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Monday
Oct082012

Punishment Of The Spanish Political Class By The People

Spanish Prime Minister Mariano Rajoy has a singular problem for a governing politician: 84% of all voters have “little” or “no” confidence in him. Even 62% of the supporters of his own conservative People’s Party (PP) distrust him. The fate of Alfredo Perez Rubalcaba, leader of the opposition Spanish Socialist Workers’ Party (PSOE), is even worse: 90% of all voters distrust him, as do 77% of the supporters of his own party! Those are the two top figures of the two major political parties, and the utterly frustrated and disillusioned Spaniards are defenestrating them both.

It has been a short honeymoon for Rajoy, who came to power on December 21, 2011. During the campaign, he lambasted the governing socialists for their mismanagement of the economy and tarred them with the catastrophic unemployment situation. He, the moderate, would be able to do better, improve the image of Spain with its international creditors, slash expenditures, and wrestle the ballooning deficit down to 4.4% of GDP by the end of 2012, a smidgen below the number Spain had committed to in 2010, and way below the 6% that had been forecast for 2011. The cuts would continue into 2013 to force the deficit down to 3%—the upper limit imposed on members of the European Union, theoretically, by treaty. The world was in awe.

He remained vague about the details, however. Not a word about the favorite social programs that would have to be gutted, or about the onerous tax increases that would have to be inflicted on the citizenry in order to get to these numbers. Instead, he talked about efficiencies and other platitudes. But tax collections kept diving, the economy kept getting worse, and unemployment kept rising, and even during the campaign, rumors surfaced that the deficit for 2011 wouldn’t be 6%, but 7%, and some evil tongues even said 8%. People gasped. Such levels would require that future cuts would be much deeper than those that had sunk socialist Prime Minister José Luis Rodríguez Zapatero. Nevertheless, to win the election, Rajoy remained vague about the spending cuts—instead of going for a mandate.

It worked. The PP won 186 of the 350 seats in the lower house of Parliament, a resounding majority (by Spanish measures). And the new Council of Ministers took only nine days to come up with its first austerity plan of cuts and new revenues.   

Alas, none of the numbers thrown around during the campaign were based on reality. The actual deficit for 2011 wasn’t 6% as forecast, or 7% as feared, or even 8% as the evil tongues had predicted, but 9%! Well, 8.96%. And Rajoy’s promise of 4.4% for 2012 was revised to 6.3%. But the actual deficit, said Bank of Spain Governor Luis Maria Linde last week, will likely blow past that as well—hence more cuts.

And so the Spaniards vented their frustrations. If an election were held today, Rajoy’s People Party, which had so handily won the election, would obtain 29.9% of the vote, a 16.5-point plunge from its January peak of 46.4%. And the PSOE would only garner 23.9% of the vote, 4.8 points below the historic low of 28.7% of last November. Never before had the combined vote of the two major parties been so low (53.8%). It’s the punishment, ineffectual as it may be, of the political class by the people.

Disillusioned and disappointed, they have taken to the streets with near daily waves of protests, demonstrations, and occasional street battles. Ignore them, Rajoy told a business audience in New York, and instead count on the “silent majority.” Turns out, that silent majority must be rather smallish as 77% of the people support the protesters.

The challenges are huge—even if there is a solid political consensus on how to tackle them. Banks and some of the Autonomous Regions, which are teetering on the brink of financial collapse, need to be bailed out by a central government that also needs to be bailed out. With unemployment of nearly 25% and youth unemployment of over 50%, desperate Spaniards and foreigners alike are leaving the country, taking their skills, knowledge, experience, and purchasing power with them. The political system is in turmoil. And now there’s the possible breakup of the country.... Catalonia Cries for Independence, And the Military Threatens To “Crush” The “Vultures.”

 “Poverty is returning to Europe,” said Jan Zijderveld, head of Unilever’s European operations. The third largest consumer products company in the world was adjusting its commercial strategy to this new reality, he said, by redeploying to Europe what worked in poor countries of the developing world. Other stars of the industry affirmed it. “The logic of pauperization,” L’Oréal CEO Jean-Paul Agon called it. Read.... The “Pauperization of Europe.”

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Reader Comments (4)

imo where this post goes wrong (i don't dispute the consensus, just its wisdom) is with "The challenges are huge—even if there is a solid political consensus on how to tackle them. Banks and some of the Autonomous Regions, which are teetering on the brink of financial collapse, need to be bailed out by a central government that also needs to be bailed out."

with regard to the banks: no. they don't. all the insolvent banks, all over the world, need to be reorganized with the stock and bondholders taking the hit for their (their!) errors and the executives punished and replaced, especially where control fraud, which was and is endemic, is found. any remaining bondholder claims become equity. depositors and counterparties need to be protected and the bad loans marked to market. the remaining functioning banks should then be brought public again with the proceeds going to the taxpayers who first bailed them out and then paid the additional transactions costs for the reorganizations.

no organic recovery can occur without this. the history of the nordic banking crisis and more recently iceland contrasted with over two decades of japan's history could not be clearer.
October 9, 2012 | Unregistered Commenterjeff montanye
A good article showing the depth of despair in Spain and the lack of any answers, political or otherwise. Certainly, the one thing most Spaniards have in common is a complete disillusion with the way that the political system in Spain is functioning. The Spaniards are democrats, to a person, but recognise that the whole political system needs changing, if Spain is to be run efficiently and well. That is a big project and will be fought by all existing politicians, who will protect their vested interests to the last.
October 9, 2012 | Unregistered CommenterNick Snelling
Jeff - I agree with your anti-bailout stance. "Need" wasn't my personal opinion of what they should do, but was a description of what Spain and the Troika members think "needs" to be done. I'm vigorously anti-bailout of any kind. It seems my wording was misleading, and I should change it. Thanks for pointing it out.
October 9, 2012 | Registered CommenterWolf Richter
I can only agree with these statements. It is amazing that both PP and PSOE claim that Catalans cannot be different from the rest of spaniards, but Basque are allowed to be different. It is also amazing that every region and newspaper claims different budget numbers, but the central government makes no effort to publish the official numbers and stop these disputes between territories, but of course that TRANSPARENCY would imply that some politicians and regions would loose out their power and privileges if objective criteria (e.g. budget allocations normalized by territory and population) had to be established and followed up with corrective actions as done in the German landers. Finally, the proof that Spain is not a democracy is the reaction of the central government to the request of the Catalan government supported by 75% of the catalans according to recent opinion polls that Catalan people should be consulted in referendum to see what they want for their future,.. Instead, Rajoy defends that the 1978 constitution, has precedence over people's opinion, because he thinks that the judges of the constitution appointed politically by him and PSOE can keep Catalans inside the house better with the doors closed than with the doors open, unlike Comeron with its seductive policy in Scotland. In short, Spain has still so much to learn from the old democracies in Europe.
October 17, 2012 | Unregistered CommenterGonzalo García

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