During the last 50 years, Spain built one of the most successful welfare systems in the world. Highly regarded by its citizens, the system offered top-quality health services, support for workers who had lost their jobs and free, compulsory education. Spain’s expenditures on social policies represented more than 60 percent of total public spending and totalled more than $402 billion, with close to $200 billion in cash benefits for social security and more than $50 billion for unemployment benefits. It was described as a true safety net, protecting most in times of need.
Fast-forward to 2008 and the economic crisis. Suddenly there was a dramatic imbalance in the system. With unemployment levels around 26 percent, an aging population, greater demands on the pension system and severe banking issues, this successful model was put at risk.
Spain was in a critical situation. Public debt doubled to almost 100 percent of the GDP. Because of the debt market, there were concerns about rising interest rates. And, to further complicate matters the country had to listen to the demands of the European Union and modify a human services system managed by 17 different regional governments.
Today Spain has reformed their public sector, banking system, labor market, healthcare, and pensions to ensure sustainability. The country brought its public deficit below 3 percent of the GDP, and has continued to provide high quality health services to more than 40 million citizens.
So, how was a crisis averted and turned into a win? What tactics did Spain use to increase efficiencies, develop a lighter administration and reform major systems?