Looking up in Fall 2017

by Joseba Barandiaran

The Basque economy has entered the Fall of 2017 with ETA giving up its arms and about to dissolve, the nuclear plant of Garoña (outside, but right at the border of the province of Araba) closed down once and for all and quarterly GDP growth steady, somewhere around 0.7%. It may not be perfect, but it looks quite good. Things are looking up.

The 2008 crisis eliminated more than one tenth of all Basque jobs by 2013, including more than one fifth of the industrial ones: that´s a total of 162,000 jobs lost in 5 years, 44,000 in Navarre and the rest in the Autonomous Region of the Basque Country (ARBC). Employment has been improving ever since, although it’s still 8% down from its maximum level.

What is pushing this recovery? Tourism and the automobile industry are driving it, we could say. The Mercedes Benz factory in Vitoria-Gasteiz is producing a record 144,000 V-class sedans and Vito vans. Almost 5,000 jobs and a big portion of ARBC`s export come from that factory. The Volkswagen factory in Iruñea-Pamplona, selling 90% of its products outside of Spain, is building two different models for the first time ever: the new Polo A07 model and an SUV model expected for 2019, which is also good news for its almost 5,000 employees. Companies such as CIE Automotive, or Irizar coaches are also successful Basque companies that are pushing for recovery. And Michelin is providing some more tires too, with further investment in Vitoria-Gasteiz, where 3,300 direct employees work.

Then there is tourism, which is somehow booming too, also in the Southern Basque Country, with several factors (including the end of ETA and Gaztelugatxe being shown in Game of Thrones) making 2017 the best year ever. And this is so for the Basque Country´s five airports (no kidding, five, in less than 21,000 square kilometers), barely affected by the Ryanair cancellations. Tourism stirred some debate and even tourism-fobia mentions, probably because of the negative effects that Airbnb-type offerings are having in everyday life in the older city centers of Donostia and, to a lesser extent, Bilbao. Nevertheless, the size of Basque tourism is still ridiculously less compared to that of the Spanish and French Mediterranean coasts.

Anyway, the media has been focused more on several Basque companies that are in trouble lately. The ship-builder La Naval is one, where almost 2,000 people are trying to keep the industrial tradition alive around the Ibaizabal river, between Bilbao and the sea. Fagor-CNA, created after one of the branches of the Mondragon cooperative group, failed in 2013 and was sold to the Catalan group Cata. Another example: the Garagarza plant in Arrasate is about to be closed and its 350 jobs are in danger. It´s hard to build appliances in Europe and make money at the same time. Similarly, 230 jobs at the paper maker CEL, with one plant in Araba (Artziniega) and two in Bizkaia (Zalla and Güeñes), also unable to find an investor that would make it profitable. Bad news for the already troubled Enkarterri area.

The Hannover, machine-tool fair hosts around 50 Basque companies as well, most of them from Gipuzkoa, a sign that Basque technology may also be competitive in the 4.0 industry. But the ultimate proof that things are running back to normal may be the 1% public salary increase for public employees that both, Navarre and ARBC, are paying… following Madrid´s indications.

And last but not least, when reviewing the Basque economy during September, we should be very aware of Catalonia and its independence process with a referendum-like vote that took place on October 1st. A big part of popular discontent may come from the fact that Catalans don´t have a similar regional finance system as the Basques do (ARBC and Navarre), limiting their contribution to Spain. Soon changes may happen in the Spanish system, regarding Catalonia at least, but they could also affect Basques.

About the Author

Joseba Barandiaran

Joseba Barandiaran is an economist
@barandiaranj | Mail | LinkedIn

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