Down but Not Out

Yesterday, I was in New Haven having lunch with Juan Linz, the greatest social scientist Spain has produced, and other friends when the results from the regional elections in Andalusia started coming in.   It had been a given on the part of not just political commentators but also the pollsters that the conservative Partido Popular would win an historic victory in the region - likely with a comfortable absolute majority - and send the Socialists, the PSOE, into opposition for the first time ever.  Imagine how stunned we were, then, when with 50% of the vote counted, our smart phones lit up with the news that the PSOE looked on its way to winning the election. 

In the end, the PP, who came to power nationally in November, did manage to get its historic victory in the south. By the slimmest of margins – 40.7% to 39.5%, they beat the PSOE and increased their seats in the regional parliament by 3 for a total of 50.  In contrast, the Socialists suffered a large loss of 9 seats to end up with 47. The only other party to clear the hurdle to enter parliament was the former communists, the IU, who doubled their seats to 12.  With 55 being the magic number to govern in a majority, the hoped for victory turned into a bitter defeat for the Populares, given that the probability of the PSOE and the IU not forming a coalition is, according to another guest at lunch who is also a prominent political scientist in Spain, ‘precisely zero.’

 As the noted political journalist Iñaki Gablando explains in a terrific video blog, José Antonio Griñán, the head of the PSOE in Andalusia and current President of the region, won the triple crown in this election. By opting to call the elections off cycle from the national elections, he ensured that the PP’s electoral tsunami did not hit the south with its full force as it surely would have had the elections taken place last November.  Griñán will maintain the PSOE’s hold on the Presidency and deny the PP’s ‘reconquista’ of ‘infidel’ Andalusia.  And, finally, his own position within the party, which had been very weak, has been strengthened.

In part, these results may show how little room for maneuver exists for governments in this crisis. While Prime Minister Mariano Rajoy claims that the results – more than 425,000 fewer votes than the PP won in Andalusia in November and a 5 percentage point drop – will not change his intention to implement austerity measures, this may signal the support the Spanish are willing to give for a program of adjustment is more limited than imagined. 

They also raise the question of whether the corruption in the PSOE in the south will ever be addressed.  Even many people who are not committed PP supporters hoped the Socialists would be turned out, both because some alternance in power is healthy for a democracy and to force the PSOE to clean up its act.  Popular disgust at the ERE scandal, where Socialists in the region were accused of cronyism and the fraudulent channeling of more than half a billion Euros in retirement payments, was not enough to keep the PSOE from returning to power, though the perceived corruption of many of the party’s regional leaders accounts for some of the decline. However, the question now is whether the addition of IU to the regional government will provide some sort of transparency or if Griñán will heed the message delivered at polls and attempt to reform the party.

The Pain in Spain

Today Mariano Rajoy, Spain’s newly elected President, gave his first speech in his new role before Parliament and laid out his plans to deal with the crisis. Like Monti, his counterpart in Italy, Rajoy’s proposed cuts fall at the lower end of estimates these countries were assumed to need. In the case of Spain, that amounted to a deficit reduction of somewhere between €15 and €30 billion in cuts and taxes. There is extensive coverage in El País of Rajoy’s plan, which offers €16.5 billion in cuts to the Administration and other measures.

Some of the highlights of Rajoy’s plan include:

·         Linking pensions to the consumer price index, the only increase in the proposal

·         Freezing public sector employment except for the armed and security forces and basic public services

·         Reform of regulatory bodies

·         Eliminate early retirements to bring the real age of retirement into line with the official age and not repeal the law raising the retirement age to 67 (that the PP had opposed while in opposition)

·         Shifting public holidays to the nearest Monday to avoid the ‘bridge’ holidays where any holiday now typically turns into stretch of days off to the closest weekend

But the biggest change is the Administrative cuts that he views as a fundamental restructuring of the State. Without elaborating the mechanics or specifics of cuts, this reform promises what all current plans in Europe intend to do to deal with the crisis, whether they come from parties in power or the opposition.

There is a focus on eliminating waste, reducing costs and improving services but without real proposals, that is the sort of meaningless rhetoric that often characterizes these debates and that the markets punish because they mask the lack of resolve. The devil is in the details and presumably over the next few months, the specifics will become clearer but there is little evidence that efficiency gains will be sufficient to tackle the deficit. There are fewer proposed tax increases than the new Italian Prime Minister offered in his budget that is to be voted on in Rome later this week. Rajoy has proposed however, similar to the Italian plan, a tax cut for firms that hire young workers and women in order to tackle the high unemployment among those groups.

For its part, the main opposition party the PSOE has been relatively supportive while at the same time underscoring both doubts and concern for the concretization of the plan. The lack of new taxes raises questions for the Socialists about where the money to pay for this plan will come from and they are insistent that the welfare state in Spain must be defended and not dismantled.

For everyone, the lack of specificity ought to make us wonder whether, when the details finally do become clear, the pain in Spain will be considerably higher than this first speech suggests.