Spain's EU rescue: an ambulance in first gear

The Kingdom of Spain is beset by problems that would seem impossible to hold within one state: 25 percent unemployment, corruption scandals that bring weekly arrests of elected officials and civil servants, illegal immigration from North Africa and the Middle East, the collapse of its two-party system in recent elections, a stubbornly high national debt, and a popular separatist movement in Catalonia. Even so, Spain shows no sign of lurching toward a collapse, despite a history replete with military coups and revolutions -- featuring seven different forms of government in just the 1800s. It also endured the most recent civil war in Western Europe (1936-1939), and a dictatorship as recently as 1975. And yes, the late General'simo Francisco Franco is still dead, although occasionally in today's environment a right-wing Spaniard will declare, exasperated, "if only Franco were still alive!"

In some ways, the reason Spain is in its quandary, but also how it is finding a way to crawl slowly out of these dire circumstances is its membership in the European Union. Spain became a member in 1986 with Greece and Portugal, much later than most states. This delay came not only because of dictatorships all three had until the mid-1970s, but because of the less-developed nature of their economies, and their reliance on agriculture and tourism. Once in the EU, Spain benefited from cheap money, as richer nations, especially Germany, loaned money on easy terms when interest rates were low and stock markets were booming. Every financial boom, however, eventually leads to a bust, as it did in 2009 and 2010. In Spain, real estate crashed first, as developers had borrowed heavily to build vacation homes and office spaces for northern Europeans and newly rich Spaniards that, after 2008, few could afford.

Spain and Greece faced insolvency in the recent Great Recession, as banks began to call in the loans they had lent so freely in previous years, finding cash-strapped investors unable to repay. In earlier years, bankruptcy and national ruin could have resulted, as Spain saw in previous centuries. This time, however, the EU came to the rescue of Spain, Ireland, Portugal, Italy, and Cyprus, all of which fulfilled the terms of the loans, bank bailouts and other fiscal measures extended. Greece, with by far the worst debt crisis, also agreed, but has since thrown out the government that did so, bringing into office a far-left party -- Syriza. Rejecting the deal that saved Athens from bankruptcy, Syriza has brought Greece to the brink of default, blaming other nations for what the Greeks did to themselves.

Spain faces no prospect of default or eviction from the European monetary union for insolvency. Despite their well-deserved reputation as a people that enjoy a good time, the conservative Partido Popular, which defeated the Spanish socialist party in 2011, has met all of its fiscal obligations to the European Union, and the economy has begun to grow again. While its unemployment rate is still painfully high, it is down from 27 percent at the height of the Great Recession and will have the fastest economic growth in the EU this year, thanks to free market reforms that have improved the investment climate and consumer confidence.

Spain's full integration into the EU has therefore brought gains, as well as losses. While Spain's economy has grown much more slowly as part of the EU than it did when it was ruled by Franco, it is now an advanced nation. Richer countries with high standards of living tend to grow more slowly. The giant leaps that come with adding roads, electricity, and educational systems are harder for rich countries to match in percentage growth. Consider it similar to comparative salaries, however; if a fast food worker gets a 10% raise, and LeBron James gets a 1 percent raise, it is clear who gains more wealth.

The challenge for Spain is one of patience. Anemic growth, in some ways slowed even more by regulations and restrictions imposed by the European Union, will mean it will be perhaps a decade before Spanish workers see unemployment rates below 10 percent. At the same time, those same Spaniards enjoy the right to work anywhere in the EU, Spanish businesses face no investment or export barriers in Europe and, as the recent banking crisis showed, the EU considers its member states as too big to fail (with the possible exception of Greece, the least responsible government in the EU). One commentator observed that the EU financial rescue of Spain was like an ambulance driving in first gear to the hospital. You are grateful for the help, but expected a bit more urgency. While the Greeks blame the ambulance for their injuries, Spain appears to be along for the ride, as long as it takes.