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Having been neutral in WW2 Spain was placed in a far better position to survive Post-War Europe than other nations and has since 1950 been the leader of the Anti-Soviet pact. It is the worlds only surviving Fascist State but surprisingly it supported the socialist nations of Yugoslavia, Albania and Greece as Franco was concerned with Stalin's expansionist movements and the three Balkans nations were the only in Eastern Europe to stand up against the USSR.
Pre-World War II
In the years leading up to WW2 Spain was a complete and utter mess. Following several military coups and revolutions the republican government found itself in a civil war against the Nationalists led by General Franco. The republicans were supported by the USSR and the Nationalists by Nazi Germany and Fascist Italy.
Eventually the Nationalists won the civil war, but Spain emerged a broken nation and despite aid from Germany refused to join the Axis. Instead, Franco declared Spain's neutrality.
World War II
The Spanish State under General Franco was officially non-belligerent during World War II. This status, although not recognized by international law, was intended to express the regime's sympathy and material support for the Axis Powers, to which Spain offered considerable material, economic, and military assistance. Despite this ideological sympathy, Spain did not enter the war as a belligerent and, in fact, frustrated German designs on Gibraltar and stationed field armies at the Pyrenees to dissuade Germany from occupying the Iberian Peninsula. This apparent contradiction can be explained by Franco's pragmatism and his determination to act principally in Spanish interests, in the face of Allied economic pressure, Axis military demands, and Spain's geographic isolation.
Post-World War II
In the immediate post WW2 world little changed for Spain, it still faced massive pressure from the allies as the only Fascist State in the world but it also had the new added pressure of the fact that the USSR now had massive domination over continental Europe. In trying to oppose this the previous Western Allies now looked for Spain to join there alliance against the USSR. Although they had no money at all the British and French still had a large military and they offered Franco the opportunity to join them, Franco declined, however, and he instead formed the short lived Iberian Alliance with the Portuguese. After the USSR imposed its dominance on the majority of Europe, however, and the Allies were in ruins Franco realized that he had to do something to preserve Spain as an independent non-socialist nation.
Spain, Leader of the ASP
Franco knew that Spain's isolated position provided it some measure of protection. However, as long as Soviet domination over Eastern Europe and the Balkans was assured, Stalin would continue to make attempts at extending his dominance over the rest of Europe. To alleviate the pressure that Spain was under, Franco was forced to sign a treaty with the socialist nation of Yugoslavia. Despite his hatred for Tito, Franco regarded the alliance as necessary, so Spain agreed to provide money to Yugoslavia while the Yugoslavians promised to continue its opposition to the Stalinist regime in Russia. As allies of Yugoslavia, Greece and Albania also joined the organization. In addition, Franco also signed a temporary agreement with Turkey which agreed to continued its support to Yugoslavia.
Spain's Nuclear Deterrent
Following the entrance of Turkey into the Anti-Soviet pact Tito called for all nuclear scientists within the member nations to attend a conference in Yugoslavia. The scientists were told that there was no way in which the Anti-Soviet Pact could survive without nuclear weapons while the USSR had them. Therefore the ASP (Anti-Soviet Pact) had two options, they could either create their own nuclear weapons or they could sabotage the USSR's nuclear stockpile. Tito wanted to do both of those options, however, and so he tasked the ASP's scientists to create nuclear weapons while at the same time he ordered spies to sabotage the USSR's own weapons.
The US provided the ASP with Uranium to create its weaponry but made it clear to Tito that they would not help them create an A-Bomb. That wasn't going to stop Tito, however, and soon Yugoslavia and the ASP were working on an A-Bomb. They finally conducted there first A-Bomb test in 1958 and there first H-Bomb test followed in 1970. In the aftermath of this the ASP formed a joint strategic bomber force based on ex German Heinkel He 177's (Based in Spain) and Junkers Ju 88's (Based in Yugoslavia, Greece, Albania and for a time Turkey). Soon though these ex German bombers were realized to be too slow and they were replaced by the Spanish built S-27 strategic bombers and smaller warheads that could be fitted in missiles or smaller bombs and could then be stored on Yugoslavia J-22's.
It had been Tito's belief that as Franco was forced to work with socialists his Nationalists would be forced to adapt and move to a fairer more centrist viewpoint. This had a very different effect however, Franco imposed even harsher rule on the populace with Falange squads crushing political opposition and total control being imposed on the populace. However, there was some relaxation of the controls on the economy and Franco's successor introduced some socialist measures such as national health policies and a free school network.
Third European War
2006 Nuclear Crisis
In 2006 Spain was forced to use its political influence on Yugoslavia to prevent the Balkans falling into nuclear war, The Yugoslavs had sent two bombers to Moscow while the USSR was preparing missiles in their silos. To most of Europe it looked like nuclear war was but minutes away. However, the Spanish President was able to convince his Yugoslav counterpart that a nuclear strike on Moscow was perhaps not the best course of action to take and the bombers were recalled.
Spain is a Fascist dictatorship ran by the regent of Spain. Most government posts at the higher levels are Fascists but at lower levels of the government it is possible to find more conservative politicians and in some local councils even Liberals have seats. Any organised opposition to the government is, however, crushed by Falange squads and Spain is in every sense a dictatorship. This does have some advantages, however, and the various separatist movements in Spain have been subdued by the Falange.
Spain has a free market capitalist economy although the local markets are often dominated by Falange backed syndicates that control the local economy. All businesses face heavy taxes, however, and it is the syndicates that are taxed highest although to them this is only a minor inconvenience as they do not face the threat of being attacked by the Falange.
Spain's military is one of the most powerful in western Europe, It can challenge the armies of Vichy France and the Monarchist North France although it cannot fight against the USSR's army of Europe and is outclassed by the Yugoslavian Peoples Army. However, the Spanish Navy is one of the largest and best in Europe and is one of only four navies in the world to operate an aircraft carrier. It also has a nuclear deterrent based on Spanish SLBM's and ICBM's.