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rfmcdonaldAmanda Cooper's Reuters article "Basque economy has lessons for Spain", does highlight an interesting exception to the picture of general economic despair in Spain: Euskadi, the Basque Autonomous Community in northern Spain, has done much better in the aftermath of the global recession and the Eurozone crisis than the rest of Spain, a consequence of the combined effects of the region's long-standing and successful industrialization and a climate that--Bilbao Guggenheim aside--makes mass tourism of the sort that precipitated real estate booms elsewhere in Spain unlikely.
It goes almost without saying that Euskadi's lessons aren't generalizable to the rest of Spain. The Basque Country stands out in Spain for its long-standing industrialization and relative prosperity, alongside a Catalonia that--unfortunately--despite its general non-real estate prosperity had a real estate boom that took Catalonia down with the rest of Spain. (The article suggests that 9.5% interest applies for Euskadi government two-year debt, versus 14% for equivalent Catalonian government debt.)
One interesting question will be whether the relative economic divergence between Euskadi and the rest of Spain might lead to renewed Basque separatism. The idea of making Euskadi financially autonomous has already gotten mainstream support. In the context of general Spanish gloom, could public opinion in Euskadi shift decisively in favour of independence?
It goes almost without saying that Euskadi's lessons aren't generalizable to the rest of Spain. The Basque Country stands out in Spain for its long-standing industrialization and relative prosperity, alongside a Catalonia that--unfortunately--despite its general non-real estate prosperity had a real estate boom that took Catalonia down with the rest of Spain. (The article suggests that 9.5% interest applies for Euskadi government two-year debt, versus 14% for equivalent Catalonian government debt.)
One interesting question will be whether the relative economic divergence between Euskadi and the rest of Spain might lead to renewed Basque separatism. The idea of making Euskadi financially autonomous has already gotten mainstream support. In the context of general Spanish gloom, could public opinion in Euskadi shift decisively in favour of independence?
Spain's dash into tourism in the 1970s and its property boom last decade largely passed by the Basque region, a cool, damp corner of the north with a reputation for separatist violence. Instead the Basques stuck with industry, by force of circumstance.
Euskadi, the Basque name for the hilly province of 2 million bordering France, now outshines the rest of Spain with a better credit rating than central government, the lowest regional unemployment and borrowing costs half those of other areas.
[. . .]
The Basque region's secret has been in sticking to manufacturing over the property and tourism industries that ended in economic misery elsewhere in Spain when a real estate bubble fuelled by easy credit burst in 2009.
Tourism was always going to be a difficult sell for the Basques because of the separatist violence that only ended in October 2011 when ETA, Europe's last armed guerrilla group, called an end to its 50-year struggle.
[. . .]
The Basque Country is Spain's fifth largest regional economy, with a gross domestic product of 66.1 billion euros, meaning it accounts for around 7 percent of national GDP. The region's exports are more or less evenly balanced between the rest of Spain and markets beyond Spanish borders.
Its deficit-to-GDP ratio is just 0.25 percent, compared with nearly 90 percent for the central state. It has the lowest unemployment rate in Spain at 13.55 percent, compared with 24.4 percent nationally.
[. . .]
"There was a clear bet on industry here, a bet on those traditional sectors, such as iron, steel, energy and small and medium-sized companies that make all those components for the energy and car sectors, that make things that you can hold in your hand," Jose Luis Curbelo, director general of the Basque Institute for Competitiveness, said.
"That is the secret of the Basque economy," he said. "Basque industry immediately internationalised, whether that was by producing components and gadgets for overseas companies, or by setting up shop and manufacturing abroad."
"That process was much faster and much more committed than in the rest of Spain, so the collapse in the domestic market hasn't affected Basque companies as much. A lot of their sales are global and they can withstand the crisis in better shape."
