreign Investments, from the Directorate General of Commercial Policies and Foreign Investments.

The government also provide numerous incentives for businesses that attempt to invest in export through preferential access to credit, tax benefits, professional training and permitted grants. The country’s key points in export lie upon adaptability and flexibility of the economic operators and in the quality of life, the country offers.

The WTO international trade data (Harrison & Corkill, 2016) revealed the statistics for the 1^st half of 2016 that there exists a strong momentum enjoyed by the Spanish external sector. As the universal exports shrunk by nearly 6.7% during the 1^st half of the year in current value terms, the Spanish exports rose by 2.4%. Among developed economies, only Germany – with an increase of 1.6% – is able to boast of a similar performance.

To achieve the rise in the export, the Spanish government had to input various exporting strategy aimed at maximizing and utilizing the international market. Firstly, Spain took the advantage of weak demand in the rest of the European Union countries and registered a modest adjustment outpaced in a more subdued recovery in imports. This strategy was formulated to counter external trade decline (Higón, 2016).

Spain engrossed the concept of trade openness. The openness prompted Spain’s share of world goods exports to remain remarkably steady, only to slip slightly from 1.8% of global exports in 2007 to 1.7% in 2015. Spain’s trade openness ratio was initially very badly affected by the fallout from the collapse in the global trade in 2008, falling to an all-time low of 34%. Despite the compensating effect of declining GDP on the denominator. However, trade openness gradually recovered thereafter, managing to even the 2010-2014 recession (Alañón* & Gómez-Antonio, 2005).

Prices have played a significant role in the recent trends in the global trade. Global exports contracted by 14% in 2016 in the current price terms. Taking into account the prices fell by a more modest 2.4%, compared to a 4.9% decline in import prices. As a consequence, recent price movements are facilitating an increase in Spanish export volumes of a much greater magnitude than is reflected in the wider international context. Spain had to make a clear implication in the prices of their exported goods which have been significant enough to allow the prices to be much contained and sustainable than in the rest of the world. Spain also undertook an internal devaluation during their toughest period of recession to help her in sustaining an inflation differential which continued to bear fruit in regards to the competitiveness of the Spanish exports (Harrison & Corkill, 2016).

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HERNÁNDEZ DE COS, P., 2011. The reform of the fiscal framework             in Spain: constitutional limits and the new public spending             growth rule, Economic Bulletin, Banco de España, October

Higón, D.A., 2016. Which innovation strategy do internationalised             firms follow? Evidence from Spain. International Journal of             Multinational Corporation Strategy, 1(3-4), pp.313-336.

Harrison, J. and Corkill, D., 2016. Spain: a modern European             economy. Routledge.

According to (GAVILÁN, 2011, pg. 16), there are 17 independent communities in Spain, with varying degrees of cultural identity and autonomy. Various regional markets linked together by the two hubs of Madrid and Barcelona to make up the Spanish market. To allow sustainability, the Spanish government waived the regulations at all degrees and increased incentives with the aim of attracting foreign businesses operating in the country.

The government passed a law that permits foreign businesses of up to 100% of equity. The law permits reduced the unit labor costs and the nation regained most of the competitiveness that was lost during the economic crisis recovery in terms of the cost of labor (HERNÁNDEZ, 2011). However, despite the adjustments in labor legislation, the permitted law remained relatively inflexible.

The Spanish government also set commercial procedures that are in line with the rest of the Western Europe countries, where it was regarded that value and price continued dominant. The commercial procedures allowed sustainable credit terms, marketing assistance and after-sales services that deemed significant for the foreign investors (HERNÁNDEZ, 2011). The essence of the use of credit to buy the goods and services was entirely accepted in the country, especially in such cities with banking sectors that tend to compete to provide broad coverage.

For any foreign investor to gain access to the Spanish market, there existed no substitute for face-to-face meetings with the Spanish business representatives. The Spaniards set a market that allowed them to anticipate a personal relationship with its suppliers from any region.

Without distinguishing between the European Union (EU) residents and non-EU residents, a Spanish law has adapted its foreign businesses and investment rules to a system of general liberalization.  According to the 18 /1992 law, it establishes rules on foreign investments in Spain which provided a specific regime for non-EU persons investing in certain sectors – national defense-related activities, gambling, television, radio, and air transportation (Harrison & Corkill, 2016). For EU residents, the only sectors with a specific regime are the manufacture and trade of weapons or national defense-related activities. For non-EU companies, the Spanish government restricts individual ownership of audio-visual broadcasting licenses to 25 percent. Specifically, Spanish law permits non-EU companies to own a maximum of 25% of a company holding a digital terrestrial television broadcasting license; and for two or more non-EU companies to own a maximum of 50% in aggregate. In addition, under Spanish law, a reciprocity principle applies (art. 25.4 General Audio-visual Law). The home country of the (non-EU) foreign company must have foreign ownership laws which permit a Spanish company to make the same transaction (Higón, 2016).

The Spanish Constitution and Spanish law establish clear rights to private ownership, and foreign firms receive the same legal treatment as Spanish companies. There is no discrimination against public or private firms with respect to local access to markets, credit, licenses, and supplies.

