Defending market integration in Spain

The Institute of Economic Studies (IEE) publishes one more year the "Index of Economic Freedom" prepared by the Heritage Foundation in collaboration with "The Wall Street Journal". Spain drops to 41st place (from 39th in previous year) worldwide out of the 184 countries analysed and to 29th place when compared to the 38 OECD countries, obtaining a rating below the average of the OECD and EU-27 countries. Reducing regulatory fragmentation and achieving true market unity are key to improving free enterprise and boosting long-term economic growth.

• Spain obtains the worst results in the categories of tax burden, public spending and fiscal health, affected by high levels of public debt and deficits and by a certain worsening of good governance variables. In contrast, monetary stability, trade openness and investor friendliness are the variables with the best rankings.
• The greater the economic freedom, the higher the quality of life and life expectancy, and the greater the economic growth. Over the last 25 years, GDP increased, on average, by 2.4% per year in economies where economic freedom improves, compared to 2.1% in countries where economic freedom is reduced.
• Fragmentation of the internal market: According to the IEE, a key element for improving the level of economic freedom in Spain is to establish a less complex regulatory framework that ensures market integration and reduces legal uncertainty. At present, 70% of the regulatory activity comes from the Autonomous Communities (regional governments), forcing companies to dedicate a significant volume of resources to understanding and complying with all the regulations. According to IEE´s estimates, compliance with administrative burdens derived from this regulatory fragmentation entails costs for companies of between 1.5% and 2.5% of GDP. Freeing up these resources would boost long-term economic growth by between 1.5% and 3% of GDP.