HispanicBusiness

The Future
Spain's stock market is now struggling with two elements of uncertainty – the terrorist attacks and the unexpected victory of the Socialists. Among equities, Endesa, the electric company, which declined 12.1 percent, and Amadeus, the travel reservation company, which fell 11.2 percent, felt the most damage. Endesa dropped because the Socialists want to base Spain's Kyoto Protocol compliance on expanded use of renewable energy. Amadeus dropped because of fears that terrorist attacks will adversely affect tourism.

Each year Spain plays host to some 50 million visitors and derives 12 percent of its Gross Domestic Product from tourism. Carlos Mulas-Granados, professor of applied economics at the Complutense University of Madrid, argues that the attacks "can have a negative impact on tourism, but we foresee the same number of visitors [in Spain] this year." Most foreigners who come to Spain have a second residence there, he says, and are thus less affected by recent events.

The economic impact of the attacks extends beyond the borders of Spain. According to a report by Goldman Sachs, the impact will be felt throughout the rest of the euro zone and will slow down the entire zone's economic recovery. This is especially likely if the Madrid massacre turns out to be the start of a pan-European campaign [by Al Qaeda], not an isolated attack. The same report predicts that there will be "rapid normalization of Spain's economy and political life." Its authors are confident that "the positive economic results will continue after an early period of instability that will affect consumer spending at home and business investment."

The transfer of executive authority in Spain will also have consequences. In the short term, says Carlos Mulas-Granados, "it's logical that markets are going to be affected by these events and by uncertainty created whenever there is a change in government. But once that is accomplished, things will return to normal." The election results, adds Antonio Argandoña, economics professor at the University of Navarre's business school (IESE), "are not going to have any economic impact beyond the normal uncertainties involved in forming a new government and taking the first steps in new policy."

'Quiet Change'
As Spain tries to recover from the attacks, a new government headed by José Luis Rodríguez Zapatero will be taking over. Experts agree that the economy will not be one of the new chief executive's priorities. Other concerns – including security, foreign policy and relations with other political groups in the country – will have greater weight on Zapatero's agenda. Although he is unfamiliar to the public, those who know Spain's new leader characterize him as a conciliator who prefers dialogue. His motto is "quiet change."

Security is now clearly the number-one concern among Spaniards, including families, companies, financial institutions and exporters. In that sense, "the government has no time to lose in clarifying its policy. It can be demanding, but it must also be credible. And it must above all allow for optimism in the business community," says Argandoña.

Starting out, Spain enjoys some advantages because of its recent economic successes. During PP's eight years in power, the country grew at an average rate that exceeded 3 percent. In the process, four million new jobs were created. "The other three big economies of the euro zone [France, Germany and Italy] achieved fewer – and more modest – reforms than Spain did," says Rafael Pampillón, professor at the Instituto de Empresa business school. "As a result, they have been putting up with lower rates of growth [than Spain] for years." However, "maintaining Spain's current growth rate of 3.5 percent, while also stimulating job growth, will be a challenge for the new government."