Spain: predictable results in uncertain times

21 Nov

The most remarkable thing about yesterday’s election results in Spain is how unremarkable and predictable they were. For weeks, the opinion polls had been predicting that the incumbent Socialist government would be trounced and it duly was. The opposition Partido Popular (PP), lead by a seasoned PP politician, Mariano Rajoy, won 186 seats in the 350 seat assembly. The Socialist Party, the PSOE, won 110 seats. In terms of percentage of the vote, the PP’s victory was all the more striking: 44.62% of the vote for the PP, 28.73% of the vote for the PSOE. The scale of the PP’s victory was no doubt a reflection of the widespread disaffection with the governing Socialists. But beyond that, there was little in the results that indicated the scale of the economic and social crisis the country is facing. No new political formations have been thrown up by the crisis. The United Left party (IU) won 11 seats and 6.2% of the vote – not an insignificant result. But generally the smattering of small parties that won altogether 54 seats were an ideological mixture: left, right, Catalan and Basque nationalist. The Indignados movement, fueled by a widespread disenchantment with the ruling political class, did not prompt any mass withdrawal from the electoral process. Their slogan – They Don’t Represent Us! – did not seem to have much impact. The abstention rate was 28.3%: higher than in the two previous elections (2008 and 2004) but lower than in 2000.

Though unemployment stands at above 20% and the country’s ability to auction its bonds on the international market is looking shakier by the day, the prevailing sentiment in the course of the campaign was that of resignation. Rajoy himself did not propose any new ideas on how to tackle the crisis. His cryptic slogan that promised to transform Spain into the “Germany of the South” could be interpreted in a multitude of ways. His promises of fiscal rectitude and public sector reform was – in the absence of specificities – no more than a vague nod in the direction of both the markets and the EU. That an election at such a crucial time should throw up so few surprises is perhaps a fair reflection of how people are responding to the crisis. But in the case of Spain, it is surprising. After all, when the global financial crisis hit in 2008 Spain was performing well. Its government did not – contrary to Greece – run up large debts in the good times. Public borrowing was low as tax receipts from high growth rates ballooned. In 2007, its debt ratio was only 36% of GDP and from 1999 through to 2008 Spain ran a balanced budget on average i.e. its borrowing was equal to zero.

Spain’s problems today are in part the result of an asset price bubble. Whilst the government did not run up debts during the boom years, private borrowing in Spain rose rapidly as individuals were able to access credit easily via national and international channels. When the downturn struck, individuals found themselves saddled with extensive debts. Regional Spanish banks have also been left with a large number of bad loans, made to finance real estate projects that will never see the light of day. Repayment of these debts has cast a long shadow over the Spanish economy as spending power is squeezed and as banks refrain from financing the private sector.

However, this does not explain why the Spanish government is today struggling to find buyers for its bonds. That is to do with the common currency union. In a downturn, governments usually run up debts in order to pay for increases in welfare payments: with +20% unemployment in Spain, those payments are large but given Spain’s position at the beginning of the crisis it should be able to weather the storm. However, because of the common currency union, the use of automatic stabilizers is limited: Spanish government borrowing is judged not on its own terms as much as in terms of the wider dynamics of the Eurozone. The fact that these automatic stabilizers would have an inflationary effect which would reduce the debt burden in the longer term is also ruled out by the currency union. The disciplinary effect of monetary union is thus not neutral but specifically kicks in to restrain some policies rather than others. As already argued on The Current Moment, the effect is to structurally lock countries into internal adaptations through domestic wages and prices instead of adapting through a mixture of internal and external measures.

A measure of success for today’s protest movements should surely be whether or not they are able to challenge ruling orthodoxies in ways that impact upon electoral outcomes. The evidence from Spain is that up until now, protests have had no such impact.

9 Responses to “Spain: predictable results in uncertain times”

  1. Tarig Anter November 21, 2011 at 1:30 pm #

    Financiers’ Reich is Buying Some European Countries
    Major German and British investment banks and financiers who are the main creditors and lenders for many European countries in the last twenty years deliberately created the current European sovereign debt disasters to gain control over certain countries.
    How to Buy a European Country?
    EU and Banks are Weapons of Mass Slavery
    Bad loans are actually toxic loans because they are poisonous. It is a calculated gamble and a secure one with the definite support from the governments of creditors, namely: Germany; UK; and France.

    There are many questions about the initial silence and roles of these governments and their controlled EU institutions.
    The core of the problem was “irresponsible lending by banks”. A credit bubble was created through banks’ lending out money to individuals and businesses to acquire assets that proved to be worth less than the amount of the loans. This was especially true in the real estate sector – something we also saw happening in the United States.

    What is called “irresponsible lending by banks” is actually a deliberate act of sabotage for the sovereignty of specifically targeted some European states.

    It is a replay of the tragic comedy “The Merchant of Venice”. Cutting a iuſt pound of his fleſh
    But can the money lenders take their loot without dropping blood?

