2014 Index of Economic Freedom

Spain

overall score67.2
world rank49
Rule of Law

Property Rights70.0

Freedom From Corruption62.6

Limited Government

Government Spending38.7

Fiscal Freedom54.0

Regulatory Efficiency

Business Freedom77.3

Labor Freedom52.2

Monetary Freedom79.9

Open Markets

Trade Freedom87.8

Investment Freedom80.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 46.2 million
  • GDP (PPP):
    • $1.4 trillion
    • -1.4% growth
    • -0.8% 5-year compound annual growth
    • $30,557 per capita
  • Unemployment:
    • 25.0%
  • Inflation (CPI):
    • 2.4%
  • FDI Inflow:
    • $27.7 billion
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Spain’s economic freedom score is 67.2, making its economy the 49th freest in the 2014 Index. Its score is 0.8 point lower than last year due to declines in the management of government spending, business freedom, and labor freedom that outweigh small improvements in trade freedom and freedom from corruption. Spain is ranked 22nd out of 43 countries in the Europe region.

Over the 20-year history of the Index, Spain has improved its economic freedom score by 4.4 points. Almost all of the 10 economic freedoms have shown some improvement, with the greatest gains in the areas of market openness and freedom from corruption. Regulatory efficiency and the rule of law have been relatively well maintained.

Modest long-term gains, however, mask the erratic path of Spain’s economic freedom over the past two decades. Still ranked “moderately free” and recording its second lowest economic freedom score in 10 years, Spain continues to score below the world averages in fiscal freedom, government spending, and labor freedom.

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Background

The burst of a housing-market bubble in 2008 meant that the global economic crisis hit Spain hard. Actions taken by the Spanish Socialist Workers Party, then in power, made the economic situation worse. The conservative Popular Party, led by Mariano Rajoy, won the November 2011 election and has since introduced the largest budget deficit–reduction plan in Spain’s history. Good progress has been made toward the EU standard of 3 percent of GDP, although the government is not there yet. In 2012, Spain received a €41 billion loan from the EU to bail out its banking sector. Thanks to high unemployment, emigration is also a long-term problem. In 2013, Spain appears to have pulled out of its double-dip recession, but growth remains low. Spain’s steadily increasing unemployment rate stands at 27 percent, and youth unemployment stands at an estimated 55 percent.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 62.6 Create a Graph using this measurement

In recent years, increased incidents of political corruption and the downturn in the economy have exposed the relations between politicians and construction magnates that fed a disastrous housing bubble. The judiciary is independent in practice, but bureaucratic obstacles are significant. Contracts are secure, although enforcement is very slow. Patent, copyright, and trademark laws approximate or exceed EU levels of IPR protection.

Limited GovernmentView Methodology

The top individual income tax rate is 52 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added tax (VAT) and a capital gains tax. The overall tax burden amounts to 31.6 percent of the domestic economy. Public expenditures are 45 percent of gross domestic income. Government debt is now equal to over 80 percent of GDP. Public finances continue to feel pressure from bailouts of the financial sector and high unemployment.

Regulatory EfficiencyView Methodology

Incorporating a business takes 10 procedures and about three weeks, but completing licensing requirements takes over seven months and costs more than the level of average annual income. Labor regulations remain largely inflexible hindering job growth in the private sector. The government has scaled back once-generous solar-energy subsidies that have contributed to a massive public debt burden.

Open MarketsView Methodology

EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers to trade. Spain has few restrictions on foreign investment. With the banking sector under growing strain since 2012, the overall stability of the financial system has deteriorated. Savings banks have been under severe pressure. The overall cost of the bailout for troubled banks has been substantial.

Country's Score Over Time

Bar Graph of Spain Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Spain to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81.60.6
2Ireland76.20.5
3Denmark76.10.0
4Estonia75.90.6
5United Kingdom74.90.1
6The Netherlands74.20.7
7Luxembourg74.20.0
8Germany73.40.6
9Finland73.4-0.6
10Sweden73.10.2
11Lithuania730.9
12Georgia72.60.4
13Iceland72.40.3
14Austria72.40.6
15Czech Republic72.21.3
16Norway70.90.4
17Belgium69.90.7
18Armenia68.9-0.5
19Latvia68.72.2
20Macedonia68.60.4
21Cyprus67.6-1.4
22Spain67.2-0.8
23Poland671.0
24Hungary 67-0.3
25Albania66.91.7
26Slovakia66.4-2.3
27Malta66.4-1.1
28Bulgaria65.70.7
29Romania65.50.4
30Turkey64.92.0
31Montenegro63.61.0
32Portugal63.50.4
33France63.5-0.6
34Slovenia62.71.0
35Italy60.90.3
36Croatia60.4-0.9
37Serbia 59.40.8
38Bosnia and Herzegovina58.41.1
39Moldova57.31.8
40Greece55.70.3
41Russia51.90.8
42Belarus50.12.1
43Ukraine49.33.0
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