BMI's Executive Summary

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José Luis Rodríguez Zapatero, Prime Minister and leader of the Partido Socialista Obrero Español (PSOE), looks like fighting a closely-run election with the centre-right Partido Popular (PP) in March 2008. Security issues will loom large in the campaign, particularly the question of how to deal with Basque separatists ETA, after the failure of peace negotiations earlier in his premiership. In Q407 there were signs that ETA's military campaign was primed to recommence, with two Spanish policemen shot by the organisation while on surveillance duties in France. Late 2007 also saw sentences finally handed out at the end of a long drawn out trial of the Islamist extremists responsible for the March 11 2004 bombings in Madrid, which killed 191 people and remain the worst terrorist attack of its kind in Europe. Despite these sources of tension, BMI's newly released Q407 defence and security report predicts a solid outlook for the Spanish defence industry and a stable internal and security outlook.

Relations between the central government in Madrid and the country's 17 autonomous regions can be difficult, sparking disputes over a wide range of issues. Spanish security forces continue to focus their attention toward international threats. There are currently no major conventional military threats to the country, but the threat from international and domestic terrorism remains very real. The Madrid bombings had a profound effect on both Spain's domestic and foreign policy, in terms of Spanish counter-terrorist operations and the withdrawal of Spanish troops from Iraq. The country remains committed to an active international peace-keeping role, despite having to pay the price: six Spanish peacekeeping soldiers were killed in a car bomb attack in Lebanon in June 2007.

The ongoing modernisation process at the heart of the armed forces, combined with an increase in Spain's involvement in peacekeeping operations, has justified an overall increase in the defence budget. Also, in light of the Madrid bombings and the pressing need to boost counter-terrorism operations, the administration opted for a 17.1% increase in the Security Services' budget. Total expenditure is forecast to increase steadily from EUR9.03bn in 2005 to reach EUR10.15bn by 2010. The defence industry will benefit from planned increases in government expenditure. Restructuring and consolidation in the Spanish and European defence industry, and the state's continued relinquishment of its hold on the industry, has allowed Spanish firms to increasingly integrate into pan-European and transatlantic markets, and gain greater access to international markets. As a result, arms exports are expected to rise in the near future, and imports are also likely to benefit from the government's modernisation plans.

Contents

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Chapter 1 - Executive Summary

SWOT Analysis

Spain Security SWOT

Spain Defence Industry SWOT

Chapter 2 - Political Overview

Domestic Political Outlook

Chapter 3 - Security Risk Analysis

BMI’s Security Ratings

Risk Ratings

Table: Spain Regional Risk Ratings

Table: Spain Regional Risk Ratings

Regional Security: Europe

Overview

Internal Terrorism

International Terrorism

Criminal Activities

Spain Security Risk Ratings

Spain Conflict Risk

Spain Terrorism Risk

Spain Physical Safety Risk

Chapter 4 - Security Risk Overview

Internal Security Situation

Domestic Terrorism

Ceasefire

Corruption

External Security Situation

International Terrorism

Madrid Bombings, March 2004

Beyond Madrid

Counter-Terrorism Continues

Chapter 5 - Military Structure & Defence Industry

Armed Forces

Table: Regional Armed Forces (including conscripted) 2006

Defence Posture

Defence Reform

International Deployments

Table: Spain Foreign Deployments

Co-ordination And Joint Operations

Table: Selected Training Events/Exercises In Which Spain Took Part 2004:

Weapons Of Mass Destruction

Chapter 6 - Market Structure

Arms Trade Overview

Imports

Exports

Industry Trends & Developments

Table: Key Players Spain Defence Sector

Procurement Trends & Developments

Recent Big Contracts Won

Table: Contracts

Chapter 7 - Industry Forecast Scenario

Army Enlargements

Table: Army Enlargements

Government Expenditure On Defence Industry

Table: Government Expenditure On Defence Industry

Key Risks To BMI’s Forecast Scenario

Chapter 8 - Macroeconomic Forecast

Q206 Growth Estimated At 36% y-o-y

Table: Spain – Macroeconomic Forecasts

Chapter 9 - Company Profiles

EADS CASA

General Dynamics Santa Barbara Sistemas

Indra

ITP

NAVANTIA – Formally known as Izar

Chapter 10 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Defence Industry

Sources

Chapter 11 - Appendix A: Risk Ratings Methodology

Conflict Risk Methodology

Terrorism Risk Methodology

Physical Safety Risk Methodology

Overall Risk Rating

State Vulnerability Index

Competitive Landscape for European Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's European Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: