rease of 2% was set for public sector employees in 1993. The rate of unemployment remains high, as it has been for most of this century. At 21.3%, the unemployment rate is considerably higher than the average unemployment rate of the European Community, which is just above 10%. GOVERNMENT SPENDINGWhile governmental spending had dramatically increased between 1986-1990 to facilitate the slightly expansionist growth, spending slowed down in 1991 in order to balance the spending out when the growth was neutral, rather than expansionist or restrictive. In 1985, non-financial state spending was 21.6% of GDP while rising to 23.2% of GDP in 1989, and remaining at more or less the same level up to 1991 when it was 23.7% of GDP. In 1986, the Spanish public administrations’ spending was roughly 3.5% of GDP, gradually increasing to about 5% of GDP in 1989. In the past decade, the figure has remained constant. Also, ever since 1986, public investment spending in the European Community has been maintained at around 3% of GDP. To set Spain on the right “expansionist” track as far as the budget goes compared to the rest of the EU, a fiscal policy coordination accord was constructed in the beginning of 1992. In an attempt to solve the problem of excess demand, a monetary policy which raised interest rates was produced to hinder investment demand was made to slow down the progress of Spain before it went deeper into economic recession. However, a new policy is being created that will force fiscal policy to play a more central role in the containment of demand, therefore leading to lower interest rates. The present structure of debt in Spain is quite biased towards the short term, which poses future difficulties for the Treasury financing in the long run.In modern market economies, progressive taxation and distribution of income in the form of services and benefits through welfare institutions are the two tools which are uti...
