Spain's accession to the European Community--now European Union (EU)--in January 1986 required the country to open its economy, modernize its industrial base, improve infrastructure, and revise economic legislation to conform to EU guidelines. In doing so, Spain increased GDP growth, reduced the public debt to GDP ratio, reduced unemployment from 23% to 15% in 3 years, and reduced inflation to under 3%. The fundamental challenges remaining for Spain include reducing the public sector deficit, decreasing unemployment further, reforming labor laws and investment regulations, lowering inflation, and raising per capita GDP.

Following peak growth years in the late 1980s, the Spanish economy entered into recession in mid-1992. The economy recovered during first Aznar administration (1996-2000), driven by a return of consumer confidence and increased private consumption, although growth has slowed in recent years. Unemployment remains a problem at 11.3% (2002 est.), but this still represents a significant improvement from previous levels. Devaluations of the peseta during the 1990s made Spanish exports more competitive, but the strength of the euro since its adoption has raised recent concerns that Spanish exports are being priced out of the range of foreign buyers. However, this has been offset by the facilitation of trade among the euro nations.