Spain country brief

Overview

Located in south-western Europe, Spain borders the Mediterranean Sea, North Atlantic Ocean, Bay of Biscay and the Pyrenees Mountains. It covers an area of 498,800 sq. km south-west of France. With a population of 46.4 million, Spain’s official languages include Castilian (Spanish), Basque, Catalan and Galician. Ninety-four per cent of the population identifies as Roman Catholic. Spain’s capital is Madrid.

Bilateral relations

Relations between Australia and Spain are steadily expanding. Spain offers significant potential as a partner, both in business and in international relations. While Spain's foreign policy traditionally focuses on the European Union (EU), the Mediterranean and Latin America, it is broadening its diplomatic and commercial presence in the Asia-Pacific. The Australian and Spanish Governments augment growing trade and investment links by maintaining policy dialogue on areas of shared interest.

Defence Cooperation

During the period 2004–14, cooperation on large-scale military projects (worth A$13 billion) has created a foundation for expanded bilateral engagement between Australia and Spain. The commissioning of HMAS Canberra (November 2014) and HMAS Adelaide (December 2015), two Royal Australian Navy (RAN) landing helicopter dock (LHD) ships, provides a tangible example of this deepening defence relationship. The LHDs are Australia's largest-ever warships in RAN service, with impressive helicopter and amphibious capacity and surgical facilities, which can be configured for humanitarian, disaster relief or combat missions. They were designed by Spanish company Navantia, the world’s sixth-largest shipbuilder. The construction of the hull was undertaken at Navantia’s shipyard in Ferrol, Spain, and transported to BAE Systems shipyard in Williamstown, Victoria, for final construction and fit out. This follows the award of three major Australian naval acquisition contracts – for two amphibious vessels, three air warfare destroyers (AWD) and twelve landing craft vessels – where Navantia is deeply involved as either designer, builder or section supplier. The Spanish-designed AWDs will also be among the most capable ships of their size in the world. The Navantia contracts complement those won in 2004 by EADS-CASA, the Spain-based division of Airbus Military, to provide the Royal Australian Air Force with five (later seven) multi-role tanker transport aircraft.

In March 2016, Navantia was selected as the preferred tenderer for the RAN replenishment vessel replacement project, at a total cost of A$640 million, with the first of two vessels expected to be delivered in 2019. Navantia was one of the companies shortlisted in April 2016 for the RAN’s Future Frigates program, estimated at more than A$35 billion, with construction expected to commence in Adelaide in 2020. As well as strengthening Australia’s naval capability, these projects are also providing significant employment, innovation and commercial flow-on to Australian firms.

Cooperation on defence acquisition projects has led to increasingly close links between the RAN and Spain's Armada, which have gradually evolved into a strategic partnership.  A manifestation of this strengthened relationship was the agreement between the two navies for the deployment of the Spanish logistic supply ship, SNS Cantabria, to Australia in 2013 to exercise and train with Australian naval ships for eight months.  The deployment also allowed SNS Cantabria to represent Spain at the Australian International Fleet Review to commemorate the centenary of the arrival into Sydney Harbour of the first ships of the Royal Australian Navy in 1913.  The Spanish frigate Cristóbal Colón will conduct a similar deployment to Australia in the first half of 2017 to assist the RAN with the introduction into service of the first Hobart Class AWD.  In preparation for the induction into Australian service in coming years of Spanish-designed ships, the Armada has also provided considerable training and operational assistance to the RAN.

The Spanish and Australian Defence Forces are also conducting similar Building Partner Capacity (BPC) missions in Iraq as part of the multinational coalition against Daesh. This has led to valuable information-sharing and exchange of ideas concerning this important mission.

People-to-People links

Spain is Australia's 29th largest market by short-term visitor arrivals.  In 2015-16, there were 35,300 short-term visitors from Spain to Australia, an increase of 11.4 per cent on the previous year.  Over the last five years, the average annual growth in arrivals from Spain was 9.1 per cent. Spain is Australia's 24th largest short-term destination.  In 2015-16, there were 68,200 short-term resident departures from Australia to Spain, an increase of 4.3 per cent on the previous year.  Over the last five years, the average annual growth in departures to Spain was 11.2 per cent.

