Spain Gets the Jitters as Open House Begins

Eric Ellis, Seville

04/20/1992 

AT 4PM today, the biggest gamble in Spanish history gets under way in the balmy spring sunshine of this historic Andalucian city.

Expo 92 will open, a six-month celebration of the Age of Discoveries, 500 years after Christopher Columbus sailed to the Americas. But the first discovery the Spanish taxpayer made in mounting this world party came long before it opened.

At last count, the Expo bill was around $US10 billion ($13.2 billion), including the wads of money spent on regional infrastructure. Include the Olympics and various other extravaganzas and Spain will have lavished up to$US50 billion on this year's jollity, much of it borrowed. With all that at stake, Spaniards need no reminding of the events that followed Columbus's fateful voyage.

Having persuaded the Spanish monarchy to finance his speculative foray over the Atlantic horizon to the New World, Columbus and the Conquistadors plundered such incredible riches they set Spain up as the world's greatest colonial power.

But that splendour proved relatively short-lived. Colonial wealth was squandered, corruption took root and the Spanish empire became the first in Europe to crumble.

Spain was left far behind by its European competitors, where it remains to this day.

Prime Minister Felipe Gonzalez is determined that the money spent on Expo 92, the Olympics and the Columbus 500 celebrations will help Spain catch up with its neighbours.

Expo and the Olympics are as much about modernising the national infrastructure and establishing the basis for further growth as they are about throwing a year-long party.

Spain is racing against an ECimposed deadline to move into the European big league.

The Maastricht EC summit before Christmas set down a schedule which EC members must meet by 1997 before true economic convergence can be achieved. Failure to do so would mean a "two-tier" Europe, essentially an economic division between north and south.

Spain so far fulfils just a handful of the requirements. To meet the target it must grow by at least one point a year faster than its EC partners.

In previous years that hasn't been a problem, as the nation came out of 40 years of Francoist repression to expand vigorously from a low economic base.

But with its trading partners slipping deeper into recession, the task has been made much more difficult.

Last month Madrid announced a $US50 billion long-term plan to transform Spain from one of Europe's most rigid economies to probably its most liberal. Designed to prepare Spain for the much-feared single market, the plan includes measures to dilute State control over key industries such as telecommunications, oil and transport as well as to restructure the labour market.

The plan is the next phase in dismantling the inefficient corporate State -government still controls up to 50 per cent of the economy - built up over Franco's rule. Franco died in 1975 and the advent of democracy has seen Spain make astonishing economic progress.

It has become something of a model for the newly democratised countries of eastern Europe. In just 10 years, a period not co-incidentally mirroring the reign of Gonzalez's Mitterrand-inspired Socialists, Spanish economic output per capita has gone from $US4,000 to $US12,000, not far behind Australia, New Zealand and Britain, according to OECD data.

Per capita income for Spain's 36 million people has gone from $US3,000 in 1980 to $US7,500 in 1986 to a present $US13,500.

From virtual zero growth at the beginning of the 1980s, Spain has been Europe's most vigorous economy, with an average 4 to 5 per cent growth since 1986, when Spain was invited to join the EC. Only Portugal has done better, off an even lower base than Spain.

The national bank account is healthy, thanks to tourism and a stronger currency. With $US64.4 billion, Spain ranks behind just Taiwan and Japan as holding the world's largest level of foreign reserves, ahead of the US and even Germany.

Its currency, the peseta, has consistently been the strongest in the European Exchange Rate Mechanism over the past two years and it is to Madrid as much as Frankfurt that financial centres such as London's City look in setting interest rates.

There have been costs. At 15 per cent - 25 per cent in Andalucia -unemployment is the second-highest in Europe behind Ireland and promises to get worse.

Inflation has pushed up the cheap wages that attracted a wave of foreign investment. The new money is now being attracted to, ironically, Mexico and South America.

Spain's re-entry to the international mainstream has also seen a splurge on imports. At $US33 billion, the country's trade deficit is one of the highest in the OECD and shows no real sign of improving. And largesse from EC members also threatens to dry up.

So what happens when the party is over?

The Government says the capital spending has provided an ancient country with the infrastructure and confidence to consolidate its re-emergence as a major economic power.

Critics say the nation will be left with a pile of white elephants, and reeling from a whopping post-prandial hangover.

It will be a cruel irony that the party thrown to show the New Spain off to the world will be ruined by a mess left behind when the visitors are gone.