Managing the Spanish economy within Europe

This article explores the economic policies developed by the Spanish socialist government from 1982 to 1996, particularly with an eye on the impact the process of European integration had on them. The introduction of stable macroeconomic policies, in the form of high interest rates, is traced to the interaction of three factors. First, an increasingly internationalized economy, reinforced by the European single market and monetary union projects, forced the Spanish government to fight inflation and deprived it of the possibility of using currency depreciations. Secondly, a radical and fragmented union movement made it impossible for the González cabinet to rely on stable corporatist pacts to achieve wage moderation. Finally, intense pressure to build a welfare state and miscalculations about the direction of the economic cycle led to loose fiscal policies that had to be compensated with tight money measures. To compensate for its incapacity to establish a social democratic corporatist regime, the PSOE engaged in an active industrial policy geared to a restructuring of the publicly owned enterprises, expanded the Spanish public stock of human and physical capital, and increased social spending to compensate the unemployed and the losers of the transformation of the Spanish economy.