"The markets want reform and voters want a new government"
A child in the 1964 Disney musical, “Mary Poppins”, is an unlikely hero for today’s angry Spanish youth. But his face features on some of the thousands of posters pinned to the walls of Madrid’s central Puerta del Sol square, where protesters have been camped out for almost two weeks. The reason? He demanded his tuppence back from the Dawes Tomes Mousley Grubbs Fidelity Fiduciary Bank, and started a run.
As Spain’s ruling Socialists reeled from a ten-percentage-point defeat at the hands of the conservative People’s Party (PP) in municipal and regional elections on May 22nd—the party’s worst-ever result—some found explanations among the tented demonstrators in Madrid and dozens of other Spanish cities. It is not that the protesters—an ill-assorted mix of anti-capitalists, anarchists and pragmatists bothered about corruption and electoral imbalances—changed voters’ minds. It is that they, and people like them, might normally have voted for left-wing parties. On May 22nd the Socialists lost 1.5m, or one in five, of their votes. Yet the communist-led United Left coalition picked up only 210,000. Likewise, Mariano Rajoy, the PP’s leader, focused his party’s election campaign on the economy and jobs, Spain’s two main concerns, but the PP gathered only 560,000 of the spare votes. Its victory was due chiefly to disillusion with the left, not great advances on the right.
Still, this was an historic drubbing. It is best measured by the record number of regional governments and city halls won by the PP. The party will now run between nine and 11 of Spain’s 17 regional governments, and have an important say in several more. The Socialists are left in control of just Extremadura and two regions that did not vote—Andalusia and the Basque country. But all of Andalusia’s provincial capitals, including traditionally Socialist Seville, are now in PP hands.
A general election must be held by the end of next March. José Luis Rodríguez Zapatero, the Socialist prime minister, announced in April that he would not stand again, hoping, probably vainly, to save his party by acting as a lightning-rod for voter fury. Few now doubt that Mr Rajoy, on his third try, will move into the prime minister’s Moncloa Palace. The question is whether he will land the holy grail of Spanish politics: a parliamentary majority. If repeated, the PP’s ten-point lead over the Socialists on May 22nd should do—just. Anything less threatens to leave Mr Rajoy without a mandate for the reforms Spain badly needs.
Mr Zapatero’s popularity has proved inversely proportional to the wisdom of his decision-making. For two years he denied that Spain was in serious financial trouble. His support fell only slightly, despite recession and galloping unemployment. But last May, as contagion spread across the euro zone’s periphery, he executed a U-turn, embracing austerity and, to a lesser degree, reform. His ratings plunged.
Now the Socialists must choose a replacement for him. A bitter fratricidal battle is looming, with calls for an emergency party conference to remove him as secretary-general. If he loses control of his party, Mr Zapatero might be dumped as prime minister, or even have to call an early election, as the PP has urged. A party meeting on May 28th was due to set the course. Alfredo Pérez Rubalcaba, the deputy prime minister, and Carme Chacón, the young defence minister, are the front-runners to replace Mr Zapatero. In policy terms neither represents a huge change.
As his party grows more uneasy, Mr Zapatero is sticking to an austerity path that aims to reduce Spain’s budget deficit from 11.1% of GDP in 2009 to 4.4% by the end of next year. The OECD, a think-tank, says he is on target. The political cost is becoming apparent. But if the Socialists think left-leaning voters abandoned them only because of spending cuts, reduced civil-service pay and pension reform, they should study the demographics of the Puerta del Sol’s unhappy campers.
The protesters are mostly students. “Most live with their parents. Their problem is the lack of a future,” says Ignacio Sánchez-Cuenca of Madrid’s Juan March Foundation, a research body. Spain’s already-startling 21% unemployment rate rises to 45% among the young. Growth, at just 0.8% over the past year, remains sluggish. A decade-long bonanza of private borrowing, followed by a spurt in public borrowing when the crisis struck, has left a heavy debt burden. Discharging it may depress growth for years. The Economist’s May poll of forecasters predicts growth this year of just 0.6%, followed by 1.1% in 2012. That will create few jobs.
Provisional economic figures released earlier in May contain some worrying details. A surprise upturn in public-sector spending—which increased by 1.1% in the first quarter of 2011 after four quarterly declines—raises questions about decentralised Spain’s ability to cut its way to fiscal health. Ángel Laborda of Funcas, a savings-banks body, says regional governments and town halls may have been using this year’s budget to pay costs from 2010. That implies a hidden extra deficit.
Many of these administrations are now in the PP’s hands. Thorough scrutiny should reveal the true state of the books. The PP now has a good chance to show voters how it would run public finances. So far, its record is mixed. The Madrid region, long a PP bastion, has the lowest deficit of Spain’s 17 regions. But PP-governed Murcia is one of the worst performers.
