Mondragon, Spain - Spain's dash into tourism in the 1970s
and its property boom last decade largely passed by the Basque region, a cool,
damp corner of the north with a reputation for separatist violence. Instead the
Basques stuck with industry, by force of circumstance.
Euskadi, the Basque name for the hilly province of 2 million
bordering France, now outshines the rest of Spain with a better credit rating
than central government, the lowest regional unemployment and borrowing costs
half those of other areas.
The success of Mondragon Assembly, one of the world's top
producers of solar panel manufacturing equipment, reflects the region's ability
to weather a eurozone debt crisis that has forced Spain to ask for up to €100bn
of EU aid for its banks.
In a factory set in a forest, a multi-armed robot hisses
behind a glass screen, lights flickering as it prepares to take in cobalt blue
tiles to stitch into solar panels. The machine could be shipped anywhere, from
Germany to Kazakhstan, and business is flourishing.
The Basque region's secret has been in sticking to
manufacturing over the property and tourism industries that ended in economic
misery elsewhere in Spain when a real estate bubble fuelled by easy credit
burst in 2009.
Tourism was always going to be a difficult sell for the
Basques because of the separatist violence that only ended in October 2011 when
ETA, Europe's last armed guerrilla group, called an end to its 50-year
struggle.
"If we didn't export, we'd be having a hard time,"
said Mikel Lezamiz, a director at Mondragon.
"It's thanks to exports that we survive or this whole
thing would come crashing down. Survival comes from not depending on a single
market, but on a number of markets.
Mondragon Assembly, part of the unlisted Mondragon group, is
the world's largest cooperative and employs nearly 100 0000 people. Around 80
people work in this plant. It also has factories in France, Germany and Mexico.
The Basque Country is Spain's fifth-largest regional
economy, with a gross domestic product (GDP) of €66.1bn, meaning it accounts
for around 7% of national GDP. The region's exports are more or less evenly
balanced between the rest of Spain and markets beyond Spanish borders.
Its deficit-to-GDP ratio is just 0.25%, compared with nearly
90% for the central state. It has the lowest unemployment rate in Spain at
13.55%, compared with 24.4% nationally.
Tools not tourism
By the time Spain returned to democracy after General
Franciso Franco's death in 1975, many of its regions had already ditched the
notion of developing their industry in favor of tourism, finance and telecoms.
Spain's sun-soaked eastern and southern coasts are dotted
with apartment blocks and holiday homes, many of them impossible to sell since
the domestic property market buckled. The wet Basque climate made its green
hills a more likely home to farmhouses or factories than luxury villas.
The region, at Spain's border with continental Europe, is
rich in natural resources. A cradle of the iron and steel industry, it was an obvious
choice as a manufacturing base.
"There was a clear bet on industry here, a bet on those
traditional sectors, such as iron, steel, energy and small and medium-sized
companies that make all those components for the energy and car sectors, that
make things that you can hold in your hand," Jose Luis Curbelo, director
general of the Basque Institute for Competitiveness, said.
"That is the secret of the Basque economy," he
said. "Basque industry immediately internationalised, whether that was by
producing components and gadgets for overseas companies, or by setting up shop
and manufacturing abroad.
"That process was much faster and much more committed
than in the rest of Spain, so the collapse in the domestic market hasn't
affected Basque companies as much. A lot of their sales are global and they can
withstand the crisis in better shape."
Curbelo, speaking in the business school of the University
of Deusto in Bilbao, said education and training have also been key in
sharpening the Basque business edge.
The region has the highest per capita output in Spain - €31
288 compared with a national average of €23 271 and an EU average of €25 134,
according to the national statistics office.
"Euskadi is in better shape to weather this situation
because over 20 years ago it bet on industrial policies," said Inigo
Urkullu, the leader of the Basque Nationalist Party.
Many of Spain's biggest corporate names are Basque.
BBVA, the country's second-largest bank, is a major player
in South America, source of more than half its revenues. BBVA has said it has
no need of EU financial assistance.
Gamesa is the world's fourth largest manufacturer of wind
turbines. CAF, a producer of rolling stock, sells trains as far afield as the
United States and China.
The severity of the European debt crisis has pushed the
borrowing costs of the Spanish state to their highest since the launch of the
euro in 1999 and many of Spain's overspending regions are shut out of capital
markets altogether.
The Basque region, by contrast, can borrow two-year debt at
8.5% interest, compared with 18% for Valencia or nearly 14% for Catalonia.
But the Basque economy is not immune to events in Europe. It
shrank by 0.3% in the first quarter mainly because of a drop in exports to
other European nations. The Spanish economy contracted 0.4% over the same
period.
Patxi Lopez, president of Basque Country, says the deep
spending cuts that have hit the rest of Spain, are not the panacea. Spain needs
to become a little more Basque.
"Spain needs to change its productivity model, the one
people call 'the brick bubble'. That has to change," said Lopez, a Socialist.
"We can't permanently spend more than we earn, but rather need to invest
in the resources that we do have."
Lopez said the Basque government has marked up nearly €500
000 for those parts of the economy that have been most hurt by the financial
crisis: small and medium-sized companies, entrepreneurs and the self-employed.
A study from the OECD shows innovation and research and
development in the Basque country far outstrips that seen on average in the
rest of Spain on most measures.
Innovation, isolation
The Basques have a reputation among Spaniards as tenacious
workers and their relative isolation in the past from the rest of Spain has
been credited in part with making them more innovative.
The end of ETA's armed struggle has not brought an end to
the desire of many Basques for greater political and financial autonomy. A
November poll by the Sociological Research Center, or CIS, showed that 56% of
Basques want a referendum on self determination now that peace is pretty well
established and that most see themselves as Basque nationalists to some degree.
The same poll shows 65% wanted all political parties linked
to ETA to be legalised, something that has started to come about in a series of
Supreme Court rulings.
In a cafe on a tree-lined avenue in Bilbao, opposite the
city's San Mames football stadium, Jose Antonio del Moral, one of the founding
partners of web portal Ya.com, reflects on the Basque experience.
"Making the jump to set up a company is huge and when
you do it, it's like leaping into the abyss... like bungee-jumping. You look
into the void.
Feeling that you will have the support of people when you do jump is crucial and it is true that here, there is a really solid, highly developed public-private ecosystem and I'm the first to say 'hey, I set up a company here for that reason'."