That the Popular Party (PP) was completely alone in the parliamentary vote to approve the government’s latest austerity measures — including the increase in VAT and the cuts to public workers’ salaries and unemployment benefits — illustrates the political stalemate that has been reached in the management of Spain’s economic and financial crisis. With his party’s absolute majority, Prime Minister Mariano Rajoy can pass whatever he wants, but this method does not help to create confidence. The costs of financing Spain’s debt are higher than ever and the country faces the prospect of being excluded from the bond market.
There are other alarming signs. Congress has yet to discuss the terms of the bailout for Spain’s banking system, whereas the German parliament did so on Thursday when it held its 10th debate in the past two years on the future of the euro. Finance Minister Wolfgang Schäuble overcame the reluctance on the part of Chancellor Angel Merkel’s party to sign up to the 100-billion-euro rescue package for Spain, the documents pertaining to which have been made public by the Dutch, Finnish and German governments, but not that of Spain.
Meanwhile, the lack of positive results stemming from government policy deepens the overall sense of uncertainty. So much so that Finance Minister Cristóbal Montoro chose to emphasize publicly the near-empty state of the Treasury’s coffers on the eve of a sovereign debt auction in which Spain ended up paying record levels of interest. This gaffe came on top of a series of mixed messages from the government, which one month says it will not be raising taxes any further only to announce a generalized hike in VAT the next. Rajoy’s administration oscillates between shows of national pride in the face of Brussels and attempts to hide the conditions that the European aid package will impose on our financial system. Because of the lack of coordination between Montoro and Economy chief Luis de Guindos, it would be useful to have a deputy prime minister specifically put in charge of economic issues who would attempt to correct this flip-flopping on policy.
Rajoy should also clarify whether he is set on his solitary path or still wishes to reach an inter-party pact on his economic reforms. No opposition grouping gave its support to the battery of measures presented to Congress on Thursday. Socialist leader Alfredo Pérez Rubalcaba criticized the government’s chosen austerity options and expressed his regret that Rajoy had not accepted his offer of dialogue made the previous week.
But it would appear that the government is not interested in consensus, an impression borne out by its insistence on blaming the current situation squarely on the inheritance it received from the previous Zapatero administration. This is merely playing to the gallery and conveniently ignores the fact that seven months of PP rule have not served to reduce Spain’s deficit. It is increasingly urgent that the government provide genuine leadership to fight within Europe against the restrictions that are strangling the Spanish economy. It is time to offer an image of a country that is aware of the plight in which it finds itself and is united behind a plan to exit the crisis. A plan for growth.