Total Power Is No Power for Spain’s People’s Party

Total Power Is No Power for Spain’s People’s Party

Total Power Is No Power for Spain’s People’s Party

Mariano Rajoy’s right-wing party crushed the socialists, but Spain’s fate depends more on bond traders and central bankers than its cabinet.


Never since the death of Generalissimo Francisco Franco in 1975 has the Spanish right held so much power. After a clean sweep in last Sunday’s elections with nearly 45 percent of the votes, the conservative People’s Party, under veteran leader Mariano Rajoy, now controls every stratum of the quasi-federal Spanish state: 186 seats—an overall majority of eighteen—in the Madrid Parliament; governments in all but two of Spain’s powerful autonomous regional administrations; and every big city except Barcelona and Seville.

Just like Portugal and Greece, the other center-left governments on the troubled Mediterranean rim of the eurozone, José Luis Rodríguez Zapatero’s governing socialists have paid the electoral price of austerity, recession and mass unemployment, taking only 29 percent of the vote, an all-time low, down from a record 44 percent in the 2008 elections.

Those are reasons enough for the People’s Party leader to be cheerful. Yet Rajoy seemed troubled on Sunday night as he waved from the balcony of the PP headquarters on the elegant Calle Genova in central Madrid. Just like the technocrats now in power in Greece and Italy, the future prime minister is acutely aware that, in the eurozone’s deepening debt crisis, total power at the national level is no power at all. Spain’s fate depends more on international bond traders and central bankers in Frankfurt than on Rajoy’s new cabinet.  

By Monday morning, Rajoy’s dilemma was painfully clear. Nervous bond investors—ever more terrified of a cascade of sovereign defaults that would augur the end of Europe’s monetary union—pushed Spanish interest rates back up to record levels, around 6.5 percent. This is manageable in the short term, since Spain’s debt, at 65 percent of GDP, is just over half Italy’s. But, in the medium run, such high debt-servicing costs would bankrupt Spain. Around midday Monday, Rajoy made his first supplicant telephone call to German Chancellor Angela Merkel in search of a commitment that there would be European Central Bank backing of Spanish debt in return for complete compliance with the eurozone’s austerity demands. The ratings agency Fitch sternly advised Rajoy to “positively surprise” bond investors with “ambitious and radical fiscal and structural reform.” The alternative would be further downgrades to its debt.

As the Spanish economy slides further into recession, the only surprise from the new PP government will come in the form of budget and wage cuts in an attempt to bring the budget deficit down to 4.4 percent of GDP by the end of next year, from over 7 percent now. This will likely involve further cuts to public-sector pay, on top of the 5 percent wage cut under Zapatero in 2010. The PP’s election promise to increase pensions in line with inflation looks shaky too. Rajoy will put pressure on regional governments, most now under PP control, to rein in deficits by whatever means necessary.

The example is Catalonia, under the conservative nationalist party Convergencia i Unio, which has closed dozens of primary-care clinics in an attempt to cut spending on healthcare. This has set off furious protests, though Convergencia performed well in Sunday’s elections as votes flooded away from the socialists in Barcelona. Immediately after the elections, Convergencia announced more wage cuts in the public sector. The new PP government in Madrid will take note. It will also try to partially dismantle Spain’s collective bargaining system, justifying deregulation as necessary to reduce Spain’s 21 percent unemployment rate, though the real goal is to cut private-sector wages, a critical plank of the euro orthodoxy’s strategy of “internal devaluation.”

All this will, inevitably, meet resistance. Spain’s two big labor unions, Union General de Trabajo and Comisiones Obreras, were reluctant to mobilize against Zapatero’s austerity program for fear of bringing the government down. Now greater labor unrest seems likely. Meanwhile, the young indignado protest movement, which has been mobilizing mass occupations and demonstrations throughout Spain for months, is moving onto the offensive. Protests against Catalonia’s healthcare cuts, as well as worsening conditions for schoolteachers in Madrid, have already seen unprecedented linkups between the indignados and the traditional labor movement.

Another sign in Sunday’s elections that the indignado movement is not, as some feared, in a parallel universe to party politics is the spectacular recovery of the Communist-led Left Unity alliance. In the 2008 elections Zapatero, admired by the left for his brave decision to pull troops out of Iraq and pass legislation legalizing gay marriage, took a large chunk out of the Left Unity vote. Now, under the Communist Party veteran Cayo Lara, the alliance has shot back into the reckoning, increasing its share of the vote from nearly 4 percent to 7 percent.

Most of the demands of the indignados, from the rejection of austerity to electoral reform, were staples of the Left Unity program. Rather than reject all established parties, the indignado protests appear to have boosted Left Unity, which has upped its parliamentary representation from three to eleven MPs, concentrated in big cities such as Madrid, Barcelona and Seville. Turnout was not significantly lower than in 2008, and there was an important outflow of socialist votes to the left. In Malaga the Left Unity candidate Alberto Garzón is an activist in the indignado movement.

In general, the indignado demands for an end to what they consider to be a false bipartisan democracy have been vindicated to some degree in the elections. The votes for parties outside the big two, from Left Unity to the new centrist Progress and Democracy Party and Basque and Catalan nationalists, have doubled. In the Basque Country, the ceasefire announced last month by the terrorist group ETA has cleared the way for the meteoric rise of radical left Basque secessionists grouped in the alliance Amaiur, which won one in four votes. Amaiur supports Basque independence and the establishment of a socialist republic of Euzkadi (Basque Country). Given the PP’s defense of what conservatives used to call, in Franco’s day, “España, una, grande y libre” (Spain, one, great and free), Amaiur may prove an even bigger headache for Mariano Rajoy than the global bond investors.

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