THE FALTERING touch and timing of the Spanish prime minister, Mariano Rajoy, was again in evidence this week, just when Spain’s crisis most requires leadership that is sure-footed in style and substance.
His public declarations sought to pressurise the European Central Bank to buy more Spanish debt, and to move towards direct assistance to Spanish banks. While insisting that Spain does not need an ECB-IMF bailout, therefore, he was attempting to attain the benefits of exceptional EU assistance without the Spanish state itself having to accept the conditions – and the stigma – that usually come with such aid. Rajoy’s approach earned him the humiliation of a rejection of his proposal by the ECB itself, leaked through the financial media, on Wednesday.
Just a few hours later, an idea very similar in intention to Rajoy’s, suggesting that the ESM bailout fund could indeed directly rescue banks was floated by the EU Commission. Had Rajoy accepted that the ECB cannot break or bend its own rules, but that rules can be changed through transparent procedures to accommodate new circumstances, he might have advanced smoothly towards his goal. Instead, his blunder contributed to yet more unwelcome turbulence in the Spanish bond and stock markets, bringing the country closer to the bailout he is so adamant will never happen.
This is only the latest in a series of missteps by a government that swept into power late last year, confident that it could solve Spain’s problems by implementing the fiscal stability and austerity packages then prescribed by both Berlin and Paris. Rajoy’s conservative Partido Popular (PP) appeared to many outside observers to be well-equipped to steady a Spanish economy badly shaken by the mismanagement of a housing bubble, and of the public sector, by the outgoing Socialist Party (PSOE) government.
The PP had had, after all, two years to observe the consequences of this mismanagement. They might have been expected to have done their homework. That upbeat assessment, however, ignored the fact that the PP was at least as much part of the problem as the PSOE. The party had long been involved in the maladministration of many of Spain’s powerful autonomous regional governments. PP regional barons, many of them still in power, were equally involved in property speculation and grandiose infrastructural projects, assisted by pliant – and now insolvent – local savings banks.
Some of them were also implicated in high-profile corruption scandals, followed by less than rigorous investigations. The PP also appears incapable of addressing crises of credibility affecting other key national institutions, ranging from the judiciary to the monarchy. Its recent moves to tighten government control over national television do nothing to increase the confidence of hard-pressed ordinary Spaniards – or, evidently, the markets – in a government that badly needs to find its feet.