Spain Defence and Security Report Q2 2008

The Spanish general elections on March 9, won by Prime Minister Jos Luis Rodriguez Zapatero's ruling Socialist Workers' Party (PSOE), were the target of disruption by the Basque separatist group ETA. The preceding elections in March 2004 had come only four days after the country's worst-ever terrorist attack, mounted by al Qaeda militants, who bombed Madrid's Atocha railway station, killing 191 people. Four years later in 2008, ETA struck two days before the March 9 election, assassinating Isaas Carrasco, a former PSOE town councillor, who was shot outside his house in the Basque town of Mondragn. The organisation did not initially claim responsibility for the killing, but police said it bore all the hallmarks of an ETA operation. Both the PSOE and the opposition People's Party (PP) responded by immediately closing their elections campaigns. In the elections the PSOE won 169 seats, seven short of an absolute majority in the 350-seat Cortes, meaning that Zapatero would need to govern with smaller regional parties like Catalan Convergence and Unity (CiU) which won 11 seats, and the Basque National Party (PNV) which won six. The elections were seen as confirming Spain's evolution into a basically two-party political system. Between them the PSOE and the PP gained 83.7% of the vote, versus 65.4% in the 1989 general elections when smaller regional parties began to lose support relative to the two national organisations. Zapatero began his victory speech by remembering the five deaths attributed to ETA since it ended a ceasefire in December 2006 after he had made peace overtures. Despite ETA's renewed activity, BMI's newly released Q208 defence and security report predicts a solid outlook for the Spanish defence industry and a stable internal and security outlook.

Relations between the central government in Madrid and the country's 17 autonomous regions can be difficult, sparking disputes over a wide range of issues. Spanish security forces continue to focus their attention toward international threats. There are currently no major conventional military threats to the country, but the threat from international and domestic terrorism remains very real. The Madrid bombings had a profound effect on both Spain's domestic and foreign policy, in terms of Spanish counter-terrorist operations and the withdrawal of Spanish troops from Iraq. The country remains committed to an active international peace-keeping role, despite having to pay the price: six Spanish peacekeeping soldiers were killed in a car bomb attack in Lebanon in June 2007.

The ongoing modernisation process at the heart of the armed forces, combined with an increase in Spain's involvement in peacekeeping operations, has justified an overall increase in the defence budget. Also, in light of the Madrid bombings and the pressing need to boost counter-terrorism operations, the administration opted for a 17.1% increase in the Security Services' budget. Total expenditure is forecast to increase steadily from EUR9.03bn in 2005 to reach EUR11.1bn by 2010. The defence industry will benefit from planned increases in government expenditure. Restructuring and consolidation in the Spanish and European defence industry, and the state's continued relinquishment of its hold on the industry, has allowed Spanish firms to increasingly integrate into pan-European and transatlantic markets, and gain greater access to international markets. As a result, arms exports are expected to rise in the near future, and imports are also likely to benefit from the government's modernisation plans.