Spain traveling down the road to success | Europe| News and current affairs from around the continent | DW | 07.10.2012
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Spain traveling down the road to success

Though Spain may request a loan from the European bailout fund, the country is taking the steps necessary to turn around its economy, according to Walther von Plettenberg of the German Chambers of Commerce for Spain.

DW: How severe of an effect has the financial crisis had on Spanish-German trade relations?

Walther von Plettenberg: Spain has been suffering though a recession for four years. That had led to German exports to Spain to drop from their highpoint of 43 billion euros ($56 billion) in 2007 to 30 billion euros in 2011. Over the same period, Spanish exports to Germany have risen steadily and reached 21 billion euros last year. From a macro-economic view, this is a positive development since it leads to a balance. For Germany's export industry, it is, of course, a negative development since companies have to find other replacement markets.

Why is it so important for Spain to change its foreign trade balance?

Walther von Plettenberg (picture: AHK)

Madrid is committed to structural changes, von Plettenberg says

Since the introduction of the euro - and the inexpensive credit that came with it - Spain, like other countries, has not saved enough and instead has relied on credit from other countries. Spain is not alone - countries including the United States and several other European countries, mainly on the periphery, have experienced similarly undesirable developments. That has led to a Spanish current account deficit of 106 billion euros in 2007, which is about 10 percent of the gross domestic product. Such a current account deficit will have shrunk to nothing in 2013, which means that Spain for the first time with have a neutral current account. Imports have, of course, been radically reduced as we see clearly in the case of Germany where they have fallen by 30 percent since 2007.

Are there ways that Germany can cooperate with Spain so it can find its way out of the crisis?

There are about 1,200 German companies operating in Spain and about half of them are in industry. That includes transferring know-how and innovation into the country. Additionally, the German industry is directly and indirectly responsible for a large number of jobs. The number of direct employees is probably between 200,000 and 300,000 and the number of indirect jobs is possibly three times as high. We're talking about a serious number of jobs that have been created in Spain thanks to German investment.

Can Germany serve as a model for Spain?

One issue that has to be mentioned here is the dual education system - the system of education in a vocational school as well as in a company. Germany, Austria and Switzerland have strong dual educational systems. This year Spain has taken major steps toward such an education reform. In September, the government presented a draft for an educational contract that points toward a dual educational system. Seat, for example, has agreed to taking part in a German education scheme and recently announced it would change its training program: it will be extended by three years and trainees will be paid from their first day, which was previously not the case. I can say that a number of other Spanish firms are doing the same.

Why is the issue of training programs so important for Spain?

Until now, the training program for young people in Spain was very regimented. Only a third of Spanish youth choose to take part in training programs - the rest study in universities or end their studies. That means about a fourth of young people have no additional educational training and many who study in universities end up without work. That's why youth unemployment is so high in Spain. That's what makes a dual education system so important so that Spanish young people have an attractive alternative to dropping out or going to university.

Is it about "education versus construction"? Where will Spain's future economic power come from?

The construction sector is going to be flat for several years. The workers and economic resources reliant on it will have to be restructured. The many young people who broke off their professional training to work at construction projects will suddenly need to be educated or re-educated for other jobs. The second important trend is continuing to promote exports. Spain cannot always carry a current account deficit. As long as foreigners accept ever increasing debt, things can go well. But at some point the capital markets will stop playing along - that applies to Spain just as it does for every other country. At that moment it becomes clear that exports have to be in line with imports - current accounts need to balance. That is already the case with regard to a number of countries. Spain has surpluses in trade with France, Italy and Portugal.

Will the government in Madrid stick to its austerity plan?

This government is committed to push its austerity plan through. It is, luckily, at the beginning of its legislative period and still has three years and I do not think it will risk the major sacrifices the population has made in the reforms of the last nine month. In my opinion, major restructuring is happening here.

Interview: Michael Altenhenne / sms

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