Spain in need of a second ‘Moncloa pact’

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

What Spain needs to face the external market pressure, and the internal social unrest is a wide political consensus among the political parties and the social partners, argues Cristina Manzano from the Madrid-based think-tank FRIDE.

Cristina Manzano is the editor-in-chief of foreign policy in Spanish and deputy director of FRIDE, a European think tank for global action based in Madrid, Spain.

"Demonstrations are becoming a common feature of Spain’s landscape. Protest against the economic measures taken by Spain’s new Prime Minister Mariano Rajoy has been mounting for weeks, and now the trade unions have called for a general strike on 29 March.

Unrest, however, does not seem out of proportion given the increasing deterioration of the economy and alarming unemployment rates, of around 23%. In fact, many international and European observers are astounded by the lull with which Spaniards have so far faced their economic fate. It seems that the storm is about to come.

The new Popular Party (PP) Administration’s reform programme is quite intense. Measures include cuts on social welfare benefits to shave off some of the state’s expenses, which together with a major tax raise will amount to €15 billion (1.5% of GDP), and a reform of the financial system, aimed at improving the solvency of banks and to restore the credibility of Spanish financial institutions.

The crown jewel of the government’s reform package is a comprehensive labour reform, which intends to introduce more flexibility in an extremely rigid market, thus hoping to favour job creation, especially for those under 30. Today, almost half of Spain’s youth is unemployed (46.4%).

But cuts and austerity are not a recipe to win the hearts and minds of the population. After a series of very bad economic news, the onset of a certain degree of violence in the protests set off all the alarms. On the streets, demonstrations that began in the Spanish town of Valencia quickly spread to Barcelona and other towns, with new scenes of violence and police toughness.

Spain’s new Prime Minister Mariano Rajoy was not amused by TV images showing how a police officer dragged a young girl by her hair during a students’ demonstration in Valencia. This might damage his government’s reputation abroad, at a time when the Prime Minister is striving to prove to Europe’s “bosses” that Spain can be a credible and reliable partner, and that the country will meet its commitments no matter what.

As tension grows amidst the gloomy economic perspectives and the prospects of an upcoming period of dangerous social unrest, some have even warned against the Hellenisation of Spain, in allusion to Greece’s extreme situation.

For Spain, the only way out of the (economic and social) crisis is a drastic national plan that can bring together the main political parties and manages to garner support from trade unions and business representatives alike; an agreement that leaves aside, at least temporarily, major political differences to concentrate on growth and jobs.

This has only been seen once in recent Spanish history, when all parliamentary parties, to prevent a democratic backslide due to serious economic instability, signed in 1977 the so-called Pactos de la Moncloa – which allowed the country to combat skyrocketing inflation rates, a tremendous external deficit and the billionaire losses of Spanish companies. 

Rajoy’s recent win in Brussels – where he negotiated with the EU and announced that the Spanish fiscal deficit for 2012 would go up to 5.8%, while maintaining the final target of 3% for 2013 – had awarded him the support of all political and social forces in Spain.

But the EU’s recent announcement of a maximum of 5.3% seems to have shaken any major commitment for consensus. This is further aggravated by divisions over the labour reform, which has become a major contentious issue, as it is seen by the left as a threat to Spain’s long-standing welfare state.

But now it is not the time for bickering or general strikes. These are a healthy part of the rule of law as it helps to keep governments in check, but will not help creating jobs. Spain needs more constructive criticism.
It is not the time for arrogance either. Having an absolute majority in parliament and a clear control of many of the regions, the incumbent PP Administration may not feel the need for such an agreement.

However, a common front would not only contribute to convince Europe of the seriousness of Spain’s commitments, but might even help convince the markets. Similarly, it would help the Spanish society to digest some of the tough measures that have been implemented, as well as the ones that are yet to come.

Meanwhile, the government, which has clearly set the path of austerity as the guiding principle of its economic policy, should start working actively to bring about measures that can boost growth and generate employment. These are most pressing and cannot wait until deficit targets have been achieved."

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