BASQUE COUNTRY The Basque Country was an autonomous region of Spain in the north of the nation, bordering France and the Bay of Biscay. It includes the Basque provinces of Álava, Biscay and Gipuzkoa. The Basques were known for their strong sense of self-government, distinct culture, and language, Euskera, which was the oldest surviving language in Europe, spoken by one third of inhabitants and the second official language in addition to Spanish. The predominant religion was Catholicism. The Basque Autonomous Community ranks first in Spain in terms of per capita income, with gross domestic product (GDP) per capita being 40% higher than that of the European Union and 33.8% higher than Spain's average in 2010. Rich iron ore deposits, forests, and ample availability of hydraulic energy from water spurred the region’s industrial development. Basque iron foundries and shipyards dated from the Middle Ages. The industries, together with trade, transport, and later firearms were the bedrock of the economy. In the 15th century, the Basque Country became the leading iron producing region of Spain and one of the most important in Europe. The shipbuilding industry was the largest in Spain and expanded considerably as commerce flourished. A strong legal framework and a broad array of schools and research centers emerged. Industrial activities were traditionally centered on steel and shipbuilding, mainly due to the rich iron ore resources found during the 19th century around Bilbao. The Estuary of Bilbao was the center of the Basque Country's industrial revolution during the 19th and the first half of the 20th century. These activities decayed during the economic crisis of the 1970s and 1980s, giving ground for the development of the services sector and new technologies. The post-war period has been a fruitful period as long as economic progress is concerned. Aggregate economic activity, as measured by gross value added (GVA), grew at an annual average rate of 3.23% in Spain from 1965 to 2008, while labor productivity did at 2.40% on annual average. However, growth did not proceed at a steady pace. Rate of labor productivity, a productivity slowdown took place until 1995. Labor productivity growth has also performed poorly in the EU since the mid 1990s, falling behind that for the US. In the late 1990’s, after 30 years of terrorist and political conflict, the Basque Country has dropped to the sixth position in per capita GDP. During that period, terrorist activity by the Basque terrorist organization ETA resulted in almost 800 deaths. Basque entrepreneurs and corporations had been specific targets of violence and extortion (including assassinations, robberies, and kidnapping for ransom). Not surprisingly, the economic downturn suffered by the Basque economy during those years has been attributed at least partially, to the effect of terrorism. On the other hand, a pure time series analysis of the severity of terrorism and the evolution of the Basque economy will be contaminated by the economic downturn which Spain suffered during the second half of the 1970’s and the first half of the 1980’s, these was the peak of terrorist activity. ETA was founded in 1959 to promote the establishment of an independent Basque state. However, it was not until 1968 that ETA claimed its first victim. In fact, ETA did not implement large scale terrorist activity until the three years of ETA, 1978–1980, witnessed a total of 235 victims. In subsequent years, the number of killings decreased gradually.

Over the last 30 years, the region has implemented its science, technology and innovation (STI) policy driven by a need to boost industrial competitiveness. The role of total factor productivity and innovation in driving growth was significant in the 1990s and declined in the early part of this decade, but appears to be on the rise again thanks in part to significant increases in public and private investment in innovation. The Basque Country has begun a transition from a model of incremental innovation in manufacturing to a model increasingly based on science and other forms of knowledge. Today, the strongest industrial sectors of the Basque Country's economy are machine tool, present in the valleys of Biscay and Gipuzkoa; aeronautics in Vitoria-Gasteiz; and energy, in Bilbao. The main companies in the Basque Country are: BBVA bank, Iberdrola energy company, Mondragón Cooperative Corporation that is the largest cooperative in the world, Gamesa wind turbine producer and CAF rolling stock producer. In 2012 and during the financial crisis the Basque Country outperformed Spain as a whole. Unemployment in the Basque Country is roughly 14.56% a percentage in line with the EU average Spain as a whole is the country with the highest unemployment rate in the European Union, at 24.6%.