After more than ten months of a caretaker government, on 29 October Mariano Rajoy (of the conservative People’s Party or Partido Popular – PP), Prime Minister since 2011, was sworn in for a second mandate thanks to the abstention of his biggest rival, the Socialist Party (PSOE).
The PSOE’s decision avoided the third elections in less than a year (after December 2015 and June 2016). The political deadlock was the umpteenth element in a perfect storm that has been gathering in the European Union’s fifth most populous country since the beginning of the financial crisis in 2008.
The PP has begun its term as a minority government and will have to find support if it is to move ahead with its proposals, beginning with the State Budget.
Spain was the eighth biggest economy in the world at the end of 2007. In 2015, after seven years of crisis, it was ranked 14. The country’s economy grew by 3.8 per cent back in 2007, but only two years later it hit bottom, shrinking by 3.6 per cent. Growth forecasts for this year are between 2 and 3 per cent, as the slow recovery of GDP that began in 2014 continues. Public debt, which in 2007 was 36.6 per cent of GDP (one of the lowest in Europe), is now over 100 per cent. The unemployment rate in 2007 was 8.2 per cent, while by 2015 it had risen to 22.1 per cent. Today the third largest political grouping in the Parliament is Podemos, a party founded two years ago. To understand what is happening in Spain, here are the key points:
1. The happy years of bricks and mortar
Spain’s economy was growing in 2007, upheld by a rampant real estate sector. The bubble had been expanding since the beginning of this century. In a country with very high structural employment, jobs were created at a pace never seen before. By 2006 banks were granting 60 per cent of their loans for the building and purchase of housing.
When the bubble burst with the outbreak of the world financial crisis, everything went downhill. First to go were the savings banks (publicly owned) full of irrecoverable loans. This triggered a financial earthquake which in 2012 led to a bank bailout from the European Union of over 41,000 million euros.
Repaying the bailout plus interest has been a heavy burden on public debt over the last four years, pushing it up to over 100 per cent of GDP, something that has not happened since 1909.
The other challenge has been the control over the fiscal deficit imposed by the EU, which Spain has so far not been able to comply with.
2. Unemployment in Spain: it never rains but it pours
The unemployment rate in Spain reached 22.1 per cent in 2016, exceeded only by Greece. The youth unemployment rate (under 25 years) reached 46.24 per cent. According to the OECD 22.6 per cent of young Spaniards aged between 15 and 19 are not in education or employment, a percentage only exceeded in the European Union by Greece and Italy. According to data from the National Institute of Statistics collected by the FEDEA think tank, between 2008 and 2014 over 300,000 enterprises disappeared in Spain. The lack of opportunities has led to a continued and in the rise rate of emigration over the last four years. In 2015 the figure reached 98,934 people.
Luis (a fictitious name) is an Ecuadoran who now has Spanish nationality. He arrived in Spain in 2004 when he was 18 years old. His father, also nationalised, had two construction companies but the crisis put an end to all that. His parents returned to Ecuador and Luis, after taking temporary jobs in the United States and France, ended up taking the decision a few months ago to emigrate to Germany with his wife and two children. “Spain is my home and has always welcomed me, but the crisis and bad government have forced us out,” he explained to Equal Times. Now he works in a restaurant and is trying to learn the local language.
A recent returnee from London is Alberto Fraile, a sound technician, who decided to leave Spain in 2010, at the age of 25.
“The crisis had a lot to do with my decision, to say ’I’m not doing anything here, I am not making good use of anything (my time and knowledge)’”, he tells Equal Times. He began by washing up in a restaurant and after a year learning English and studying, he found work in his sector. A few months ago he came back to Spain to stay with his family.
“Ninety per cent of the Spaniards I met there want to come back” he says. It is not easy, however. Some are even paying off the mortgage on their Spanish homes with what they earn in London, he explains.
For those who have stayed in Spain, the figures on paper might appear encouraging. Unemployment is falling slowly: this summer was the first time in six years that it dropped below 20 per cent to 18.91 per cent. However, Spain has the highest level of temporary jobs in the Eurozone, as one in every four contracts is temporary.
3. Cuts and more cuts... and the social backlash
According to the FEDEA report, spending on the welfare state was cut by 12.3 per cent between 2011 and 2014 alone (taking into account inflation). Spending by the Autonomous Communities (who have taken over responsibility for most social expenditure) fell by 10 per cent for health, 19.4 per cent for education and 13 per cent for social protection over the same period.
The massive loss of jobs, cuts, labour reforms and education reforms – criticised by much of society – and the perception of inefficiency by the ruling class led to mass protests by some sectors, from the very beginning of the crisis. The 15M movement, with its camps at the Puerta del Sol in Maddrid in 2011, which led to the creation of citizens’ assemblies and demands for real democracy, inspired other movements such as Occupy Wall Street in the United States.
