Iberia’s Spanish stalwart!

A cheery welcome to you dear reader! Thank you for your gracious perusal of my blog!

This will be the first article to appear dedicated entirely to the political situation in Spain since my adoption of this fascinating and often quixotic land as my home. As I write, I’m listening to La Isla Bonita by Madonna for added inspiration.

Since I arrived last summer, I have been struck by the similarities politically between Spain and the UK. Both are facing separatist challenges in Catalonia and Scotland. They are both governed by dominant conservative, right wing governments who prioritise austerity measures in handling their respective economic challenges and both have seriously weakened and divided left wing political parties.

However, I’m going to park the comparison for the time being and talk about Spain. Last month the long serving Prime Minister, Mariano Rajoy, was re-elected the leader of his governing Popular Party (PP) at a special party congress with a thumping 96% of the vote. He faced very little in the way of serious challenges to his iron grip on the Party. A phlegmatic, dour and stolidly stubborn man this unprepossessing politican has seen off many of his internal and external opponents and outlasted the predictions of many. Whether that is due to his and his advisers’ political skill or the self destructive tendencies of the opposition is a subject of much debate.

This crowning coronation as head of PP is a far cry from his situation a year ago. Faced with an inconclusive December 2015 election and questions about his political strategy  even some within the often obedient PP were beginning to raise concerns about his continued leadership of the country and Party. I’m fortunate in having spoken to a wide cross section of Spanish society, from investment managers and scientists to lawyers and students, and the general consensus is one of contempt and suspicion of not just Señor Rajoy but the political class in its entirety.

It often surprises me how weak and lacklustre the opposition PSOE, Podemos and Ciudidanos parties have been in taking on the Spanish leader. They had a golden opportunity following December elections but failed to make the compromises necessary to form a viable alternative to PP. Famously the PP merely sat back and watched, and the mercurial Prime Minister was able to return back to office in a following election last June.

However, the ECFR (European Council on Foreign Relations) think tank, based in Madrid, recently dubbed him the ‘Merkel of the South.’ Undeniably he has survived in office for what passes as a long time in Europe nowadays (he has been in office since 2011) his counterparts in the U.K., France, Portugal, Italy, Greece and Poland have all chopped and changed. Only the previously referenced Chancellor of Germany, Angela Merkel, has been around longer. He has plotted an economic course based on orthodox   Adam Smith inspired policies on economic growth and taxes. This fiscal discipline has arguably brought Spain stability and solid GDP figures. According to the latest data from the Bank of Spain, the GDP growth rate for 2016 was 3.2%, matching the 2015 statistics. Favourable low oil prices and buoyant tourism figures were seen as key contributors to this success El Pais, the respected Spanish newspaper, reported.

When Mr Rajoy took power in 2011, the economic crisis was biting hard and thanks to generous giveaways and largesse the previous Spanish government had been forced to begin talks with the IMF and European Central Bank for a fully fledged bailout of its economy. This, fortunately, did not come to pass but Spain still had to accept financial assistance for its banks from the European Stability Mechanism (ESM)  and take harsh public spending cuts and carry out tax rises to stave off a Greek style crisis. In this the Spanish Prime Minister can take some credit but it has come at a great cost for classroom sizes and the provision of doctors.

I will now elaborate a little further and show you that all is not rosy in Spain. Whilst overall unemployment is coming down, although it remains a shocking 18.2% (the second highest in the EU after Greece) youth unemployment in Spain is chronically and persistently high. Eurostat, the EU’s official statistics office, highlights an eye watering 42% of Spain’s youth remains out of work. The increase in tourism numbers should be welcomed but it must be noted that the jobs in this sector are often highly seasonal with little security and few long term prospects for educated graduates. The remedy for this shocking and truly wasteful situation is for serious labour market reforms, which include opening up the job market for young people and making it far more inclusive for them, in particular whilst they study. Unfortunately, given that the ruling party relies heavily on the older generations for votes it is unlikely to hurt its core constituency and undertake this fundamental reform any time soon.

Aside from the economy Spain also faces a D-Day moment with the constantly grumbling Catalan nationalists this year. The authorities based in Barcelona plan to hold a referendum on independence in September. Not only have the federal government in Madrid and the EU given a firm no to the plan but the Constitutional Court in Spain has also ruled it is a flagrant violation of the Spanish Constitution and declared the poll illegal. The Catalans seem determined to single mindedly pursue this disastrous course and the latest numbers from the regional government show that 45% support secession and 46% are against. The Spanish government strategy has been uncompromising and that is understandable but to really pull the rug from underneath the carpet of the Catalans it might worth calling the bluff of the secessionists and avoid making them into some form of martyrs. The polls show the government in Madrid might actually win such a high stakes gamble.

The last point I want to address is the international profile of Spain. Since the Eurozone crisis hit in 2008 Spain has been a pygmy on the international stage. Long again the Spanish government had established an Alliance of Civilisations which aimed to bridge the gap between the Western and Islamic worlds and Spain hosted several summits to this affect. It also remained the EU’s main point of contact with Latin America, via its Ibero-American Summits organisation. It has since, justifiably I feel, focussed attention on restoring its economy. However, with populism on the march in Europe and America, and the distractions of critical European elections in France and Germany (possibly Italy) Spain has a unique chance to help lead Europe. Mr Rajoy is charmless and drab but those could be qualities when held up against the unstable likes of Donald Trump. The appointment of Alfonso Dastis, a former Ambassador to the EU, shows Mariano Rajoy recognises this, and in subsequent telephone calls with the new US President Señor Rajoy has offered himself as an interlocutor between the US and Europe. It remains to be seen however, if the Spanish leader can rely on his still fragile minority government too keep him in power beyond the next year, let alone provide the much needed and testing leadership that we currently need in Europe.

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