Including: Spain’s first Transparency Law comes into force; Podemos slips in voting intention poll, unveils economic programme;
population continues to fall mainly because of emigration and Bankia’s accounts for its public listing ‘full of errors’.
Category: Elcano Royal Institute
Can Spain afford the economic programme of Podemos?
The anti-establishment, leftist party Podemos (We Can), established almost a year ago, which, according to a poll, would be the second most voted party if an election were held today, has unveiled its economic plan that is long on spending ideas and short on how to finance them.
The 68-page manifesto, which will serve as a basis for Podemos’ election programme next year, softens some of the party’s more radical ideas contained in its programme for last May’s European elections, such as a guaranteed basic income for the needy and retirement at 60, but sets out a battery of measures that, in the opinion of its opponents, would turn Spain into a Venezuela-style basket case but without the advantage of having oil.
Podemos, led by media savvy political scientists, in particular its leader Pablo Iglesias, and born out of the movement of los indignados (the indignant ones) in 2011, is now pitching itself as a Nordic-style social democratic party. It is competing directly with the Socialists whom it accuses of being part of the ‘caste’ that has impoverished Spain and which bowed to the demands of the Troika when the crisis erupted during their watch in 2008.
The authors of the report , the Spanish political scientist Vincenç Navarro and the economist Juan Torres, are highly critical of ‘neo-liberal globalization’ and a ‘badly designed’ euro zone, which they say is dominated by Germany and has exacerbated Spain’s crisis.
The proposals for a country with a jobless rate of 23.6% read like a Christmas wish list to the Three Kings. They include:
• Credit should be enshrined in the constitution as an ‘essential public service’, state banks created and an undefined ‘citizens’ bank of public interest’ established.
• Pensions, wages, public and private investment and welfare spending should be increased. Podemos calls for the elimination of the Popular Party’s 2013 pension reforms, designed to make the untenable system more sustainable. The reforms severely restrict index-linking of pension payouts and are gradually raising the retirement age to 67 from 65. Podemos says the retirement age should remain at 65.
• A limit on the maximum gap between average salaries and the top ones (currently 127 times higher).
• Abolition of the PP’s 2012 labour market reforms, which reduced the cost of shedding workers on permanent contracts and enable companies to opt out of sector-wide made collective bargaining agreements in certain circumstances.
• Debt relief, particularly for those struggling to pay mortgages. On the question of Spain’s still very high sovereign debt load (almost 100% of GDP), Podemos says ‘the only way out of this vicious circle is the restructuring, as orderly as possible, of European and Spanish debt. The question is not if this is desirable or not but under what conditions it takes place.’
• The European Central Bank should be reformed and full employment added to its core objectives.
The document says little about where the extra revenue would come from to finance the ambitious spending plans other than taxing the rich more and cracking down on tax evasion and fraud.
The programme would require the European Central Bank to assume a central role in helping Spain, particularly in granting more credit, which would only happen in the extremely unlikely event that there was authorisation to do so by all euro countries. Furthermore, the report’s authors admit that ‘it is materially impossible for these policies to be carried out […] in the framework of the euro as it is designed.’
The only way to fulfil the programme would be for Spain to leave the euro, something that the majority of Spaniards do not want, according to the latest Eurobarometer carried out in October. Almost three quarters of respondents in Spain said the euro is a good thing for the EU, the largest proportion among the four biggest economies.
A Spain that returned to its own currency and artificially stimulated domestic demand through spending it could not afford – by printing money or borrowing abroad (in these conditions who would want to lend to Spain?) as not only the very rich would vote with their feet – would be very vulnerable to head winds in the global economy, from which it would not be isolated.
Moreover, higher social security contributions, a reduced working week and higher salaries, as proposed, would hardly encourage the private sector to create jobs and invest. Indeed, unemployment and inflation would rise and productivity suffer.
The authors are right to say that Spain cannot return to its previous unsustainable economic model, excessively based on the real estate and construction sectors, massive indebtedness and the predominance of the financial sector, among other factors. Yet they offer little more than vague ideas about Spain’s future direction, other than proposals of good intentions such as the need to ‘construct more satisfactory and efficient productive models and economic relations based on respect for the life of people and nature and more concerned for general wellbeing than personal profit that excludes and kills millions of human beings.’
