SPAIN: Nation in Trouble

SPAIN Nation in Trouble

Things have been going from bad to worse for a long time in the once great kingdom of Spain. Left behind by the great revolutions of the 18th and 19th centuries, Spain moved from feudalism to confused socialism to fascism through one of history’s most destructive civil wars. After that came the mismanagement and the narrow imagination of Francisco Franco’s regime. Spain was near economic disaster when U.S. aid began to arrive.

Wisely spent, the $2 billion pumped into Spain during the past eight years might have gone far toward putting the country on its feet. But bureaucrats went on an ill-conceived spending spree, some of whose principal results are a steel mill whose products cost half again as much as German imports, an auto plant in Barcelona that builds ersatz Fiats for more than twice the cost of the real thing, thousands of luxury apartments still unrented, a $300 million annual trade deficit, an inflation that nearly doubled the amount of currency in circulation in five years (from 37 billion to 70 billion pesetas) and brought a 40% increase in the cost of living the past two years.

As though this were not bad enough. Spain, by being left outside Europe’s prosperous new Common Market, was in danger of losing its markets for wine and citrus fruits.

Bitter Medicine. The time for drastic remedies had come. Last week Commerce Minister Alberto Ullastres, in a midnight four-hour speech to late-hour Barcelona businessmen, outlined a stern stabilization plan, obviously approved by Franco, that was almost exactly what foreign economists have been trying to force upon Spain for the past ten years. Its proposals:

¶ Make drastic decreases in government spending. (Actually, many construction projects have already been stopped for lack of money to meet the payroll.)

¶ Tighten credit and stop printing paper money.

¶ Devaluate the peseta and abolish the multiple exchange rates. (Mercury exporters get 31 pesetas for a dollar, tungsten exporters 90. Paris black-marketeers 60. The official rate: 42.)

¶ Join Western Europe’s OEEC and consider carefully whether to join the Common Market, too.

¶ Liberalize the Spanish economy.

All this would be radical and painful therapy: Common Market membership would flood the country with industrial products cheaper and better than Spain’s own : devaluation and convertibility would be hard on corrupt officials, smugglers and black-marketeers: a heavy cutback in government spending may within a month put a quarter of a million workers on the streets of Barcelona alone. Aware of the dangers—which could be political as well as economic—Ullastres told his Barcelona audience: “This is probably the worst moment through which we will pass . . . There will be a few disturbances, layoffs, reduction of production . . . increases in prices.”

Franco himself was talking a more relaxed line. In an interview with a Mexican correspondent, he dismissed the economic problem as just another of Spain’s ”small crises of growth, which require adjustment measures but do not alter the progressive march of the nation.”