Alfonso Botti - 19/04/2012

     Spain has been in the international limelight a few times since the fall of Francoism: for her happy transition to democracy, her extraordinarily rapid modernisation, her creation of a network of enviable and efficient infrastructure, her economic miracle and generous extension of civil rights and the social state. The last time was 11th September 2004 with the bombs of Atocha. Well, now she is back, this time for her proximity to the brink. The facts and figures are too familiar to need trotting out again (unemployment, spread, deficit-GDP ratio, recession, the mortgage default rate…). A recent neologism now reflects the widespread social hardship. Until four years ago there were eleven million mileuristas demanding a higher minimum wage (the term refers to those earning no more than 1000 euros a month, especially underpaid neo-graduates with no job security). Today that salary looks like a mirage to the latest generation, dubbed the nimis (not even 1000 euros).

     After his expected electoral success last November, the new Popular leader, Mariano Rajoy, has had to embark on a series of cuts and reforms unprecedented in the history of democratic Spain. Much as Zapatero was forced to do by pressure from the EU and IMF, Rajoy presented a bill in late December last year – approved by the Congress in January – enabling him to dock some 9 billion euros off ministerial spending and nearly one billion off the territories, freeze state employee salaries and turnover (the police, army, health-workers and teachers are limited to 10% turnover), raise the weekly working hours, shelve until January 2013 applying the new law supporting non-independent persons (a gem of Zapatero welfare), increase income tax rates for 2012 and 2013 by 0.75 to 7% (according to the bracket), and raise taxation on savings income from 2 to 6%.

     On 10th February the government ratified the labour reform making dismissal easier and reducing indemnities and tenure. In early March Rajoy applied to the European authorities to raise the deficit-GDP ratio from the agreed 4.4% to 5.8%; he had to make do with 5.3%. In the 2012 Finance Bill put before Congress on 3rd April (they’ll be voting on it in the second half of May) he stuck to his line on cuts (to the tune of 27.3 billion euros), raised company tax and capital gains, as well as property rates (from 4 to 10% on homes officially classed as above average), and increased people’s electricity bills. Funding for research has been slashed by 34%, infrastructure investments are half what they were in 2010, and the same goes for social policy, education and the long-promised investments for outlying areas.

     He also proposes a tax amnesty (the third since Spain became a democracy, the others being 1984 and 1991); this is designed to claw back 25 billion which has dodged the taxman, evaders being enabled to pay 10% of the sum evaded. It goes on record that when the possibility of an amnesty was raised by the socialist government in 2010, the PP were dead against it. On 9th April Rajoy announced further cuts to the tune of 10 billion in the health and education fields, and on 14th April he got the green light from the presidents of the autonomous Communities where the PP is in power. While it still remains to complete reforms to the finance system and bail-outs to a number of banks, the latest tile to crash onto Spain and its government comes from Argentina where Cristina Fernández Kirchner is threatening to nationalise the Spanish oil company Repsol YPF. By such measures the decrease in GDP forecast at 1.7% for 2012 is likely to round up to 2%.

     Lack of any clear policy on employment and growth has been pilloried on all sides: by the socialists, the unions and important sectors of society. Rajoy has already had to digest a general strike on March 29th, the threat of an appeal against the new labour law on grounds of unconstitutionality, failure by the PP in the Andalusian elections, and equal underperformance in the Asturias, while the survey conducted by Metroscopia on behalf of El Pais placed the PP at 38.1% - a more than 6% drop from what they polled at the last general election. Stoked by unwise statements on both sides, magnified by the press of both nations, there seems to be a competition between Spain and Italy as to who will sink and who will swim.

     This is a blinkered and misleading approach recalling Renzo’s hapless capons in Manzoni’s masterpiece: companions in misfortune, they go on pecking at one another. Spain and Italy have different problems and a different economic structure. In common they have a need for growth stimulation, a new development model, and a change in their energy supply and consumption. Whether they regain the investors’ and international markets’ confidence hangs on these issues. Not on anything else.

Alfonso Botti
(University of Modena and Reggio Emilia)