The so-called tides (mareas) have also emerged from this, defending different rights and services. The two most representative of these are the white tide (consisting of health professionals fighting against, for example, the copayment scheme introduced in 2012) and the green tide (teachers and students in confrontation with the government over the education law). One particularly high profile group is the Plataforma de Afectados por la Hipoteca (PAH), which aims to help those at risk of losing their homes because they can’t pay the mortgage, another outcome of the property bubble bursting. One of its founders and spokespersons, Ada Colau, is now the mayor of Barcelona.
Calls for austerity and cuts in basic services contrast with the steady stream of corruption cases (with sentences handed down or still awaiting judgement).
Spain ranks 36th (out of 168) on Transparency International’s Corruption Perceptions Index, with one of the highest levels of corruption found in the Euro zone.
The biggest scandals involve prominent members of the two parties that have alternated in power since 1982, PSOE and PP (even the PP itself, as a legal entity), as well as political leaders such as the Catalan nationalist Jordi Pujol (together with his wife and many of his descendents), or former IMF director Rodrigo Rato. In addition to these there are the corruption cases in town halls, many of them linked to property proceedings.
Nor have the trade unions (UGT and CCOO) escaped accusations of corruption, or the royal family (with the charges brought against Princess Cristina de Borbón in the ‘Nóos’ case).
5. The new political parties
Discontent with the traditional parties has been steadily mounting since the beginning of the crisis. Lack of trust has driven voters, particularly the young, to seek new alternatives. From this emerged Podemos, to the left of the Socialist Party, a party created in the heat of the social protests. It was founded in March 2014 and is already the third political force in the country’s parliament (and given the PSOE’s internal crisis, it is already second in voting intentions).
One of its members, Luis Miguel García, 41, joined this year. “I was surprised that a lot of people in Podemos had not been active in any party or if they had it was many years ago. However many of them actively participate in social movements,” he told Equal Times. In his opinion, “Podemos was the symptom that showed just how exhausted our democracy had become.”
There has also been the relaunch of Ciudadanos, a decade old party from Catalonia, which has a strong anti-independence element, and which has recently launched itself on the national scene, to become the fourth biggest political force in the country. The emergence of Ciudadanos on the national scene has meant that some of the more moderate voters of the PSOE and PP, who distrust Podemos, have opted for it.
6. Territorial crisis: Catalonian independence (the Catalan question)
The future of Catalonia in Spain (or out of it) is yet another aspect of the already complicated national political situation, and one of the reasons for the political deadlock in country.
The President in Catalonia’s parliament, known as the Generalitat, Carles Puigdemont, recently announced that the referendum on the Independence of Catalonia would be held in September 2017, bypassing the Spanish constitution.
The Junts Pel Sí coalition (composed mainly of the conservative CDC and the left wing republicans in the ERC) won the last regional elections, but not with an absolute majority. Their main electoral promise was to begin the independence process. This coalition was able to form a government thanks to the support in extremis of the anti-establishment and pro-independence group CUP. Between them the two groups won 47.8 per cent of the vote.
The most recent confrontation with the central government began in 2006, with the approval of a new autonomous statute (the text regulating the autonomous community of Catalonia and the parameters of self-government), contested by the PP as unconstitutional.
The economic crisis and the central government’s fiscal policies, which the pro-independence groups consider to be prejudicial to Catalonia (despite the fact that it contributes 4.53 per cent of GDP to finance other regions, in third place after Madrid and the Balearic islands), has also driven a growing number of Catalans to join the pro-independence camp. [Editor’s note – The following elements have also contributed to this growing number: the funding of the pro-independence message; the politicization of Catalonia’s National Day "Diada", the regional language, Catalan – and even the Barcelona Football Club – whose motto is "more than a club"; as well as the absence of a calm/constructive debate between all the parties. This is a non-exhaustive list that we will not explore due to length constraints.]
7. Political deadlock
On 23 October the PSOE, deeply divided internally, decided to abstain at the swearing in of the conservative Mariano Rajoy to enable the PP to remain at the head of government. Its general secretary Pedro Sánchez was left by the wayside, resigning after an internal rebellion in the party’s federal committee.
The deadlock began following the elections on 20 December 2015, which the PP won. The distribution of seats among the PP, PSOE and the recently arrived Podemos and Ciudadanos parties, as well as the MPs representing the Catalan independence parties, made it very difficult to reach a government agreement.
The so-called “red lines” of all the parties played a decisive role in the negotiation of agreements, particularly with regard to Catalonia. Ciudadanos was opposed to alliances with the pro-independence groups, and Podemos was in favour of holding consultations on the right to self-determination.
The PSOE reached agreement with Ciudadanos, but could not get Podemos to abstain. Six months later, in new elections, the PP again won the most votes. However, its share of the seats was not enough to form a government. After signing an agreement with Ciudadanos, Rajoy asked the PSOE to abstain. It refused. Faced with such a situation, and running out of time before they would have to call for new elections, the PSOE whose leaders were now deeply divided and some of whose members were opposed, decided to abstain. This move was to set the scene for the next turbulent chapter in Spanish politics.