In order to establish a foreign company in Spain, the basic requirement needed for such a setup include the incorporation before a Public Notary and filing with the companies register called Mercantile Register (Registro Mercantil). The public deed of incorporation of the company must be submitted; it can be submitted electronically by the Public Notary. The Central Mercantile Register is an official institution that provides access to companies’ information supplied by the Regional Mercantile Registers after January 1, 1990. Any national or foreign company can use it but must be registered and pay taxes and fees (Higón, 2016).

The above regimes instill the Spanish investment promotion agency called “invest in Spain” which aims at facilitating foreign investment, provides procedural clarifications and offer conducive services to all the investors.

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Cepeda-Carrión, I., Leal-Millán, A.G., Ortega-Gutierrez, J., and Leal-            Rodriguez, A.L., 2015. Linking unlearning with service quality             through learning processes in the Spanish banking industry.             Journal of Business Research, 68(7), pp.1450-1457.

Harrison, J. and Corkill, D., 2016. Spain: a modern European             economy. Routledge.

Every time the year begins, it is always marked with various challenges which makes any the banking sector industry to assume its achievements, failures, and experiences of the previous years to associate future periods. According to the CEO of Caixbank, Gonzalo Gortazar, he presumed that profitability is objectively significant as the European Central Bank’s commitment till the year-end 2017 is to maintain zero interest rates (ESTRADA, 2017). However, it was realized that his notion of charging for liabilities in the short term is just a hovering around the industry.

Secondly, the banking industry is also arriving into a different twist in regards to the regulation. The industry feels at a disadvantaged position that tends to shadow banking and at a probable appearance of new native digital players such as Apple and Google, which are considered not a subject to the similar regulatory framework (ESTRADA, 2017).

Lastly, there exist people who believe that digital transformation in the short term has various entities that acknowledge digitization as a complement to branch activity. There exist various challenges that are posed by technology and the changes it brings in the banking system. For instance, it is believed that in the coming years, the advancement of the analytics proficiency in bank workers might be required to compete with others.

The Spanish banking needs to address various significant challenges that not only affect the Spanish banks, but also the other Euro area nations. Such challenges to be addressed include:

a)      Profitability

According to Cepeda-Carrión (2015), the Spanish banking sector profitability has been very low, well short of the double-digit figures observed in the earlier periods. In 2017, Spanish deposit institutions overall saw their return on equity fall by 1.3 percentage points, from 5.6% in 2015 to 4.3% in 2016, although it remains slightly above that of the main European countries and the European average. There are several factors exerting downward pressure on banking sector profitability. The very low-interest-rate environment, in response to a euro-area inflation rate that is below the ECB’s target rate, is one of the main factors behind the low levels of profitability in recent years.

b)      Resolution requirements: MREL

Spanish banks need to comply with the new resolution requirements that were introduced during post-crisis, aiming to secure the stability of the financial system, minimize the cost for the taxpayer of banking crises and ensure that banks’ critical functions are maintained. Spanish banks will have to comply with the minimum requirement for own funds and eligible liabilities (MREL). For that purpose they will have to have, on their balance sheets, instruments that provide sufficient loss-absorbing capacity and that will allow them, where appropriate, to recapitalize (Cepeda-Carrión, 2015).

c)      Technological innovation

There exist various challenges that are posed by technology and the changes it brings in the banking system, that is, the situation in which the digital innovation is transforming traditional banking. This transformation is already apparent in citizen’s ability to communicate with banks without having to go to a branch, in the constant supply of new products and services, in the new ways that data can be used or in the improvement of market systems and infrastructures allowing instantaneous execution of transactions which previously took several days. Technology implications and must be analyzed with caution taking into account the particularities of the banking sector and avoiding oversimplification. For example, the use of technology for high-speed analysis of a large volume of heterogeneous data –known as “big data” –may have multiple applications in banking. Similarly, services such as cloud computing offer various advantages, it increases dynamism which is not free from a risk of data loss which must be controlled (Harrison & Corkill, 2016).

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Conclusion

The economic crisis that hit Spain since it joined EMU rose in a situation in which the scope of the economic policy instruments had contracted significantly. The 2008-2010 recession was believed to have great immense than those that rose in the mid-1970s and early 1990s. The crisis was marked adjustment in the domestic demand for commodities and services, which was barely offset by a significant contribution of net external demand to the growth of GDP.

However, Spain’s recovery from the crisis was remarkable, marked with the emergence of the adjustment of the imbalances previously built upon being absorbed. The adjustment of real estate sector, boosting the financial environment continues to evidence a series of distinctive recovery feature.

The country’s export was marked with certain successes that accurately determines Spanish current underlying situation. For any business to export, the government also empower certain export investment portfolios from the EU member state that are exempted from all the declarations despite their amount.

The labor market also responded adequately with the unparalleled strength to the shocks that affected the Spanish economy in the past 4 years. The driver of employment in the boom years, sustained by the feedback loop between the expansion in the construction and immigration, had led to an overestimation of the enhancement in the essentials underlying the operations of the labor market.

In sum, Spanish economy experiences varied task that needs, alongside the definite strategies in the EU to advocate for the reform of the institutional outline of Monetary Union and the strategy of the predicament-management instrument, defiance with the inevitable obligation to financial circumstances and the introduction of determined reforms on various portfolios.