After the failed investiture of Socialist Pedro Sánchez, Spain is preparing for a new national election. There is no clear prospect of what the new government could look like and this uncertainty will persist. The most important change compared to the last election is the alliance between Podemos and Izquierda Unida (the ‘United Left’) who in the new campaign will operate together as Unidos Podemos. According to the most recent polls this new coalition seems to overtake the PSOE (Socialist Party) and is just behind the conservative PP (People’s Party). Yet the differences are small and everything will depend on the electoral campaign. Although the campaign will officially be launched on 10 June, the party leaders have already started making their electoral promises.
To give you an example; in an interview with the British newspaper Financial Times Rajoy (PP’s leader and acting Spanish president) promised a tax-cut in case he will be re-elected on 26 June. This statement triggered severe criticism, because on the same day the interview was published, the European Commission was debating possible sanctions for Spain and Portugal for violating their budget deficit limits. If sanctions had been imposed, it would have meant a fine of 2.000 million euros for Spain plus a renewal of the obligation to get the budget deficit below 3% GDP.
Spain closed the year 2015 with a deficit of 5% of GDP, which is eight decimal more than agreed with Brussels. Moreover, Spain’s public deficit for the first time since 1909 exceeds 100% of GDP. In this challenging situation, Rajoy asked for more time to accomplish the deficit targets because, so he argued, the failure to meet the target was due to the fact that inflation was lower than expected. And at the same time he promises a tax cut should he be re-elected!
Rajoy announcing a new tax cut at the very moment that Juncker seemed to be ready to postpone the possible sanctions was obviously not such a hot idea ─ it could have influenced the decision of the European Commission negatively. Luckily, the Commission decided to examine the situation in Spain again in early July and to postpone the decision about possible sanctions. In the meantime, Brussels will give Spain one year extra to reduce the public deficit below the 3% of GDP. But in exchange, they demand new budget cuts and adjustment measures in the order of 8,000 million euros over the next two years.
Without any doubt this decision was taken in order to avoid influencing the outcomes of the upcoming election. If Spain had been fined, this would have created unrest among its citizens. We should not forget that the 15M movement (which gave birth to Podemos) started as a protest against the austerity measures and cuts. But, are we sure that this Commission decision will have no effect on the national election? I could imagine that it gives Mariano Rajoy an advantage as the adjustments will have to be implemented by the next president without the acting president’s electoral campaign.
Since the Great Recession and the austerity measures imposed on the country to overcome the economic crisis, the Spanish worry about economic issues. According to the Spanish Sociological Research Centre (CIS), unemployment and economic problems are seen as the main problems by a high percentage of Spanish citizens since 2008. Due to the numerous corruption scandals in the last years, people are also increasingly worried about corruption. They are tired of suffering the worst consequences of the crisis while the media are full of news about corruption cases. It is therefore not surprising that in order to attract voters political parties focus on economic issues in their campaigns. However, does it make sense to promise more jobs and a tax cut when Brussels demands new adjustments and reforms?
We will see what role the European Union and the public deficit will play during this electoral campaign, compared to the previous one. The PP will predictably emphasise that they succeeded in reducing the public deficit and that they did everything ‘the right way’ to improve the economic situation in Spain ─ even though it meant cuts in social rights. On the other side, Podemos and Izquierda Unida (Unidos Podemos) will taunt the PP with the social consequences of their cuts. They will stress the necessity of putting the citizens first and thinking of the impact of the austerity measures. Unfortunately, over the last weeks they have demonstrated their inability to put citizens’ interests first and to form a government. The socialists (PSOE) will also criticise the PP and their social cuts but without mentioning those cuts and anti-social reforms the former socialist President Zapatero was responsible for. And Ciudadanos, finally, who consider budgetary stability a priority, will blame the PP for the deficit and will use this to justify the reduction on social spending which they are advocating now compared to what they promised in their last election programme.
During the upcoming campaign each of the political parties will claim to be the best option to improve Spain’s economy. It is also likely that most political parties will attack the PP’s economic management. It is curious to see political parties actually agreeing on something before this new election, an election which has become necessary because of their incapacity to agree on forming a government. And, worse still, they were not even able to come to an agreement on how to reduce the election spending –another example of an economic issue that was in the centre of the public debate just a few days ago. The economy will dominate the headlines again in July when the new government has to implement the cuts and adjustments requested by Brussels. I can only hope that the most vulnerable citizens will not again pay the highest price as was the case under the last austerity measures.
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