Indignant in Iberia (FT 28/5/11)
Protesters attend a demonstration against Spain’s economic crisis
Hispanic spring? Young ‘Indignados’ protesting last Sunday against high unemployment in central Madrid. The same day, voters suffering the effects of a severe downturn delivereda defeat for the ruling Socialist party in local and regional elections
After seven years of almost uninterrupted energy and optimism, José Luis Rodríguez Zapatero is finally on the ropes. The Spanish prime minister has suffered a humiliating blow dealt to other western leaders in charge during the post-2008 economic crisis. He has been badly beaten at the polls – in this case, regional and local – and his Socialist party is expected to lose again in the general election that must be held in the next 10 months.
“We have often won, and we know how to win. We also know how to lose,” said a subdued Mr Zapatero, conceding his party’s worst local election defeat since the restoration of democracy in the 1970s.
So far, so predictable. Gordon Brown, former UK prime minister, was voted out last year despite being praised for his management of the international financial crisis.
Yet Spain’s political upheaval is perceived – at home and abroad – as only the latest symptom of a particularly severe economic downturn far harder to resolve than mere popular disillusionment with the party in power.
This is a new, uncomfortable reality for Spaniards. After 15 years of outperforming Germany in terms of economic growth, only in the past two has Spain done worse. Until then, it was the toast of Europe, attracting nearly 5m immigrants and billions of euros of credit to build and finance housing stock revealed as surplus to requirements after the property bubble collapse.
Today many outsiders see the country as the eurozone’s next domino, the member most vulnerable to an international credit squeeze that would force it to follow Greece, Ireland and Portugal in seeking a European Union and International Monetary Fund bail-out. France’s Natixis this week became the latest investment bank to ask almost casually in a research report whether Spain should leave the euro and to speculate on what would happen if it did.
In Spain itself, people’s self-confidence has been badly dented by such unwelcome attention from the markets, as well as by the collapse of the domestic housing bubble in 2007. Even intelligent Spanish bankers and business leaders have started to see Anglo-Saxon or German conspiracies behind every lurch downwards in the value of their sovereign bonds.
Not that many plotters would benefit in the long run. Any bail-out of the eurozone’s fourth-largest economy, would stretch the EU’s resources to the limit, and put severe strain on the German and French banks that helped finance the rapid Spanish expansion of the past two decades.
A casual observer – a tourist wandering through the centre of Madrid, say – might conclude that the events of the past fortnight have confirmed Spain’s status as a specially weak economy and a fragile polity, making it a member of the “peripheral” nations’ club that is causing such consternation at the core of Europe.
A week before last Sunday’s elections, thousands of young Spaniards, organising themselves through Facebook and Twitter like Arab revolutionaries, took to streets nationwide to protest at high unemployment and the domination of politics by the Socialists and the rightwing Popular party. They occupied city centres, including Madrid’s Puerta del Sol and the Plaza de Catalunya in Barcelona, from which police yesterday tried to expel them using baton charges.
These self-proclaimed indignados (“the indignant ones”), mostly students and unemployed twenty-somethings, have plenty to complain about. Local politics is often steeped in corruption, and more than 100 candidates – some re-elected with increased majorities – are being prosecuted or investigated for such crimes. With unemployment at 21 per cent of the workforce, double the EU average, nearly 5m people are out of work. For those aged 24 or less, the rate is 45 per cent. For some political commentators, the only surprising thing about the youth uprising is that it did not happen sooner.
It would be wrong, however, to conclude that Spain’s economy is as weak as those of Greece or Portugal, that its banks are as loaded with bad property debt as those of Ireland or that its politics are dangerously unstable.
Almost without exception, the demonstrators have been peaceful and good humoured. They also lack a unifying cause akin to those of the Arab world’s pro-democracy protests.
This week the Puerta del Sol, lined with tents and makeshift stalls offering petitions and political manifestos, resembled London’s bourgeois-bohemian Camden Market more than Cairo’s Tahrir Square. On banners and posters, animal abuse, bankers, George Soros, racism, sexism and immigration controls get the thumbs down. Better education, revolution, the arts, recycling, organic food, solar power and political reform receive a clear thumbs up. Less clear is what they want to happen next.
“The main issue is that we are discontented and indignant at the system,” says Ana González, 23, a fine-arts student who works in a café, and sports a nose-ring and two studs next to her left eye. She says she is in favour of electoral reform to give smaller parties more representation. But as for how the protesters can achieve their aims: “We really don’t know.”
For the PP – the big winner in this week’s polls – the big problem is not some peculiar Iberian tendency towards failure and decay but the economic incompetence of Mr Zapatero.
Opinion polls suggest that Mariano Rajoy, the uncharismatic but competent leader of the resurgent party, is certain to be the next prime minister. Furthermore, such was the scale of the PP’s recent victory, and so deep are the divisions splitting the defeated Socialists, that an early election – probably in the autumn – now seems as least as likely as the prospect of Mr Zapatero hanging on until March 2012.
Bankers, business leaders and economists say Mr Zapatero was late in recognising the severity of the crisis but give him credit for vigorously pursuing since last May a plan to cut the budget deficit and restore Spain’s reputation in the financial markets. Without sufficient political support, however, there is no compelling reason for him to remain prime minister.
“With the coffers empty, people have ceased to believe in Zapatero fairyland,” says Manuel Arias Maldonado of the university of Málaga, recalling Mr Zapatero’s personal and ideological aversion to the public spending cuts he has been obliged to enforce. “To govern in Madrid [home of central government] against … the regions and the municipalities, that’s pretty hard. That’s the equivalent of paralysis.”
On a brighter note, Prof Arias says the sharp swing against the Socialists – in a country where most voters have liked to think of themselves as “centre-left” because of the taint left by Franco’s rightwing dictatorship – suggests the country is becoming more like a conventional western democracy. Many voters, it seems, simply switched their votes from the Socialists to the PP, which was founded by one of Franco’s ministers.
“Voting is less and less seen as an emotionally charged thing that has to do with family and alignments, and more as a pragmatic punishment or reward for the best and worst governments,” says Prof Arias.
The next government clearly faces a tough task in continuing the deficit-cutting begun by Mr Zapatero, and in laying the groundwork for future economic growth. But Mr Rajoy’s PP, far from laying out a detailed economic recovery plan, has said almost nothing about its intentions beyond calling for the early elections.
Both supporters and opponents of the party say its politicians fear they will suffer the fate of the UK Conservative party, which failed to win enough seats in parliament to govern alone, if they tell voters the truth about the economic hardship awaiting them.
“The PP has to make a very clear statement about where it stands in terms of economic policy,” says Jordi Canals of Barcelona’s Iese business school. “At some point you need a shadow government.”
Most economists think a Rajoy government would do little different from Mr Zapatero’s administration on deficit control, except perhaps enforcing regional budgets more rigorously. But they do expect a PP government to push for more radical liberalisation of the labour market and other measures to increase competitiveness.
In doing so, it would be able to build on an economic record that is not quite as grim as some bond market investors seem to think and exploit a democratic system more stable than the recent protests suggest.
During the years of crisis, Spain has reduced its dependence on foreign credit, halving its current account deficit. Multinationals in finance, energy and infrastructure have expanded overseas, exports have risen steadily and the tourism industry is expected to benefit this year from turmoil in rival destinations in north Africa.
“If the EU can somehow stave off the crisis – the currency issue, the restructuring of Greek debt – I think Spain will survive,” says Prof Canals. “It will be a slow process, but Spain will survive.”