There were 3,440 student visas granted to citizens of Spain in 2015-16. This is an increase of 11.2 per cent when compared to 2014-15 (3,094) and an increase of 87.2 per cent when compared to 2011-12 (1,838). Spain is a significant English Language Courses (ELICOS) market being one of the countries with strongest growth in terms of student numbers. Spanish nationals travelling on tourist visas, may also attend ELICOS, as the courses are often shorter than 3 months and therefore do not require a student visa.

Spanish authorities estimate that there are approximately 2,000 Australians (not dual-nationals) living and working in Spain. The Australian Embassy estimates there are approximately another 4,000 Australians with Spanish or EU dual-nationality living in the country.

In the 2011 Census, 92,957 Australian residents claimed Spanish descent. The Spanish community in Australia comprises principally those who migrated to Australia in the 1960s under a government-to-government assisted-migrant-passage program, and their children, but includes the descendants of nineteenth-century, primarily agricultural, immigrants. New South Wales has, by far, the largest number of residents born in Spain. Spanish ranked as the third most common major European language spoken in Australian homes, with approximately 117,500 speakers.

Since 2009, when the Spanish government opened a branch in Sydney, the Cervantes Institute has been contributing to the expanding knowledge in Australia of modern Spain, its language and culture.

The Australian Embassy in Madrid manages a highly successful public diplomacy program. Activities in 2015-16 focused on raising awareness about contemporary Australia in Spain. Events highlighted Australian music, film, literature and indigenous cultures and promoted Australia as a successful multicultural nation and an attractive place to study, work, visit, live and invest.

Bilateral Agreements

Bilateral agreements include an Extradition Treaty (1988), a Social Security Agreement (2003), a Treaty on Mutual Assistance in Criminal Matters (1991), an Agreement on Cultural, Educational and Scientific Cooperation (1991), a Double Taxation Agreement (1992), an Air Services Agreement (2009), an Agreement for the Mutual Protection of Classified Information of Defence Interest (2012), a Defence Cooperation Memorandum of Understanding (2013) and a Work and Holiday Visa Memorandum of Understanding (2014).

High-level visits

The strength of the relationship has been enhanced by a significant number of high-level visits. Spanish Prime Minister Mariano Rajoy visited Australia for the G20 Summit in November 2014. Foreign Minister José García-Margallo visited Canberra in September 2014 to meet business leaders, sign the bilateral Work and Holiday Visa Agreement and inaugurate the Spanish-built solar energy plant at Royalla (ACT). King Juan Carlos and Queen Sofia made an official state visit to Australia in June 2009, visiting Canberra and Sydney.

Trade and Investment Minister Andrew Robb visited Madrid in July 2014, accompanied by a high-level business delegation from the Europe Australia Business Council. Minister for Infrastructure Anthony Albanese visited Spain in April 2013. Minister for Defence Materiel Jason Clare visited in August 2011. Governor-General Quentin Bryce visited Spain in June 2011. Minister for Foreign Affairs Stephen Smith visited in February 2010.

Bilateral economic relationship

Trade

In 2015, Spain was Australia's 25th largest merchandise trading partner with total merchandise trade reaching A$2.6 billion. Australian merchandise exports to Spain were A$561 million, and included coal, fruit and nuts, other ores and concentrates and aircraft, spacecraft and parts. Australian imports from Spain in 2015 stood at A$2.1 billion, with the biggest import items being passenger motor vehicles, medicaments (including veterinary), ships and boats, and pharm products (excluding medicaments). Australia’s trade in services with Spain totalled A$719 million; A$290 million in exports and A$429 million in imports.

See also the section on 'Defence Cooperation'.

Investment

Spanish companies are increasingly significant players in infrastructure, water and energy efficiency sectors in Australia. They are also prominent participants in the internationalisation of the Australian construction sector. Many of Spain's largest infrastructure companies now have a presence in Australia. In 2015-16, contracts awarded to Spanish companies included transport infrastructure projects (CAF – Canberra light rail, ACS - Sydney M5 motorway, Acciona-Ferrovial – Toowoomba Second Range Crossing, OHL – Pacific Highway upgrade) and renewable energy generation projects (Elecnor – Barcaldine and Moree solar photovoltaic plants in Queensland and NSW, Gas Natural Fenosa – Crookwell windfarm in NSW, Acciona - Mt Gellibrand wind farm in Victoria).

