Economic Crisis and Social Conflict in Post-Franco Spain
Economic Crisis and Social Consensus
The transition coincided with the start of an international economic crisis caused by a large rise in oil prices. Rising oil prices led to an inflationary process that reached rates of 20% per annum. Between 1973 and 1974, the trade deficit doubled, while the balance of payments moved from a surplus of $500 million to a deficit of over $3 billion. This economic crisis led to a deep industrial crisis, which caused unemployment to increase to a very high annual rate, reaching 10% in 1979. In parallel, the annual per capita income grew by just under 1% between 1975 and 1985.
The Moncloa Pacts and Economic Reform
The main parties signed the Moncloa Pacts (October 1977), which contained a series of agreements to reform and reorganize the economy, alongside a program of legal and political action. Its main objectives were:
- The reduction of inflation.
- The implementation of a set of reforms to equitably share the costs of the crisis.
To control prices and sharply devalue the peseta, a new strategy for controlling public expenditure was designed, a program to rationalize the consumption of energy was agreed upon, and wage moderation was established.
Modernizing the Spanish Tax System
Additionally, a tax reform was launched to undertake the modernization of the Spanish tax structure, which had been frequently delayed. In 1977, the Special Tax on Heritage came into force, and the following year, the Personal Income Tax (IRPF) was introduced, extending the employment tax—previously paid only by employees—to all forms of income. Efforts were also made to reform Social Security and increase public funding, which allowed for the extension of unemployment benefits and increased pensions.
Political Violence and Threats to Democracy
While these changes were occurring, some sectors promoted violence to destabilize the country. The main threats to democracy came from reactionary military coups and terrorism.
Right-Wing Extremism and Violent Attitudes
Right-wing forces nostalgic for the Franco era mobilized to prevent the consolidation of democracy. These groups organized violent demonstrations and even created groups of gunmen such as the Guerrillas of Christ the King, the Triple A, or the Spanish Basque Battalion.
Left-Wing Terrorism and Separatist Movements
Terrorists sought victims among the armed forces, law enforcement, and certain individuals associated with the Franco regime, further encouraging the reactionary impulses of those groups. Left-wing terrorism was linked to the emergence of organizations like the GRAPO (First of October Anti-Fascist Resistance Groups) and the FRAP (Revolutionary Anti-Fascist and Patriotic Front), who staged several acts of violence and kidnappings.
The Impact of ETA and Terra Lliure
Nevertheless, the main terrorist activity came from ETA, which launched a bombing campaign that caused 77 deaths in 1979 and 95 in 1980, with a special emphasis on the military and law enforcement. In Catalonia, the separatist organization Terra Lliure was created, committing several bombings and kidnappings until its dissolution in 1995.