The Spanish defence industry is seeing an increasing spending squeeze, in line with general budgetary trimming and austerity measures. The 2011 budget was EUR7.2bn, and was another year of reductions aimed at shrinking the countrys deficit. Cutting spending in the sector has become a pan-European trend in 2011, which has led to a similar decline in Spains export figures, putting a new emphasis on relations with less traditional importers, particularly Latin America and Asia. Spanish defence firms are likely to be seeing fewer contracts both at home and abroad.

In industry terms, it has been a quiet quarter, although in August 2011 Santa Bárbara Sistemas, the General Dynamics European group, was awarded the supply of cartridges of 7.62 mm x51 links to the domestic army for EUR1.5mn, according to infodefensa.com. In September Spain joined with a bid by France, Germany, Italy and Poland to strengthen an EU defence policy by signing a letter of agreement, AFP reported. The UK abstained. The signatories had not yet revealed the contents of the joint letter, but a diplomatic source said it highlighted the need for common defence structures between European states. The Council of Ministers has also signed off construction of five new Meteoro patrol vessels. The ships are made by Spains Navantia ship-building company with the first Metero unit completing sea trials in July 2011. The navy is also receiving a single new frigate and contemplating construction of a new class of frigates to replace ageing vessels. New submarines will be arriving in fleet service, alongside new helicopters. The army continues to receive new armoured vehicles, artillery, helicopter gunships and medium-lift rotorcraft. Ongoing air force procurements include Eurofighter Typhoon multirole combat aircraft, strategic airlifters, medium-lift helicopters; plus, new air-to-ground and air-to-air weapons.

Spains security risks remain moderate given the central governments continued struggle against the Basque Fatherland and Liberty organisation (ETA), which seeks Basque independence and is accused by the government of being responsible for more than 800 deaths over the past 60 years. ETAs call for a ceasefire in September 2010 (announced permanent in January 2011) should it fail to yield a lasting peace, would not be the first attempt to end the conflict to fall by the wayside, and there remains potential for the 40-year political struggle to continue for the foreseeable future.

Indeed, one year on after the announcement of the ceasefire there has been little by way of cooperation between ETA and the Spanish government. In September 2011, a Batasuna spokesperson, Txelui Moreno, criticised the government for failing to make any real or constructive steps towards peace during the period, Expatica reports. Zapatero rejected these claims, and again called for the abolition of ETA, while interior minister Antonio Camacho made a statement saying that the one who has to take the step is ETA.