Blocaj în Spania

I flew back from Spain (where I was at a conference) just as the results of the second Spanish general election of the year came out.  The incumbent conservative People’s Party improved its number of seats, while the opposition Socialists managed to finish second ahead of the Podemos-UL leftist coalition.  The turnout was just under 70%, one of the lowest in the post-democratic period.  It was expected that Podemos would move into second place, but it appears that the rush to the left had faded at the last minute.  Nevertheless, the PP cannot form a majority government unless both the pro-market, pro-EU Citizens party (which lost ground) and the Socialists back PM Rajoy.  Last time, they refused to do so.

But last time, the Socialists also refused to join with Podemos to form a leftist government, because that would mean confrontation with the EU over public spending and budget deficits, would encourage separatism in Catalonia and the Basque country (where Podemos finished first) and also might mean they could be swallowed up by Podemos.  So it is political stalemate again.  The most likely outcome is that PM Rajoy will form a minority government with the tacit backing of the Citizens and the Socialists for a fixed period and on certain terms.  The uncertainty in Spanish politics may not match that of Britain after the Brexit vote, but it is still there big time.

Despite its well-documented corruption (party kickbacks for government contracts both national and local), enough people have been prepared to vote for the PP, partly because the rich know that they are the party of big business and the banks and will protect their interests and partly because they were expected to revive the economy after the miserable failure of the previous Socialist government.

But although there have been some signs of economic recovery under Rajoy, it has been mixed at best and, at worst, has offered no relief to the majority.  The Long Depression since the end of the global crash in 2009 has exerted its icy grip over the Spanish economy as well, at least for most people.

Despite a decline in 2015, the youth unemployment rate remains among the highest in the EU. Total unemployment is now 21% but still almost one out of two of active people aged between 15 and 24 remain unemployed. And long-term unemployment remains double that of 2008.  The unemployment rate would be even higher except that Spaniards have left the country to look for work elsewhere in Europe (the UK and Germany) or even Latin America. The rate of net emigration has reached 250,000 a year, draining the economy of some of the most educated and productive young citizens.

Indicators measuring poverty and social exclusion are very high compared to the EU average, and deteriorated further in 2014. The IMF reported that “the improved labour market conditions during 2013 and 2014 did not translate into an improvement in social indicators in those years. The crisis led to a sharp increase in the share of the population at-risk-of-poverty and at-risk-of poverty or social exclusion). These poverty indicators deteriorated even further in 2013 and 2014 despite the amelioration in labour market conditions. The rise in the proportion of workers in part-time (from 14.5 % in 2012 to 15.6 % in 2015) and temporary jobs (from 23.4% in 2012 to 25.7 % in 2015) in recent years went hand in hand with an increasing risk of poverty among part-time workers (from 18.7 % in 2013 to 22.9 % in 2014) and temporary workers (from 17.5 % in 2013 to 22.9 % in 2014). Together with moderate wage developments, this contributed to the overall increase in in-work poverty observed between these two years.”

And as the EU Commission put it: “still high unemployment and the risk of labour market exclusion, affecting in particular young and low skilled people, hampers adjustment and implies high social costs. Furthermore, low productivity growth makes competitiveness gains hinge upon cost advantages, also affecting working conditions and social cohesion. If protracted, it hampers the transition of the economy to a more knowledge-intensive growth model.”  In other words, the only way things have improved for Spanish capital is by keeping wages down and employing cheap labour rather than making investments for new technology and higher productivity.

The EU Commission added that “Spain’s R&D intensity and innovation performance keeps declining, against the backdrop of a relatively low number of innovative firms…The average low skills’ level of the labour force hampers the transition of the Spanish economy towards higher-value activities. This in turn limits the capacity of the labour market to provide opportunities for the high number of tertiary education graduates in knowledge-intensive sectors.” That means no jobs even for those with degrees.

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