This week marks the 40th anniversary of Spain’s entry into the European Economic Community, the name for the precursor bloc to today’s European Union. Portugal would also join the EEC on January 1, 1986. King Felipe VI recalled this progress. in his Christmas message.
The monarch’s speech saved the effort needed to put together a real puzzle for Spain in the 70s and 80s. Francisco Franco, the dictator who ruled the country until 1975 (that year marked exactly 40 years since the beginning of this democratic transition), had asked for Spain’s accession to the EEC in the 60s, but the answer was negative, since the prerequisite for joining this club was that the countries had to be democracies.
When Franco died, the request was sent again. From the nationalist to the communist parties, they defended entry into Europe. PC leader Santiago Carrillo said joining the EEC was “joining Europe”.
“The transition,” said Felipe VI, “was above all an exercise in collective responsibility. It arose from the common will to build a future of freedoms based on dialogue.”
Inflation doubled in the two years after Franco’s death. Spain’s goal of integration in Europe coincided with the peak of inflation (almost 30% in 1977) and the signing of the Moncloa Pacts.
With the victory of the PSOE by Felipe González in October 1982, the film ended with a twist.
For more than a decade (1973-1984), Spaniards lived with constant price increases of over 10% per year. This very quickly led to a loss of purchasing power if wages were not adjusted. It was not until 1984 that the inflation rate fell to single digits. This path to disinflation was supported by a socialist government, although early in González’s term there was an initial decline in workers’ incomes.
Former Labor Minister in the González government, Joaquín Almunia, described the challenge it posed in an article published a few years ago in the Madrid newspaper El País on the occasion of the 40th anniversary of the PSOE’s victory in the parliamentary elections.
“The Minister of Economy Miguel Boyer told us: ‘Well, the first decision we have to make is to devalue the peseta and lift the caps on energy prices because they cause a huge distortion.’ And those were the first decisions we made: increase gasoline, devalue the peseta. What a joy!”
Most of the discussions and analyzes surrounding these consensus agreements in Spain in the late 1970s often place more emphasis on the political aspects of this transition and ignore an important aspect that enabled disinflation and the adjustment of the economy to Spain’s integration into the European Community: the setting of salaries on the basis of future inflation in order to make devaluation expectations compatible (Moncloa Pact). In doing so, Spain simultaneously embarked on the path of stabilization and integration.
Boyer finally managed to make the corrections he proposed (devaluation and correction of energy tariffs) as part of this “wage fixing”. From Argentina’s point of view, the Spanish Economy Minister did something like “the great Remes”, a Creole expression that referred to the figure of Duhalde’s Economy Minister at the beginning of 2002, when he devalued the peso by 300% and increased retentions (curiously, Duhalde had the support of Raúl Alfonsín as the PSOE of the unions).
In recent years in Argentina there have been debates and discussions about how best to cement disinflation. The opinions of various protagonists also varied to some extent. Former President Macri, for example, claimed in his book Para qué, published a few years ago, that “drastic measures” must be taken, as suggested by Economy Minister González 40 years ago. In fact, Macri has always qualified the value of party agreements because he believes that traditional politics “usually overvalues” consensus. And he warns that agreements can mean “refraining from change.”
Felipe VI said in his Christmas address that “in all these years, Spain has experienced unprecedented change that has allowed it to consolidate democratic freedoms, political pluralism, decentralization, external openness and prosperity.” Today Spain is the fastest growing country in Europe.
Disinflation processes usually take time. They combine aspects of orthodoxy, heterodoxy and integration into the world. According to a study by Harvard economist Carmen Reinhart, it took 60% of countries more than seven years to reach single-digit inflation and 40% took more than 10 years, as shown by the region’s economies between the 1980s and 1990s
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