In common with other developed countries Spain has an economy based principally on services. The tertiary sector generates about 63 percent of Spain's GDP as against approximately 25 percent for industry, 8 percent for construction and 4 percent for agriculture and fisheries. The Spanish services sector is in turn characterized by the importance of tourism alongside the more conventionally important services of commerce, education (see also education and research), health care, public administration, transport and business services of all kinds. Since the beginning of Spain's economic leap forward in 1960, the tertiary sector has grown far more than the primary and secondary sectors, and this remains true even for the years of industrial development (1960–73), when the transfer of surplus agricultural labour was higher to services than to industry. Most services are located in towns and cities, hence the heavy internal migration from countryside to town and the rapid urbanization of those years. The trend towards employment in services became even more marked during the long recession of 1975–84, when industry underwent a process of shrinkage. The services sector was the only one to show a net gain in employment (by about 450,000 jobs) during these difficult years.
   The classical explanation for tertiarization-that as household incomes rise a family will spend proportionately less on material necessities and proportionately more on leisure, education, health and the like—has been reinforced in the case of Spain by other factors. First, there is the obvious fact that Spain has been the beneficiary of other people's leisure spending, hence the importance of its tourism sector. Second, the implantation of democracy and regional devolution brought in its train a major expansion of services provided by the state and the new autonomous communities. And third, the opening up of Spain's international trade both immediately before and after accession to the Treaty of Rome led to a very significant increase in the activity of the financial and advertising sub-sectors. Since the early 1980s, 1,700,000 jobs have been created in services, although different areas have had different fortunes. There has been a loss of jobs in commerce, in repairs, in transport, and in domestic services. On the other hand, there has been a major increase in jobs in hotel and catering, in business services, and in leisure and cultural services, although many of the newly employed have been women on part-time or seasonal contracts. But above all there was, throughout the 1980s, a huge increase in jobs provided by the state, namely in Public Administration, Health, Education, and Social Security, which together more than compensated for losses in other areas of services. But even after public sector spending was curtailed in the mid-1990s, the services sector continued to contribute powerfully to employment: in 1995 and 1996-years of recovery after the recession of the early 1990s—four out of every five jobs created were in services, due in some measure to the boom in part-time contracts following the 1994 labour market reforms.
   Since the mid-1980s developments in the services sector have also been affected by the need to adjust to European competition and legislation. Financial and business services have been at the forefront of developments, prompted in part by the arrival of foreign firms, and therefore not always comfortable for native enterprises. The net impact of Europeanization on job creation remains unclear because the shake-out involves mergers and takeovers, which often result in job losses, as well as the implantation of new businesses, which result in job creation. Deregulation, which was initially slow in the services sector, is proceeding apace. The first subsector to be deregulated was banking, with the removal of a variety of compulsory coefficients and a number of other constraints on the private banks, as well as the lifting of geographical and other restrictions on the savings banks (Cajas de Ahorros). The stock exchanges, too, have been liberalized, reformed and modernized. In real estate services property contracts, rents and leases for all new properties were liberalized in 1985; further legislation, meant to redress the balance by allowing for the revision of existing contracts in the case of older, tenanted property, was approved in 1995. Transport has undergone some minor adjustments, mainly as a result of deregulation in civil aviation: Iberia's loss of its monopoly on domestic flights has brought in new competition and a thorough revision of fare structures. Deregulation of telephone and telecom-munication services has been much slower in coming: partial liberalization occurred in 1987 but full deregulation was not due to be achieved until 1998 in accordance with EU requirements. Telefónica, the state-owned telephone company, is being privatized as well as having to face tough competition for the first time. Foreign interest in the Spanish telecommunications sector is intense, and it is expected to be one of the best-performing areas of the entire services sector. Another area of services greatly affected by European integration and showing increasing domination by foreign companies is insurance. Because Spanish households are relatively underinsured, health, life and pensions insurance is expected to undergo substantial expansion. Distribution and retailing have also had to adapt to the changing pattern of business. The traditional, small to medium size family-owned shops have been adversely affected by competition from large stores, and the numbers declined by 30 percent in the ten years to 1995. Large-scale retailing is now, with one major exception, in the hands of foreign companies, especially French ones such as Continent, Auchamp and Carrefour, although Marks & Spencer has also successfully implanted itself in several major Spanish cities. The one exception to this trend, and the jewel in the crown of Spanish retailing, is the hugely successful El Corte Inglés chain of department stores and its hypermarket subsidiary Hipercor, which together constitute the third largest company by turnover in Spain behind Telefónica and Repsol. Within the retailing sector a recent development has been the opening of large shopping malls in the major cities.
   The services sector in Spain is still in the throes of adaptive change. Traditionally inefficient, inflationary and fragmented, the process of deregulation, competition and concentration to which it is being subjected is bound to bring about further transformation. Provided that tourism retains its importance, the services sector will continue to provide employment opportunities for two out of every three working Spaniards.
   Further reading
   - Chislett, W. (1996) Spain 1996. The Central Hispano Handbook, Madrid (although the handbook lacks a chapter on services, chapters 6 on tourism and property, and 7 on finance, contain much useful information).
   - Salmon, K. (1995) The Modern Spanish Economy. Transformation and Integration into Europe, London: Pinter (chapter 8 contains an informative survey of financial, insurance and other services).

Encyclopedia of contemporary Spanish culture. 2013.

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