SPAIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000600050014-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 4
• Document Creation Date: December 16, 2016
• Document Release Date: October 19, 2004
• Sequence Number: 14
• Publication Date: October 29, 1975
• Content Type: MEMO

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Approved For Release 2004/10/28 :CIA-RDP86T00608R000600050014-7
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Approved For Release 2004 IA-RDP86T00608R0006000500144
Spain: Short-Term Prospects Addendum on the 13conomy
The Spanish economy, which grew a spanking 6% annually
in 1970-74, is experiencing a sharp deceleration precipitated
by slumping exports. Because of high inflation and a looming
payments problem, the government has proceeded cautiously in
efforts to revive activity. As a result, the increase in
real GNP this year probab'.y will be only 2%, roughly half
that of 1974 -- a poor year by Spanish standards.
Industrial production began to falter in the summer of
1974, plunging steeply after October as export orders dried
up. In fiis+:. quarter 1975, seasonally adjusted output fell
at a 23% annual rate before rebounding somewhat in April.
Since then industrial activity reportedly has revived some-
what, while remaining well below last year's levels. During
first half 1975, industry operated at only about 80% of
capacity.
Although the 1977 budget expenditures are slated to
rise 19.6% in nominal terms to a record $14 billion the real
increase in spending will be only 3%. This will not be
sufficient to restore Spain to its long-term growth path.
Both the armed forces and law enforcement received 20%
increases to $2.1 billion and ;;1.7 billion, respectively,
reflecting Madrid's concern over domestic unrest and com--?
licated foreign problems such as in the Spanish Sahara.
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 Approved For Release 2S$e~~l~.OfZ IA-RDP86T00608R000600050014
Unemployment is offic_ally listed at 4%, comparc-.1 w.th 2%
last year, and could become a pressing concern to Madrid.
There are 1.4 million Spaniards working in other countries --
275,000 in France, ..40,000 in West Germany, and 75,000 in
Switzerland. in the past 12 months more than 70,0O0 have
returned from these three countries alone,following 60,000
who came back last year. The f:rend is likely to continue
into 1970'. Returning workers must be added to much disguised
unemployment and many who are now on part-time at home.
While Madrid has increased spending and lowered the tax
on capital gains to bolster output and reduce unemployment,
it increasingly has focused policy attention on price contr3l.
Consumer prices are increasing at a 17.5% annual rate, forced
up slightly from the 1974 rate by 20%-25% wage gains so far
this year. New anti-inflation measures introduced for 1975
have included a 15% tax on interest-earnings from savings
deposits and a 10% tax surcharge on investment dividends and
profits. Wage increases may not exceed the rate of increase
in the cost of living. Rents and profit margins have been
frozen, and the prices of goods will be allowed to rise only
enough to cover increases in the cost of labor and material
inputs.
The foreign sector is a major constraint on economic
expansion. The value of imports is more than double that of
SECH I'-'- * r,
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Approved For Releas;3TO 41 ply/ : CIA-RIJP86T00608ROOb600050014-7
exports, and the trade deficit has widened so this year.
The deficit is expected to rise from $8.3 billion in 1974 to
more than $9 billion in 1975. Heavy continued '.!emand for
imported oil, compounded by the latest OPEC pr._ce increases,
will push Spain's oil bill to more than $3.5 b;-Ilion this
year. The broad nuclear program and exploration efforts in
the Mediterranean will not free Spain from h::avy dependence
on imported oil. Despite the world recessic.i, tourist
revenues and worker remittances have done w' 11 and the
deficit on current account may be held at .;iightly more
than $3 billion -- about the same as last year. Spain's
foreign reserves are adequate at $6.26 billion, but Madrid
has preferred to borrow abroad to cover the current account
gay).
Madrid blames its poor trade nerfo?rmance on what it
considers unfair treatment by the EC and the United States.
The execution of terrorists last month apparently hardened
European attitudes towards Madrid. Spanish-EC trade'nego-
tiations have been deadlocked since last year and are not
likely to resume soon. Madrid also is unsatisfied with the
results of attempts to gain mare favorable tariff preferences
from the US and will continue its drive for concessions in
this area.
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Approved For Release 2004/10/28 : CIA-RDP86T00608R000600050014-7