2013 Index of Economic Freedom

Spain

overall score68.0
world rank46
Rule of Law

Property Rights70.0

Freedom From Corruption62.0

Limited Government

Government Spending43.0

Fiscal Freedom53.9

Regulatory Efficiency

Business Freedom80.3

Labor Freedom54.3

Monetary Freedom79.9

Open Markets

Trade Freedom86.8

Investment Freedom80.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 46.2 million
  • GDP (PPP):
    • $1.4 trillion
    • 0.7% growth
    • 0.2% 5-year compound annual growth
    • $30,626 per capita
  • Unemployment:
    • 25.1%
  • Inflation (CPI):
    • 3.1%
  • FDI Inflow:
    • $29.5 billion
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Spain’s economic freedom score is 68, making its economy the 46th freest in the 2013 Index. Its score is 1.1 points lower than last year, with declines in financial freedom, fiscal freedom, and monetary freedom outweighing improvements in the control of government spending and labor freedom. Spain is ranked 22nd out of 43 countries in the Europe region.

Registering substantial score declines for the second consecutive year, the Spanish economy has fallen behind several other European economies and solidified its status as only “moderately free.” Economic dynamism has slowed as the economy has endured sharp adjustments. Challenges are particularly significant in fiscal freedom, government spending, and financial freedom. Large fiscal deficits and rising public debt signal the need for financial management reforms and a return to a sustainable level of public spending.

Spain’s economic crisis turned into a full-scale political crisis in 2012, and the momentum for deeper economic and structural reforms appears to be largely stalled. Plans to rescue failing savings banks (cajas), long insulated from market pressures and considered too politically powerful to be allowed to fail, have gone badly awry. Still burdened with bad loans from the housing-boom years, the cajas now threaten the stability of larger banks.

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Background

The burst of the housing-market bubble in 2008 meant that the global economic crisis hit Spain hard in 2009. Prime Minister José Luis Rodríguez Zapatero of the Spanish Socialist Workers Party attempted to use spending on public works and increased unemployment benefits to address the slowdown. This, combined with the collapse of the housing market and the subsequent banking crisis, caused the budget deficit to grow rapidly. The conservative Popular Party, led by Mariano Rajoy, won the November 2011 election and has introduced the largest budget deficit–reduction plan in Spain’s history. The European Union announced a bailout of €100 billion for the Spanish economy in June 2012. Spain’s unemployment rate is 25 percent.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 62.0 Create a Graph using this measurement

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 intellectual property protection. Enforcement actions using Spain’s new legal framework concerning intellectual property rights have significantly increased criminal and civil actions against infringements.

Limited GovernmentView Methodology

The top income tax rate is 56 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 equals 31.7 percent of total domestic income. Government spending has increased to a level equivalent to 43.6 percent of GDP. The budget balance has averaged deficits near 10 percent since 2009, and growing public debt has forced Spain to seek an EU bailout.

Regulatory EfficiencyView Methodology

Procedures for setting up a business have been streamlined, with the number of licensing requirements reduced. Bankruptcy proceedings are fairly straightforward. Steps taken in 2010 to reform the labor market were designed to make it less costly to dismiss a permanent worker. Despite some progress, labor regulations remain largely inflexible. Inflation has edged up as the government faces unprecedented challenges to monetary stability.

Open MarketsView Methodology

Spain’s trade policy is the same as that of other members of the European Union, with the common EU weighted average tariff rate standing at 1.6 percent, and some additional non-tariff barriers interfere with trade. Nearly all sectors are open to foreign investment, but the uncertain economic climate has a significant effect on investment flows. With the banking sector under growing strain, the stability of the financial system has deteriorated.

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
1Switzerland81-0.1
2Denmark76.1-0.1
3Ireland75.7-1.2
4Estonia75.32.1
5United Kingdom74.80.7
6Luxembourg74.2-0.3
7Finland741.7
8The Netherlands73.50.2
9Sweden72.91.2
10Germany72.81.8
11Georgia72.22.8
12Lithuania72.10.6
13Iceland72.11.2
14Austria71.81.5
15Czech Republic70.91.0
16Norway70.51.7
17Armenia69.40.6
18Belgium69.20.2
19Cyprus69-2.8
20Slovakia68.71.7
21Macedonia68.2-0.3
22Spain68-1.1
23Malta67.50.5
24Hungary 67.30.2
25Latvia66.51.3
26Poland661.8
27Albania65.20.1
28Romania65.10.7
29Bulgaria650.3
30France64.10.9
31Portugal63.10.1
32Turkey62.90.4
33Montenegro62.60.1
34Slovenia61.7-1.2
35Croatia61.30.4
36Italy60.61.8
37Serbia 58.60.6
38Bosnia and Herzegovina57.30.0
39Moldova55.51.1
40Greece55.40.0
41Russia51.10.6
42Belarus48-1.0
43Ukraine46.30.2
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