Monday, May 25, 2009

Spain Is Economically And Politically Bankrupt

Rajoy prescribes dose of Spanish austerity
By Victor Mallet in Madrid

Published: May 25 2009 17:45 | Last updated: May 25 2009 17:45

Spain’s opposition Popular party and Mariano Rajoy, its leader, have not had a good crisis.

Although Spain has plunged into its worst economic recession since the end of the Franco dictatorship in the 1970s, the right-wing PP has failed to capitalise on the Socialist government’s discomfiture over the country’s 4m unemployed and has only just begun to match the Socialists in the opinion polls.

Even business leaders who reflexively support the PP complain that Mr Rajoy, a former cabinet minister, lacks the drive and charisma to lead the opposition to victory in a national election due in 2012.

Mr Rajoy, however, has been reprieved by his party’s outright regional election win in Galicia – his home – in March. In an interview with the Financial Times, he launched a stinging attack on the government’s economic policies and predicted victory for the PP in the June 7 European elections.

“The government has presented 11 economic plans since March 2008. Every fortnight there are two or three measures announced. There’s no order or coherence,” said Mr Rajoy.

Mr Rajoy was scathing about the “untenable” rise of Spain’s indebtedness. “At the end of 2007, Spain had a budget surplus of something over 2 per cent [of gross domestic product]. At the end of 2008, the deficit was already 3.8 per cent and at the end of 2009 it could be at 10 per cent.”

The PP, Mr Rajoy said, believed in “austerity” and would aim for a budget deficit of about 3 per cent – the same as the now widely ignored limit set by the European Union.

For all Mr Rajoy’s optimism, it is not clear that Spanish voters are in the mood to support austerity or the PP’s plans for labour reform and lower taxes.

The PP crept ahead of the Socialists at the start of this year in the opinion polls but the latest survey shows them almost level with about 42 per cent support each.

The PP leader may gain more traction, at least in central Spain, with his complaint that the 17 autonomous regions have gone too far in imposing local languages at the expense of Spanish and in applying divergent commercial standards that cause headaches for investors.

In defence of his plan for a law on the unity of the Spanish market, he gave the example of the government’s plans to help the motor industry through the crisis with a €2,000 subsidy for the purchase for each new car, a measure that has run into bureaucratic obstacles in parts of Spain.

“Imagine that if you wanted to buy a car in Manchester, there would be a certain aid package, and in Liverpool there would be totally different regulations. This is what is happening in Spain,” Mr Rajoy said.

He admitted that the PP, like the Spanish Socialists, was campaigning in the European elections largely on domestic issues. “We will win the European elections. The Popular party will be the leading political force [in Spain] in the vote,” he predicted. As for his own performance, the self-effacing Mr Rajoy is not a populist – he smokes fat cigars and prefers modest local meetings to big crowds – but he insisted he was eager and ambitious enough to be Spain’s next prime minister.

“If not, I wouldn’t be here,” he said at his party headquarters in Madrid as he prepared to tour the country on the European election campaign trail. “I am going to join this battle because I think things could be done infinitely better, because I have the desire and lots of experience.”

The next test for Mr Rajoy, then, will be the results of the June 7 vote. If the PP does well, he should in theory be on track as a future Spanish prime minister after national elections. If not, he will be under more pressure than ever to step aside.

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