“The chartered councils became provincial councils, and were charged with collecting certain agreed taxes: this was the birth of the Economic Agreement”
In 1876 Spanish Prime Minister Antonio Cánovas del Castillo made it compulsory for all provinces to contribute funds to the Spanish Exchequer and conscripts to the armed forced. The Basque “chartered councils” resisted falling in line with these provisions, and in 1877 the Prime Minister changed their status from chartered councils to provincial councils like all the rest. However there was no administrative structure in place to collect taxes, so an agreement had to be reached: the councils would collect taxes as agreed and would take responsibility for passing on to the Spanish Exchequer “the amount that it was assumed that the Ministry of the Exchequer would have been able to collect on its own account”. This was the birth of what is now known as the Economic Agreement (in Spanish Concierto Económico).
Mining and Railways
“Under the Agreement mining and international trade provided a boost for economic development, ushering in a prosperous industrial society”
The fact that the Basque councils held these prerogatives led to a period of demographic development and economic prosperity. Following the Second Carlist War there was a boom in the mining industry. This brought a need to build new infrastructures, especially to improve the ports to handle international trade in ore and to build railway lines. The Triano Mine Railway was a pioneering project in Spain: it was publicly owned, and thus brought in copious amounts of revenue at a time when industrial expansion was in full swing. It was at that time that trade with neighbouring countries began, and the local iron and steel manufacturing concern that was to grow into Altos Hornos de Vizcaya was started up.
The Boom Years and the Changes
“The Agreement was beneficial to all parties involved: these were boom years for the Basque economy and culture”
The Economic Agreement was originally intended to run just for a few years, but it turned out to be beneficial to both parties: the state for its part received immediate, guaranteed revenue at no expense to itself, and the Basque councils enjoyed wide-ranging autonomy and authority. They controlled town halls and highways, they had their own police forces (known as miñones and miqueletes), they could approve farms, chairs at academic institutions and a huge variety of projects, all built on the economic boom. Changes of government had no substantial effect on the health of the system.
Changes in the workings of the Exchequer led to changes in the Agreement, but the system proved flexible enough to withstand them. In 1886 and 1893 modifications were introduced, and in 1894 the Ministry of the Exchequer explicitly acknowledged “the economic and administrative independence of the councils”.
Even such upheavals as the war in Cuba (1898) failed to change the system significantly: a special donation was agreed for that year and everyone was happy.
The early years of the 20th century were a good time for Basque businesses: by law they paid taxes only to the Basque authorities. The economy of Bizkaia grew even bigger and more dynamic. Ever closer relations began to be forged with firms elsewhere in Spain, which led to a certain amount of friction with the Spanish Exchequer, which attempted to collect taxes from them that it was not authorised to levy by law. This was solved by renegotiating the quota payable to the state under the Agreement in 1906 for a 20-year term – somewhat longer than usual – with a slight increase ten years into that term.
The Basque economy did exceptionally well out of World War I. Spain remained neutral in the war, so Basque industry was able to supply products to the warring powers. Prices rose exponentially, and the shipbuilding and steel industries made huge profits. In the years that followed schools were set up, roads were improved and organisations such as Eusko Ikaskuntza (Association of Basque Studies) and Euskaltzaindia (Royal Academy of the Basque Language) were founded.
The Civil War and the Abolition of the Agreement
“Following his victory in the Civil War, General Franco repealed the Economic Agreement in Vizcaya and Guipúzcoa, which he saw as “traitorous provinces”.
The 1906 Agreement quickly became obsolete, and in the 20 years before it was due for renewal in 1926 the political scene changed radically: the councils could no longer justify their traditional argument that the “land was poor” in renegotiating the quota to be paid. This resulted in friction between the councils and the Ministry of the Exchequer, especially during the years of the Second Republic and the discussions that ensued concerning a statute of autonomy.
The Civil War began in July 1936, and lasted until 1939. The Basque exchequer continued to collect its own taxes after the outbreak of hostilities, and economic policy was decided by the Basque government. However, on 19 June 1937 Franco’s troops took Bilbao. This was the beginning of the end for the Economic Agreement: just a few days later a decree was passed that repealed the Agreement in Vizcaya and Guipuzcoa (though not in Álava or Navarra) on the grounds that they were “traitorous provinces”.
The Dark Years
“During the long years of the Franco regime, the rights conquered via the Agreement were lost”
The abolition of the Economic Agreement resulted in road maintenance being neglected to the point of abandonment, in the closing down of schools and in the disbanding of the provincial police forces, among other things.
During the Franco years timid attempts were made to renegotiate a “special status” for Vizcaya and Guipúzkoa, especially in the 1960s, but they were doomed to failure by the unwaveringly centralist outlook of Franco’s apparatus of government.
Franco died in 1975, and in 1978 political reforms were completed by which there was a transition to democracy, with the approval of a new constitutions under which the Basque Country was recognised as an Autonomous Community in its own right. This marked a new beginning.
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