Australian investment in Spain was worth almost A$6.5 billion in 2015. Major Australian investments in Spain are in a range of sectors, including financial services and energy (Macquarie Group), mining (Berkeley Resources, Highfield Resources and Kimberley Mining) and education (RMIT).

The Australia-Spain Business Association is headquartered in Madrid with branches in Barcelona and La Coruña (Galicia). The Spanish Government and Catalan regional Government maintain trade promotion offices in Sydney, where the Spanish-Australian Chamber of Commerce and Industry, La Camara, promotes business relationships within the Spanish-Australian business community.

The Australian Trade and Investment Commission (Austrade) is the Australian Government’s trade and investment promotion agency. Through its global network, Austrade helps Australian companies succeed in international business, promotes Australia as an international education and tourism destination and attracts productive foreign investment into Australia. Austrade has an office in Madrid, where it provides assistance to Spanish companies interested in the Australian market, and is also responsible for the Portuguese market.

Political Overview

System of Government

Spain is a parliamentary monarchy. The head of state is His Majesty King Felipe VI, who is also commander-in-chief of Spain's armed forces and head of the Supreme Council of Defence. The head of the government is the prime minister (known in Spanish as the president of the government). Legislative power is vested in the Cortes Generales, comprising two houses, elected by direct universal adult suffrage for four years. The Congress of Deputies has 350 members, elected by proportional representation. There is also a less powerful but nevertheless important Senate, with powers of legislative amendment. It comprises 259 members (208 directly elected and 51 appointed as regional representatives).

The Spanish constitution recognises the right of the various regions of Spain to autonomy while emphasising the indissoluble unity of the Spanish state. Spain is divided into 17 autonomous communities, each with its own elected assembly and executive government, together with two North African enclaves, Ceuta and Melilla, called autonomous cities. The powers of the autonomous communities vary considerably, with the Basque Country, Catalonia and Galicia having special status and extensive powers, including over regional policing.

Major Parties

Spain's major political parties are: the centre-right People's Party (PP) and the centre-left Socialist Party (PSOE). In 2015, two newcomers – the radical left anti-austerity Podemos (‘We can’) and the liberal, centrist Ciudadanos (‘Citizens’) parties – entered the mainstream for the first time, ending the domination by the PP and Socialists stretching back to 1978 and the new post-Franco Constitution. Other significant parties include, in Catalonia, mainstream pro-independence coalition ‘Together for Yes’ (Junts Pel Si-JPS) and, in the Basque country, the Basque Nationalist Party (PNV) which is made up of pro-independence, moderate democratic nationalists.

Political Developments

Interim Prime Minister Mariano Rajoy came to power in a landslide election in November 2011, winning the largest majority in Spanish history. His party, the Partido Popular (PP), has since won the most number of (minority) seats in inconclusive national elections in December 2015 and June 2016, but without success in negotiating to form government with other parties. The PP remains the interim government, pending either an eventual agreement with or by other parties or further elections later in 2016.

Mr Rajoy is only the second conservative PM since Spain’s transition to democracy in the 1970s. His government’s overwhelming focus has been on the economy and implementing structural reforms in an effort to continue Spain’s recovery from its 2007-13 financial crisis and to lower Spain’s high unemployment rate.

Foreign Policy

In the modern era, Spain’s role in international affairs grew following its entry into the European Community in 1986, and Spaniards are strongly pro-European. Spain is also a member of the OECD and is a permanent invitee to the G20. Spain assumed a non-permanent seat on the UN Security Council for the 2015-16 term, during which it has been Rapporteur on Afghanistan and chair of three nuclear non-proliferation committees.

Spain became a member of the North Atlantic Treaty Organization (NATO) in 1982, with its full integration into the military structure of NATO completed in 1997. Until 2014 when the transition process was completed, around 1,500 Spanish military personnel were involved in the NATO-led International Security Assistance Force (ISAF) operation in Afghanistan. Alongside its Global Coalition Partners, Spain is engaged in international efforts building the capabilities of Iraq’s Security Forces and in the fight against Daesh. Previously, Spain has sent troops on peace-keeping missions in Bosnia, Kosovo, Haiti and Lebanon, and as observers in the former Yugoslavia, Ethiopia, Eritrea, the Congo, Kosovo, Burundi and Sudan.