There is no doubt that Podemos has tapped into a deep vein of discontent and anger with the political class, which has been discredited by the wave of corruption scandals. Almost two-thirds of respondents (63.8%) in the latest barometer conducted by the government-funded CIS said corruption and fraud were Spain’s main problem, the second main concern after unemployment (77%).
Opinion polls in recent months show that far from being a temporary phenomenon, Podemos will be a force to be reckoned with in the next general election due to be held by next December. However, it is beginning to lose momentum, according to the Metroscopia poll published in El País on 7 December which put it in second place, after the Socialists, with 25.0% of the vote (27.7% in November when it was the most voted party).
Podemos would appear to have reached a ceiling; this could well be because it is having to spell out its policies and propose solutions and not just diagnose Spain’s problems which has a zero political cost.
It is now up to the PP and the Socialists to convince the electorate that they have renovated themselves in order to recover their credibility. If they do not, their attempts to counter Podemos’ unrealistic reforms and convince voters that the party’s road map would bring ruin not prosperity will sound hollow.
Inside Spain (21 October-18 November)
Including: stand-off between Catalonia and Madrid remains after mock referendum on independence; banks pass the ECB’ assessment with flying colours; corporate titans propose way to radically cut unemployment and Spain shoots up the Doing Business ranking, cuts time needed to start a business.
How to radically cut Spain’s unemployment: feasible or wishful thinking?
Spain leads the world market in infrastructure development
A spate of major contracts won over the last month in Australia, Brazil and the US has strengthened Spain’s already commanding position in the global infrastructure market. The potentially most interesting development is Ferrovial’s take-over bid for Australia’s Transfield Services, as it is a stepping stone to China.
http://www.realinstitutoelcano.org/wps/portal/web/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari52-2014-chislett-spain-leads-world-market-for-infrastructure-development#.VFpYXfTF_wc
Spanish banks pass the ECB assessment with flying colours
Spanish banks sailed through the latest EU-wide health check, signalling they do not need any more capital. This follows several years of tough adjustments as a result of the near collapse of the financial system in 2012 that triggered a €41 billion bail out (exited in January).
http://www.realinstitutoelcano.org/wps/portal/web/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/commentary-chislett-spanish-banks-pass-eu-stress-test-with-flying-colours#.VE51movF_wc
Inside Spain (22 September-21 October)
Main events include: Spain wins UN Security Council seat; Catalan President scraps independence referendum, plans another form of consultation; public debt to exceed 100% of GDP in 2015, forecast to decline as of 2016, and Telefónica completes €8.6 billion purchase of Germany’s E-Plus.
Turkey’s EU accession: trying harder, but still failing
The European Union’s annual report on Turkey’s accession negotiations, which have advanced at a snail’s pace since they were opened nine years ago this month, is like an end of term student report card. If an overall grade were to be assigned to Turkey it would be a C, with the comment that the government was trying harder but still had a long way to go to obtain the mark that would enable the country to join the EU.
http://www.realinstitutoelcano.org/wps/portal/web/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/commentary-chislett-turkeys-eu-accession-trying-harder-but-still-failing#.VDftxSmSyyM
The distance between Spain’s image and the country’s reality
Even before Spain’s crisis and despite some notable political, economic and social achievements, the country’s image abroad and within Spain was out of sync with reality. This situation worsened during the recession, which is now over but the gap persists.
http://www.realinstitutoelcano.org/wps/portal/web/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari43-2014-chislett-distance-between-spains-image-and-countrys-reality#.VC2GNimSzwd
Inside Spain
My review of what’s happening in Spain. This one covers two months as it is not published in August when Spain closes down.
Otherwise, published every month since 2004.
http://www.realinstitutoelcano.org/wps/wcm/connect/3482cb80459422c2898be911646dbfa9/109_InsideSpain_ElcanoNewsletter.pdf?MOD=AJPERES&CACHEID=3482cb80459422c2898be911646dbfa9
William Chislett 