    These debts were made with evil intentions and they must be either written off or rescheduled by the people without additional usury.

  2. Tarig Anter November 21, 2011 at 4:19 pm #

    The main challenges for the new Spanish government surely will not come from internal problems, because major German and British investment banks and financiers are taking over Europe in an advanced leap to globalist hegemony.

    United by “all means” is in Angela Merkel’s warnings: “Another half century of peace and prosperity in Europe is not to be taken for granted. If the euro fails, Europe fails. We have a historical obligation: To protect by all means Europe’s unification process begun by our forefathers after centuries of hatred and blood spill. None of us can foresee what the consequences would be if we were to fail.”

  3. The Current Moment November 21, 2011 at 4:54 pm #

    Tarig, you seem to impute to both banks and private actors more generally the kind of prescience that even fervent believers in the rational market hypothesis would shy away from. We prefer to investigate the current moment as a set of political dynamics, open-ended and often contradictory, that have little to do with a behind the scenes take over of the world by a handful of conspiring financiers.

  4. Tarig Anter November 21, 2011 at 5:30 pm #

    The Current Moment, More about Goldman Sachs men in the EU Stephen Foley wrote in The Independent on 18 November 2011:
    “What price the new democracy? Goldman Sachs conquers Europe”

    Also, I am investigating specific actions and inaction by the EU and globalist bankers like the following questions posed here to all readers:

    1- Do you have any idea why these investment banks and financiers provided bad debts?
    2- Do you know the names and ownerships of the major investors and creditors to each European country in crisis?
    3- Why the EU institutions did not warn and intervene before approving the loans to heavily indebted countries?
    4- Why the EU is suddenly very vigorous in dealing with debt default and bankruptcy while they were watching the clear problems in the making?
    5- What made elected governments exceed any reasonable debt ceiling and overspend beyond their capacity?
    6- Why the essential financial and economic prerequisites of the EU were relaxed and allowed heavily indebted countries to gain membership?
    7- How far the EU and the financial markets are legally allowed to topple democratically elected governments and appoint unelected rulers?
    8- What are the invisible relationships between the EU institutions and those investment banks and financiers?
    9- Why the credit rating system was not applied to states that exceeded reasonable Debt/GDP ratio?
    10- Why very rich countries like the USA, Germany, Luxembourg, Belgium, Switzerland, Austria, Sweden, Denmark, Finland, Norway, France, and the UK are the top indebted countries without interference?

    I appreciate any information and comments on these questions to let everybody know the truth behind the alliance between bankers; bureaucrats; and senior officials in any country.

  5. scott November 21, 2011 at 7:41 pm #

    There doesn’t need to be a conspiracy if a group of like-minded people who are socially similar and have similar economic interests feel the same way about an issue. The Euro powers that be are wedded to a neo-liberal narrative that ignores the distorting effect of currency union and says that the zone’s problems are the result of profligate safety net spending. The cure apparently is lessened regulation, lower incomes, impaired sovereignty, and effective rule by unelected technocrats. All of which favor the interests of the few who have the most resources over the many who lack that kind of wealth. No, we don’t have mustache-twirling vaudeville villains meeting in secret conclaves, but you don’t have to be a member of the tinfoil-hat brigade to sense a real threat to Europe’s postwar social democratic project and to believe that the self-styled producers are tired of supporting the eaters.

    • The Current Moment November 22, 2011 at 8:01 am #

      Scott, point well taken. However, to see events as being overrun by like-minded individuals with similar interests, strengthening their hold over Eurozone economies, is a depoliticized picture of events. The fact that a single set of ideas – supply side reforms, deregulating labour markets, raising retirement ages etc. – has become the dominant outlook of EU institutions and national governments is a reflection of political developments in Europe. That social democratic project you mention has been entirely transformed since the 1970s. It is not the one that existed in the 1950s and 1960s. Today, we have a curious alliance between actors of the old post-war corporatism (organized labour, employer associations) and a very different kind of economy far more hostile to the interests of labour. Politically, parties traditionally representing different segments of society function today as governing parties, not as vehicles for political representation. That narrows the political process and has allowed national executives to build up a series of institutions at the European level that pursue the same economic ideas. To present this as a neoliberal dogma of the few lording it over the many makes it seem more coherent and powerful that it really is. In the vacuum left by the dismantling of the post-war Keynesian consensus, people were always going to have a go at making a buck. Nothing new, or impossible to overcome, there.

  6. Tarig Anter November 21, 2011 at 8:02 pm #

    I have no more convincing words other than what I stated above or on my blog. Thanks.

  7. Noticias November 28, 2011 at 10:55 am #

    Es muy interesante tu web, voy a seguir leyendo

  8. Paco A. February 17, 2017 at 9:25 pm #

    Well, this is correct: “There doesn’t need to be a conspiracy if a group of like-minded people who are socially similar and have similar economic interests feel the same way about an issue. “

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