The defense budget for 1988 was set at 762 billion pesetas (for value of the peseta--see Glossary), or US$6.74 billion based on 1988 rates of exchange. It was apportioned on the basis of 37 percent to the army, 24 percent to the navy, 19 percent to the air force, and 20 percent to centralized functions (the Ministry of Defense). The army budget, which had constituted 46 percent of the total in 1982, had begun to diminish as a result of reductions in army force levels. The shift also reflected major weapons acquisitions programs by the navy and the air force. The cost of centralized functions had risen as a result of the development of the new command structure, the consolidation of many operations that had previously been administered by individual services, and the decision of the minister of defense to control major equipment acquisitions more directly.

The 1988 defense budget was somewhat higher than the corresponding figures for 1987 (703 billion pesetas) and for 1986 (630 billion pesetas). In real terms, however, the rise in defense allocations had been lower than the annual rate of 4.432 percent planned for the eight-year period 1982-90. Moreover, the military budget had declined as a percentage of the total government budget, from 13.2 percent in 1978 to 8.81 percent in 1986. Military expenditures also declined slightly, during the same period, as a percentage of gross domestic product (GDP--see Glossary), from 2.06 percent to 1.97 percent.

Alhough personnel costs remained high in proportion to total defense expenditures, a distinct reduction was recorded between 1982 and 1986, of from 49.9 percent to 44.5 percent. Expenditures for construction and materiel expanded from 34.8 percent of the total in 1982 to 42.3 percent in 1986. Operating costs (of 15.3 percent in 1982 and 13.2 percent in 1986) were proportionately somewhat lower. Although the army was gradually bringing its personnel outlays under control, they continued to be much higher than those in the other services--58.8 percent of its total expenditures in 1988, compared with 31.3 percent in the navy and 33.5 percent in the air force. Moreover, because of their earlier starts on modernization programs, much higher shares of the navy and the air force budgets (over 50 percent for each in 1986) were being invested in equipment and in construction than was true in the army (22 percent in 1986).

According to a study prepared by the United States Arms Control and Disarmament Agency, Spain ranked thirteenth among NATO's sixteen nations in military expenditures per capita, calculated on the basis of 1985 defense budgets. With the exception of Luxembourg and Iceland, it ranked last in military expenditures as a percentage of GDP. Spain's defense outlays were well below the average of 3.4 percent of GDP attained by other European NATO countries.

Data as of December 1988