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Country Commercial Guides for FY 2000: Spain Report prepared by U.S. Embassy Madrid, Released July, 1999   Note*

III. POLITICAL ENVIRONMENT

Political Relationship with the United States

Spain and the United States enjoy excellent bilateral relations. The two governments share common views on a broad range of issues and are allies in the North Atlantic Treaty Organization (NATO).

Major Political Issues Affecting the Business Climate

Two political issues affect the current business climate in Spain: the need to create greater flexibility in the labor market and a minority government dependent upon ad-hoc coalitions to advance its legislative programs.

Labor market regulations in Spain are extremely rigid, despite modifications in the first half of 1997. Companies in Spain faced with economic difficulties have problems downsizing staff, and encounter Social Security and redundancy payments. Government efforts to eliminate these rigidities have been opposed by trade unions, but some progress has been made since the government of President Aznar won the general elections in March 1996.

The ruling Popular Party (PP) must depend on other parties to form a working majority in the Congress (Cortes). These informal coalitions complicate the Government's ability to take action on pressing economic and political matters.

Political System, Schedule for Elections, and Orientation of Political Parties

Spain has been a parliamentary democracy since its modern constitution came into effect in 1978, after the death of dictator General Francisco Franco. King Juan Carlos I is the head of state, while President (Prime Minister) Jose Maria Aznar of the center-right Popular Party has been head of the government since May 1996. The bicameral legislature, or "Cortes", consists of the lower chamber or Congress of Deputies, popularly elected at the provincial level, and the upper chamber or Senate, which combines both directly elected and appointed seats. In addition to the central government, Spain is divided into regional units or "autonomias", which have their own governing bodies including a chief executive or President and legislatures. There are also provincial and municipal levels of government with delegates appointed by the central government and locally elected officials. Spain's constitution created a system of asymmetrical autonomous regions with varying degrees of power upon whose 'nationalist' parties, the ruling national Popular Party, forms its majority in Congress. Their support is conditioned by the fulfillment of specific regional goals, particularly the ceding of certain central government competencies, such as health care and police functions, to the regional governments.