An Economic Exception: The Basque Country

Whilst Spain as a whole has suffered from tough economic times, the Basque Country has remained relatively successful. By Anna Wallander

Bilbao is the first city of the Basque region

Bilbao is the first city of the Basque region

Since the beginning of the economic crisis in 2008 Spain has been one of the most affected countries in the European Union and it seems as if an end to the negative impacts is still far out of reach. However, if one looks closer at each Spanish region individually, differences are noticeable. While Andalusia, with the highest unemployment rate of its history, is doing quite badly, other regions such as the Basque Country have managed the crisis surprisingly well. How does the Basque country resist the crisis so much better than the rest of Spain?

When entering the Basque Country, a small and almost forgotten region in northern Spain, it feels as if you just left Spain. It’s colder and raining, you are surrounded by green mountains, and the people greet you with kaixo and aupa, the local language. There is neither paella nor flamenco to be seen anywhere. However, nor is the crisis.

Of course, Euskadi – as the Basque call their region – has also been hit by the crisis. Unemployment along with debt has risen. Nevertheless, comparing numbers, those of the Basque country are far from the average Spanish figures. In the Basque Country there is a 12.1% debt of the GDP. The Spanish government has a debt-to-GDP ratio of almost 90%. The Basque unemployment rate reaches 14%, whereas the average unemployment in Spain is almost double. At the other extreme, Andalusia has an unemployment ratio of 36%.

How can there be such a big gap between different regions of the same country? What makes the Basque Country economically stronger than the other regions?

First of all, it should be noted that the Basque Country has a special place in the Spanish constitution, which gives it more freedom and independence in its activities. After the rough history the region experienced during the dictatorship of Franco, where Basque culture was greatly suppressed, and after the terrorism exercised by ETA, an Economic Agreement was signed between the region and the Spanish government. The Basque Country was granted autonomy in its fiscal activities, which has worked to its advantage ever since. By being more independent, Euskadi is not as affected by the success or failure of the rest of the country and can introduce its own policies to protect it from economic risks.

Moreover the Basque Country has never been very active in the construction sector, but has put a lot of focus on industry. In fact, 26% of its income is gained from the industrial sector, a high number compared to the Spanish average of 16%. After the bursting of the real-estate bubble, this has proved to help the region avoid an immense economic downturn. Andalusia, on the other hand, has invested a lot in apartment buildings along the coast, a very unstable and speculative business.

Additionally, in recent years, a new sector has gained importance in the Basque Country: tourism. As, due to its dark history, terrorist activities were still believed to be very strong, the region did not attract many visitors in the past. However with the ceasefire introduced two years ago tourism has started to grow, introducing a source of income which was non-existent a few years ago in this part of Spain.

Another reason explaining Basque Country’s resistance to the crisis is the businesses that are active in the area. The Mondragon Cooperative Corporation, a worker cooperative founded during the time of Franco, is today the biggest business group in the Basque country and the seventh largest in the whole of Spain. The Corporation’s business structure has had a major influence on crisis management. Studies have shown that cooperatives have been less affected by the economic downturn than the conventional capitalist businesses we are used to. One of Mondragon’s principles is not to lay off its workers if it can help it, but instead to invest in its workforce. The Corporation emphasizes that its employees are more important than its profits. If, for example, one business unit needs to let go of an employee, this employee will be redeployed to a different business where more workers are needed.

Even though it is good to see positive results in Spain, the Basque economic stability has come with negative effects as well, as the Basque separatist feelings have grown even stronger among its inhabitants. Just like in Catalonia, many argue that they would be better off if they were completely independent from Spain.

Some of the Basque success factors may have resulted from circumstances, but southern Spain can still learn a lot from the northern region. In the end it all comes down to one question: will the country work together as one, or will the economic differences only strengthen the separatist feelings that already exist in the country?

Image: ‘Bilbao 7:00am’ courtesy of Julen Landa, released under Creative Commons.

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