Reference: Casellas, A. 2003. “The Spanish defense industrial restructuring in the post Cold-War decade.” From Defense to Development? International Perspectives on Realizing the Peace Dividend. Ann Markusen, Sean DiGiovanna, and Michael C. Leary eds. London: Routledge Press, p. 43-74. 3. The Spanish defense industrial restructuring in the post-Cold War decade Antònia Casellas Introduction Spain has significantly downsized its defense industry in the 1990s with mixed results in moving workers and facilities into civil sector activities. In the 1980s, the electronic and aerospace sectors enjoyed the support of governmental policies, which targeted them as engines for Spanish re-industrialization. As a result, they managed to advance their technological capability and became more competitive in the production of subsystems for the international market. Improvement in technological capability, specialization in subsystems, and internationalization have also benefited civil production in these sectors, and now accounts for more than 50 percent of total sales. In contrast, the naval, armament, and ammunition sectors have not been able to adapt to the new defense environment. Both sectors have gone through a deep production crisis while remaining totally dependent on defense markets. Post-Cold War budgetary defense cutbacks have taken place in all Spanish defense industrial segments. Defense sales decreased by 29.5 percent in the period 1990-96, and the Spanish defense industry lost 54 percent of its total direct employment. While the decrease in defense sales is linked to lower military expenditures, the extensive job loss is also attributable to an ongoing industrial restructuring process in publicly owned firms initiated in the 1980s. The Spanish defense industry represents a complex defense conversion process as it combines progress in and barriers to defense conversion. On the one hand, there are several features that reinforce a low supply-side resistance to defense conversion. First, from an industrial perspective, Spain is a second-tier defense producer with a relatively small defense industry in terms of direct employment and assets. Second, Spanish defense firms are specialized in electronic and engineering subsystems, which have a high capability for dual-use production.Third, there is no defense economic dependent region in Spain. Fourth, the Spanish defense firms have already undergone an extensive labor force restructuring. Finally, the defense firms are ín a process of privatization and integration into the international defense production, which could reinforce their specialization in subsystems. On the other hand, the Spanish defense industry presents barriers to defense conversion.