Ireland and Spain: A tale of two parliaments…

Hello and Hola!

This is going to be a double whammy today as I talk about two delightfully fascinating countries – Ireland and Spain. These two are very dear to my heart so I will be kind, never fear dear reader!

The similarities of the two in recent times is quite striking. Both are strongly pro-EU, open minded and prosperous countries who, until recently, were in pretty dire straits. Both, to varying degrees, had to be bailed out by the European Union (EU) when the 2008 economic crash hit. They subsequently voted in dour, centre right leaders with a mission to stablise the country and pay off their respective country’s debt through a dose of austerity measures and tax rises. Never a vote winner in the best of times there were indications things were on the up by the time the electorate next came calling. Then came hung parliaments in both Madrid and Dublin!

However, both have responded slightly differently to the hung parliaments that resulted from their respective general elections.

Let’s start with Ireland.

Ireland

Here a nail biting election resulted in a Parliament (Dail) which saw a huge increase in independent candidates. For decades politics in Dublin had seen either the centrist Fianna Fail or the centre-right Fine Gael come to power. For many years Fianna Fail had held the reins of power under the charismatic but controversial Bertie Ahern and his successor the hapless Brian Cowen.

Without getting into the details, up until 2009, Ireland had been known as the ‘Celtic Tiger’ with near 10% economic growth rates, low taxes, unprecedented foreign investment and a heavy dose of government spending. The skyline of Dublin attests to this era where several districts of the capital city were transformed into glitzy skyscrapers, flash apartment blocks and stylish restaurants.

Then came the crash and the moment of reckoning and the EU and IMF were eventually called in to bail out the country as it tried to swim through the heavy treacle of debt.  In came the smooth Enda Kenny, leader of Fine Gael, who swept to power in 2011, with a landslide victory and a comfortable majority, vowing to clean up Ireland’s finances and return the country to the good old days. In coalition with the Labour Party he pushed through a mixture of painful austerity measures, which included a cut of €18.5 billion worth of investment in healthcare over six years and a €1.3 billion cut in funding for local authority housing in 2013 alone, says the Irish Examiner newspaper.  There followed tax increases in cigarette duty and alcohol levies in the annual budgets. By the time it came to elections in February 2016 Ireland had seen 7.8% GDP growth in 2015 (the fastest in the Eurozone), unemployment rate drop to 9% and inflation of 0% according to European Commission statistics.

All this success on paper, which was widely applauded in Brussels and with the IMF in Washington, failed to convince voters and even though he ended up with largest number of seats in the Dail, Mr Kenny was still 30 seats short of majority to form a government. Labour had only a humiliating 8! Seven weeks of horse trading followed in the bucolic grounds of Leinster House, the seat of government. Just this week a deal was hatched between Fine Gael, the gaggle of independents and the urbane Michael Martin, leader of Fianna Fail which allowed Mr Kenny to take up his post again. Last minute wheeling and dealing over the future of the Irish Water utility and the divisive water charges saved the deal. The deal envisages a confidence and supply arrangement where there will be no formal coalition but an acceptance that Fine Gael can go for three budgets and reshuffles without a vote of confidence bringing it down before then.

In conclusion Mr Kenny lives to fight another day, for at least three years! All’s well that ends well? I leave that hanging with you dear reader!

Now, onwards to sunny Madrid……….

Spain

Last but by no means least, Spain is effectively the same play but with different actors. The mercurial Mariano Rajoy in place of Mr Kenny and the photogenic Pedro Sanchez in place of Mr Martin. Long a two horse race, rather than seeing the rise of an array of independents, the Cortes (Spain’s Parliament) saw the once dominant conservatives, Popular Party (PP) led by Mr Rajoy, and the Socialist Party, led by Mr Sanchez, record less than 50% of the seats in Parliament combined. Newcomers were Podemos, staunch left wingers, and Ciudandos, liberal centrists, and a variety of much smaller regional parties who also came to prominence.

For the PP it was punished basically because of a series of corruption scandals, which had seen the police arrest dozens of senior party officials, including the party treasurer, and again the pinch of austerity which had made Mr Rajoy less popular than he should have been.

Meanwhile, the Spanish have been voting with their feet and the National Statistics Institute (NIE) recorded a 56.6% increase since 2009 in Spanish citizens living abroad. According to the European Commission, GDP economic growth was 3.2% in 2015, unemployment a still high but falling 22% and inflation at -0.6%. Things were improving under Senor Rajoy but the lack of trust in the mainstream parties and allegations of corruption drained support and the Spanish electorate, justifiably, looked for alternatives. Much like Ireland.

A December 2015 election duly reflected that sentiment and until today the new look Parliament saw highlights such as a breast feeding deputy and an MP sporting dreadlocks (of course all from the radical Podemos I hasten to add!) and only one election, that of the Socialist Patxi Lopez, as Speaker. No government, unfortunately, and Mariano Rajoy has continued in a caretaker capacity, often avoiding the fractious Cortes altogether.

After many false starts, with Ciudandos and the Socialists signing an accord which ended up going nowhere, and warnings from economists that the markets and investors won’t wait much longer for a government to be formed the pressure was on. All efforts ultimately proved fruitless and in early May, King Felipe VI dissolved Parliament and called fresh elections for 26th June. This as warnings came from Brussels that Spain’s public deficit to GDP ratio has exceeded an agreed target  of 4.2% and hit 5% instead. Fines may be imposed on Madrid and a full in tray will await a new PM.

Let’s hope the next round will concentrate minds and keep Spain on the path of recovery.

Conclusion

Ireland did well to secure an agreement for government but it is fraught with danger and the pressure will still be on Mr Kenny over the next three years.

My hope is that Spain can emulate the same formula with either Mr Rajoy or another returned. Compromise may not be pretty but it will be necessary as the mood has changed little since the last inconclusive election, so we may end up with such a rainbow of party flags in the Cortes once again!

Rest assured Madrid and Dublin will not be dull over the next few years!

 

 

 

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