Stabilization Plan

   The Stabilization Plan of July 1959 has often been credited with laying the foundations for Spain's economic take-off in the 1960s. Though it redirected economic policy away from selfsufficiency towards a more internationalized and market-led philosophy, the real factors facilitating rapid economic development were external: a prosperous Europe that sent millions of tourists, remittances from more than one million Spanish emigrants, foreign investment and help from the IMF and World Bank.

   The Plan was the work of a small group of technocrats, most of whom belonged to the secretive Catholic organization Opus Dei, and whom Franco had brought into the government in 1957 to solve the problem of a near-bankrupt economy. The fact that it took two full years for the Plan to be presented reveals the regime's hesitation in adopting liberalising and marketoriented measures associated with western democracies. Nevertheless the technocrats, more conservative in their religious than in their economic philosophy, persuaded Franco's cabinet to apply for membership of the OECD, the IMF and the World Bank, and it was upon the advice of these bodies that the Stabilization Plan was drawn up. The first objective of the Plan, therefore, was to correct the serious deficit in the balance of payments.

   The Plan was in effect a mixture of deflationary and liberalising measures, with more initial emphasis on the former. The peseta was devalued against the dollar and the previous system of multiple exchange rates abolished. To contain inflation, public sector borrowing was reduced, loans from the Bank of Spain to government agencies slashed, and interest rates raised. The government-controlled prices of public transport, electricity, petroleum products and tobacco rose, provoking a severe, though short-lived, recession, which some commentators have blamed for intensifying the wave of worker emigration that now affected Spain. These attempts at balancing the books were accompanied by other, less immediately obvious steps, which were to be just as significant in the longer term. Although the Spanish economy was to remain more protectionist than other western economies, the revision of the Tariff Statute, with the removal of quotas and other trade barriers on a wide range of goods (especially capital goods) amounted to a tacit admission that Spain's international trade needed to expand if the economy was to develop. In addition, incentives were given to foreign investors to set up businesses in Spain, and the Stabilization Plan was, indeed, soon followed by a large increase in inward foreign investment.

   The Stabilization Plan has undoubtedly passed into the text books as a key episode of modern Spanish history. While the Franco regime had never before introduced such a comprehensive package of economic measures, the Plan, though it marked the beginnings of Spain's slow integration into the world economy, could not by itself bring about the economic miracle of the 1960s. It merely set the scene.

   Further reading

   - Fuentes Quintana, E. (1984) "El Plan de Estabilización económica veinticinco años después", Información Comercial Española, nos. 612–3: 25–40 (a retrospective assessment by a leading authority).

   - Harrison, J. (1985) The Spanish Economy in the Twentieth Century, London: Croom Helm (a very readable account of Spain's recent economic history).

   - Wright, A. (1977) The Spanish Economy 1959-76, London: Macmillan (a solid, clear, descriptive account of a crucial period in Spain's development).

   C. A. LONGHURST