The attempted military coup d’etat of July 1936 failed in Bilbao and the City Council of Bilbao declared its loyalty to the Republic. On 7 October the first Basque Government was constituted in Gernika and the headquarters of the first Basque President, José Antonio Aguirre from Bilbao, was established in the Carlton Hotel of Bilbao.
On 19 June 1937 the Francoist army conquered Bilbao. The Basque Government, the Autonomy Statute, the Economic Agreement, together with the co-official character of the Basque and Spanish languages, were revoked.
The Township ceased to be “Unvanquished.” This circumstance was commemorated by the Carlists, as shown in 1940 by the award of the Medal of the Township to the “surviving Carlist veterans of last century’s Crusade.”
The democratic city councils were replaced by management committees appointed by the military authorities and on 21 June 1937 José María Areilza was appointed mayor of Bilbao. In one of his first speeches he made the intentions of the new regime clear: “Bilbao has not surrendered, instead it has been conquered by the army and its weapons (…) there have most certainly been victors and vanquished” (21.07.1937).
Fifty-nine percent (1,120 out of 1,914 municipal workers) were dismissed, another 17% were suspended from work with an economic sanction, 22% were reinstated and others were retired. The building of a “new state” commenced, with a totalitarian and corporative inspiration. All the civil and military powers were concentrated in the Head of State, F. Franco. Political, trade union and religious liberties were suspended and a political regime was established that systematically violated individual rights and guarantees.