Spain has maintained its close relationships with Hispanic America and the Philippines, based on history, a common culture, language, religion and strong investment and trade ties.

A further priority is the Mediterranean rim, where a number of countries have important political and economic links with Spain. The Union of the Mediterranean has its headquarters in Barcelona. Relations with Morocco have often been dominated by the issues of sovereignty of the two Spanish enclaves of Ceuta and Melilla, illegal immigration, drug-trafficking, fishing rights and countering terrorist activities. Spain continues to dispute British sovereignty over Gibraltar.

Spain became a Forum Dialogue Partner of the Pacific Islands Forum in 2014, and provides an aid program to the region. The Pacific is important to Spain’s fishing industry and in recent years it has increased efforts to prosecute Illegal, Unregulated and Unreported (IUU) fishing breaches by Spanish companies and individuals. Spain has strong historical ties in the Pacific, with Guam, the Marshall Islands, Palau and the Federated States of Micronesia a part of its former empire.

Economic Overview

Spain's economy grew rapidly following its accession to the EC in 1986.  It adopted the euro on 1 January 2002.  In 2015 Spain's economy was the 14th largest worldwide, the 5th largest in the European Union (EU) and the Eurozone's 4th largest.  Spain's top three principal merchandise export destinations were France (15.5%), Germany (10.8%) and Italy (7.5%). Australia ranked 27th  (0.7%).  Spain's top three principal merchandise import sources were Germany (13.1%), France 10.8% and China (8.7%), with Australia ranked 59th (0.2%).

Since the 1990s, Spanish companies have gained multinational status, often expanding their activities in culturally close Latin American markets, where Spain is the second biggest foreign investor after the US. Spanish companies have also expanded into Asia, especially China and India. Typically, Spanish companies have invested in fields like renewable energy commercialisation, technology, train manufacturing, textiles, petroleum and infrastructure, with six of the ten biggest international construction firms specialising in transport infrastructure being Spanish companies.

Economic Developments

Services play an important role in Spain’s economy. Spain is a major tourist destination. Attracting over 68 million foreign tourists in 2015, the sector directly contributes 5.8 per cent of GDP and 5.2 per cent of employment. Manufacturing has been dominated by textiles and apparel, motor vehicles, shipbuilding, machinery and pharmaceuticals. Spain is a major producer of agricultural products, including grain, poultry, olives and olive oil, grapes and wine. Fishing is a significant industry; Spain's fishing fleet is one of the largest in the world.

In the period leading up to the global financial crisis (GFC), the Spanish economy boomed and attracted appreciable levels of foreign capital. However, Spain was hit hard by the late 2007 collapse of a speculative housing boom as well as by the GFC. The economy went into recession in 2009. After two years of austerity measures, Spain came out of recession in late 2013 and in January 2014 formally exited ahead of time the EU financial assistance package to the Spanish banking sector. Assisted by productivity gains and improved cost competitiveness, Spain’s exports diversified and rose significantly; the current account has been in surplus since 2013. In 2014 Spain consolidated the first signs of recovery across a wide range of indicators (consumer confidence, property prices, employment growth, competitiveness, inwards investment, tourism), which continued through 2015. Domestic consumption has been the main driver of Spain’s continued recovery.

The economy grew 3.2 per cent in 2015 (second-highest growth in the Eurozone) and is expected to grow 2.6 per cent in 2016. However, while unemployment has fallen slowly but steadily, this is mainly due to temporary employment contracts and it remains at around 20 per cent, with over 50 per cent youth unemployment. The government has forecast a peak in public debt of 101.2 per cent in 2016, followed by a reduction in 2017. This, and Spain’s failure to meet its 3 per cent budget deficit target in 2015, have led to criticism and increased vigilance by the European Commission. Economic recovery remains at risk through 2016 from the hiatus in both the formation of a national government and continued economic reforms, impacting on business and investor confidence, and from the still-sluggish performance of other Eurozone economies that represent Spain’s key export markets.

Last Updated: 27 September 2016