A deep economic malaise, exacerbated by the euro crisis, dominates all other issues in Spain’s upcoming elections
SPAIN HOLDS general elections next Sunday, but voters are painfully aware that their fate for the next four years will probably be decided not in Madrid, but in Berlin and Paris, or perhaps by stock markets in Shanghai.
There is a debate, of sorts, between the governing Socialist Party (PSOE) and conservative Partido Popular (PP) about how to deal with a crisis that sees one in five Spaniards jobless, a stagnating economy slipping towards recession, and the menacing threat of further collapses in the country’s once vibrant savings bank sector.
The PSOE, whom most Spaniards blame for their dire situation, proposes some stimulus alongside the drastic austerity policies it has already put in place. Its prime ministerial candidate, Alfredo Pérez Rubalcaba, seized on last week’s cut in ECB interest rates as a sign that his thinking is in line with the European mainstream.
The PP simply keeps its cards close to its chest, with a programme of mind-boggling vagueness, calling for growth through reform of the labour market and the restructuring of the banking system.
Its leader, Mariano Rajoy, has in effect muzzled the strident right-wing voices that usually dominate the party’s rhetoric, and keeps whatever plans he has for further cutbacks well out of view.
The disillusioned voters of the centre will determine this election, and he will do nothing to frighten them.
All opinion polls show that they are flocking to the PP en masse, promising Rajoy a decisive absolute majority after eight years in opposition.
Barring some extraordinary development this week, he will take over a country that has made some remarkable advances under the outgoing PSOE prime minister, José Luis Rodríguez Zapatero, but which now teeters on the edge of default and collapse due in part to what has been called Zapatero’s “pathological optimism”.
In 2008, Zapatero insisted that Spain was protected from the global crisis because its banks were not exposed to the US subprime debacle. He ignored clear signs that his economy was nevertheless being undermined by a property bubble, by a banking debt crisis, and by unwieldy regional administrations that had been spending money they didn’t have for decades. Under other circumstances, Zapatero might be remembered for remarkable achievements and events, including the legalisation of gay marriage and the apparent final demise of the Basque terrorist group Eta.
But he should have remembered Bill Clinton’s maxim: “It’s the economy, stupid.”
While he insisted that Spanish fundamentals were sound, unemployment soared from 10 to 18 per cent in just over a year, growth stalled, and financial scandals proliferated.
Zapatero’s sudden conversion to a harsh austerity programme in 2010 alienated many PSOE voters. But it did not produce any economic recovery. He announced last April that he would not run again, but a botched succession race produced only Rubalcaba as the lacklustre best the PSOE had to offer.
As turbulent bond markets accelerated the euro crisis, Spain now looked vulnerable to default, likely to be the fourth domino to fall after Greece, Ireland and Portugal. However, a brief improvement in economic indicators over the summer prompted the PSOE to bring the elections forward from next March to this month, in the hope that a recovery continuing into the autumn might break the PP’s commanding lead.
But by late August it was clear that the lift was merely due to an exceptional tourism season. Market attacks on Spain’s sovereign debt intensified, and the threat of IMF-ECB intervention loomed larger than ever.
At this point the PSOE made an unprecedented move to avoid intervention, with the bilateral support of the PP. Breaking a principle dating back to Spain’s 1970s transition from dictatorship to democracy, the two parties changed the constitution without consensus from the other major parties, and without a referendum.
In the face of outraged but minority opposition, in early September they inserted a clause that limits the national deficit to 3 per cent, and the level of debt to 60 per cent of GDP.
Brussels applauded this radical departure, which calmed the markets somewhat. Meanwhile, the resurgent crisis in Greece and the new crisis in Italy have – albeit temporarily – removed Spain from the immediate firing line facing intervention.
The constitutional reform stitched a central plank of conservative policy – imposing rigid limits on public spending – into the constitution. Some observers argue that the PSOE has simply strengthened the hand of an incoming PP government to dismantle Spain’s welfare state.
So it is not surprising that the polls also show a late surge for the former communists of Izquierda Unida, and the PSOE is now haemorrhaging to both left and right. But a resurgent left will remain small, without leverage to influence a conservative majority.
It remains to be seen, of course, whether a strong PP government will be sufficient to stave off another attack on Spain’s sovereign debt, or whether intervention has simply been postponed, not averted.