Luis de Guindos: Integration and convergence - from the peseta to
the euro
Remarks by Mr Luis de Guindos, Vice-President of the European Central Bank, at an event in
honour of the 40th anniversary of the Spanish constitution, organised by the Spanish Ministry of
Economy, Madrid, 18 December 2018.
* * *
1
This month marks 40 years since Spain began writing the most optimistic chapter of its history .
On 6 December 1978 the Spanish people did more than just vote in favour of a democratic
country that would uphold the values of the rule of law and equality. Our support for the
constitution also laid the foundations for Spain to modernise its economy and become an
integrated part of the European family.
In addition to safeguarding fundamental rights and civil liberties, Section 38 of the constitution
states that "free enterprise is recognised within the framework of a market economy" and
confirms that the public authorities guarantee its exercise. In practical terms, this meant Spain
would align itself with the western model of parliamentary democracy, based on a market
economy and free competition and underpinned by the social rule of law. A little more than a year
later, negotiations began for Spain to join the European Economic Community, a historic
milestone that would be achieved in 1986.
But this wasn't an easy road to follow. The first years of our democracy were marked by
economic difficulties, partly resulting from the international crises linked to sharp oil price
increases and the lack of an anchor for inflation expectations in most developed countries.
Nevertheless, this new Spain, democratic and integrated into Europe, never stopped looking
outwards. Trade and financial flows and the movement of capital increased, and exports and
imports rose from accounting for roughly 35% of GDP in 1986 to 66% in 2017.
These steps towards modernisation would never have been possible without a society that was
convinced of the fact that Europe represented prosperity and the future. The pro-European
nature of civil society united Spaniards more strongly than their ideologies or political affiliations,
and this sentiment has held firm despite the difficulties people experienced during the financial
crisis.
A recent survey by the Elcano Royal Institute shows that eight out of ten Spaniards believe that
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opening up markets provides Spanish businesses with good opportunities . This is resounding
proof that Spain benefits from the European Union in general, and the Economic and Monetary
Union created by the euro area in particular.
The annual growth in per capita income between 1977 and 1985, one year before Spain joined
the EU, was 0.7%, well below the 1.8% enjoyed by the countries that would go on to form the
euro area. However, between 1986 and 1998, before the euro was introduced, Spain's per capita
income grew at an extraordinary annual rate of 2.7%, above the average for future euro area
countries of 2.1%.
The arrival of the euro also had a positive effect on growth, in spite of the serious difficulties
during the crisis. Since 1999, GDP per capita has been growing at 1.2%, which is 0.1% higher
than in the other euro area countries and much higher than during the early years of our
democracy.
Recently, some people have tried to blame the euro for the length of the financial crisis in Spain
and have advocated control over monetary policy interest rates and exchange rates. What they
often forget is that being a member of the euro area enables Spanish households and
businesses to benefit from lower real interest rates, lower inflation rates and reduced
macroeconomic volatility, all of which boost productive investments and make a vital contribution
to the sustainability of public finances.
Furthermore, it is not true that structural currency devaluations solve economic crises.
Devaluations are short-term measures. In the long term, the competitive boost they provide is
eroded by the higher inflation they cause. And, in a complex system of global production chains
like the one we have today, devaluations can make it harder for businesses to plan. The euro is
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also the second-most important currency in the international monetary system , which
strengthens Spain's credibility in a global context.
It's true that the crisis revealed significant institutional shortcomings in the structure of the
monetary union, but it's equally true that European countries have taken this on board and carried
out substantial reforms. The banking union represents one of the greatest achievements of
European integration. Banks are now supervised at the European level, which enables risks that
transcend national borders to be identified. Completing the banking union, in particular by setting
up a European deposit insurance scheme, should be a priority for national governments.
If we look back 40 years, it's clear that Spain today is a more prosperous and modern country.
However, we must not forget that much remains to be done. Improving the functioning of the
labour market is still an outstanding issue - more than 3 million people remain unemployed, and
the youth unemployment rate is still above 30%. But there are grounds for optimism.
Following the collapse in GDP during the hard years of recession, Spain, supported by the
European Central Bank's measures, has reached an annual growth rate of 2.8% over the last
five years, well above the European average. Spurred by the need to search for new markets
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during the years in which domestic demand tightened , Spanish businesses have managed to
find opportunities overseas and many are now global leaders in their sectors.
Spanish society has worked very hard to return to economic growth after almost a decade
marked by the crisis, and it has done so while remaining true to its commitment to Europe. 40
years ago the Spanish people voted for a better country - one that was democratic, open and
modern. The 1978 constitution and the process of European integration have enabled us to make
this better country a reality.
1
The text was published as an op-ed in Expansión on 6 December 2018.
2
See the survey entitled "Europe as seen from Spain and France" (Europa vista desde España y Francia), Elcano
Royal Institute, March 2018.
3
See "The international role of the euro", ECB interim report, June 2018.
4
See Almunia, Miguel, Pol Antràs, David Lopez-Rodriguez, and Eduardo Morales. 2018. "Venting Out: Exports
during a Domestic Slump".