Markets did not celebrate the PP’s win. Bond yields rose and stocks fell, stoking fears that Spain’s attempt to “decouple” itself from the problems of other peripheral euro-zone countries may be in trouble. Mr Rajoy has criticised Mr Zapatero’s pension reform without offering an alternative. If he wants to take control of a country that is not in crisis he must become clearer about his plans for government.
As Spain’s ruling Socialists reeled from a ten-percentage-point defeat at the hands of the conservative People’s Party (PP) in municipal and regional elections on May 22nd—the party’s worst-ever result—some found explanations among the tented demonstrators in Madrid and dozens of other Spanish cities. It is not that the protesters—an ill-assorted mix of anti-capitalists, anarchists and pragmatists bothered about corruption and electoral imbalances—changed voters’ minds. It is that they, and people like them, might normally have voted for left-wing parties. On May 22nd the Socialists lost 1.5m, or one in five, of their votes. Yet the communist-led United Left coalition picked up only 210,000. Likewise, Mariano Rajoy, the PP’s leader, focused his party’s election campaign on the economy and jobs, Spain’s two main concerns, but the PP gathered only 560,000 of the spare votes. Its victory was due chiefly to disillusion with the left, not great advances on the right.
Still, this was an historic drubbing. It is best measured by the record number of regional governments and city halls won by the PP. The party will now run between nine and 11 of Spain’s 17 regional governments, and have an important say in several more. The Socialists are left in control of just Extremadura and two regions that did not vote—Andalusia and the Basque country. But all of Andalusia’s provincial capitals, including traditionally Socialist Seville, are now in PP hands.
A general election must be held by the end of next March. José Luis Rodríguez Zapatero, the Socialist prime minister, announced in April that he would not stand again, hoping, probably vainly, to save his party by acting as a lightning-rod for voter fury. Few now doubt that Mr Rajoy, on his third try, will move into the prime minister’s Moncloa Palace. The question is whether he will land the holy grail of Spanish politics: a parliamentary majority. If repeated, the PP’s ten-point lead over the Socialists on May 22nd should do—just. Anything less threatens to leave Mr Rajoy without a mandate for the reforms Spain badly needs.
Mr Zapatero’s popularity has proved inversely proportional to the wisdom of his decision-making. For two years he denied that Spain was in serious financial trouble. His support fell only slightly, despite recession and galloping unemployment. But last May, as contagion spread across the euro zone’s periphery, he executed a U-turn, embracing austerity and, to a lesser degree, reform. His ratings plunged.
Now the Socialists must choose a replacement for him. A bitter fratricidal battle is looming, with calls for an emergency party conference to remove him as secretary-general. If he loses control of his party, Mr Zapatero might be dumped as prime minister, or even have to call an early election, as the PP has urged. A party meeting on May 28th was due to set the course. Alfredo Pérez Rubalcaba, the deputy prime minister, and Carme Chacón, the young defence minister, are the front-runners to replace Mr Zapatero. In policy terms neither represents a huge change.
As his party grows more uneasy, Mr Zapatero is sticking to an austerity path that aims to reduce Spain’s budget deficit from 11.1% of GDP in 2009 to 4.4% by the end of next year. The OECD, a think-tank, says he is on target. The political cost is becoming apparent. But if the Socialists think left-leaning voters abandoned them only because of spending cuts, reduced civil-service pay and pension reform, they should study the demographics of the Puerta del Sol’s unhappy campers.
The protesters are mostly students. “Most live with their parents. Their problem is the lack of a future,” says Ignacio Sánchez-Cuenca of Madrid’s Juan March Foundation, a research body. Spain’s already-startling 21% unemployment rate rises to 45% among the young. Growth, at just 0.8% over the past year, remains sluggish. A decade-long bonanza of private borrowing, followed by a spurt in public borrowing when the crisis struck, has left a heavy debt burden. Discharging it may depress growth for years. The Economist’s May poll of forecasters predicts growth this year of just 0.6%, followed by 1.1% in 2012. That will create few jobs.
Provisional economic figures released earlier in May contain some worrying details. A surprise upturn in public-sector spending—which increased by 1.1% in the first quarter of 2011 after four quarterly declines—raises questions about decentralised Spain’s ability to cut its way to fiscal health. Ángel Laborda of Funcas, a savings-banks body, says regional governments and town halls may have been using this year’s budget to pay costs from 2010. That implies a hidden extra deficit.
Many of these administrations are now in the PP’s hands. Thorough scrutiny should reveal the true state of the books. The PP now has a good chance to show voters how it would run public finances. So far, its record is mixed. The Madrid region, long a PP bastion, has the lowest deficit of Spain’s 17 regions. But PP-governed Murcia is one of the worst performers.
Markets did not celebrate the PP’s win. Bond yields rose and stocks fell, stoking fears that Spain’s attempt to “decouple” itself from the problems of other peripheral euro-zone countries may be in trouble. Mr Rajoy has criticised Mr Zapatero’s pension reform without offering an alternative. If he wants to take control of a country that is not in crisis he must become clearer about his plans for government.
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