Sunday, August 31, 2014

Democratic Regeneration

Suddenly, Spain's government has decided that its priority for the coming months is what it describes as 'democratic regeneration'. These are words that few have ever associated with the Partido Popular and Mariano Rajoy but there's no need to worry; Spain's right wing hasn't suddenly caught the democracy 'bug'. The weight of that long political tradition is still sufficient to ensure that the PP regards anything smacking of greater democracy as something to be avoided at all costs.

Instead we are getting a response to the dismal results that Spain's two main political parties obtained in May's elections for the European Parliament. 2015 is a big election year in Spain, if everything is scheduled as expected the country will have municipal and regional elections followed a few months later by a general election. The shock of the European elections was twofold, firstly because support for the two main parties combined fell just short of 50% of the vote, and secondly because of the surprise emergence of Podemos as a potential threat to that two party hegemony.

The PP does not panic in a very public way, but results which had the party not even reaching 30% of the vote in their strongholds of Madrid and Valencia have had a profound effect internally. Were this pattern to be repeated in the municipal and regional elections then the PP faces the prospect of losing power in places where they have governed for decades. Imagine the bonfire of incriminating documents that might mean, assuming of course that any incriminating paperwork that exists hasn't already already been destroyed in the wake of all the corruption scandals of the last few years.

The PP has an abysmal problem in reaching agreements with other parties, and the prospect of either governing in minority or passing to the opposition is too terrible to contemplate. Something must be done, and that something appears to consist of manipulating electoral law to ensure they can still govern with fewer votes. Pioneer in the gerrymandering exercise has been Maria Dolores de Cospedal, who combines her job as secretary general of the PP with that of president in Castilla La Mancha. Using the excuse of austerity, Cospedal has pushed through a law drastically reducing the number of members of the regional parliament. The new law has the happy effect of both making it harder to dislodge the PP from power and of effectively excluding any smaller parties from representation unless they can overtake one of the big two.

Inspired by such an impeccably democratic example, Mariano Rajoy has announced that he intends to change electoral law for the municipal elections so that the party which receives the most votes gets to govern regardless of whether they have an absolute majority or not. Although they talk of a minimum threshold necessary for a party to claim control of a city without winning the election, we will have to wait and see what the PP tries to get away with. Currently they talk of 40% of the vote, but that could easily be lower if the poll data they manage isn't looking good. Today's El Mundo poll has them on 30% nationally, a third of those who voted for Rajoy in 2011 have gone and many may not be returning. Rajoy seems determined to push through a major change in electoral law regardless of whether any other party supports it or not, and the talk of 'democratic regeneration' is merely the cynical touch the PP seems to feel is needed to decorate all of their measures. If that's still not cynical enough for you they also claim the change will help to avoid corruption.

The illusion of change in order to ensure that everything remains safely in the same hands seems to have become the trademark of Rajoy's administration and the management of the country's crisis. As the two-party system shows signs of weakness they change to law to try and prop it up. If someone like Pablo Iglesias becomes popular partly as a result of television appearances, then the PP has a solution; try to make sure he doesn't appear on television. It's the concept of the managed democracy they hoped for after Franco's death, sure people can vote but not just for anybody. Come on. This is not just the attitude of the PP, the whole establishment of the transition years gets intensely nervous at anything that might upset the cozy cronyism they have nurtured carefully for so many years.

There is a delicious irony in seeing all those who shouted in 2011 that what the indignados had to do was form a political party and present themselves for election changing their tune. Now that a section of the movement appears to have done just that and with a certain amount of success, not just the music changes as laws get quickly changed to preserve the status quo at any cost. This is not just about Podemos, new broader based civic platforms are quickly forming to present alternative candidacies in big cities like Barcelona, Sevilla and Madrid. The common denominator is a rejection of the old way of doing politics, and of those who administer the crisis in their own interests.

The emergence of Podemos, placed just behind the PSOE in El Mundo's poll, has had the effect of provoking some kind of crisis in almost all of Spain's political parties. This was most evident with the PSOE, who finally realised they had to renovate their image after over 2 years of steady decline rather than improvement in opposition. The unconvincing way they have done this, with all sorts of manoeuvres to try and fix the election of a new leader, doesn't bode well for a significant change of direction. The PP, who vilified Rubalcaba as being the epitomy of evil, suddenly realised how much they will miss him as they become the only party of the 'old guard'. They were much more comfortable with the ritual 'y tú más' sessions that the increasingly rare parliamentary debates in Spain consist of.

Perhaps the party which has taken the biggest hit from Podemos has been Izquierda Unida, who found themselves pushed behind the new party in several regions. IU had benefited from disenchantment with the major parties, but not as much as they should have. Podemos come in a with a different language and fresher style, and the leadership of IU has been left wondering what happened. The dead hand of the Spanish Communist Party has damaged IU's prospects for years as many of those who could be attracted to the platform left to do other things. Those behind Podemos amongst them. 

Even Unión Progreso y Democracia, who presented themselves as a safe way to break the two party hold, have a crisis of their own as they are no longer in pole position to be the alternative. Still very much the personal project of Rosa Diez, the party machine reacts badly to dissent and those who favour a fusion or agreement with Ciudadanos are subjected to insults by the loyalists. Diez apparently believed she could eclipse the Catalan upstarts, but her right wing media allies seem to be in favour of the merger and have fanned the flames. Again, the emergence of Podemos leaves UPyD looking every bit as much a part of Spain's political establishment as the two big parties, a case that is supported by the reaction of its leaders to the new party.

The opinion polls differ greatly on just what is happening, and are also subject to ever greater manipulation as part of the, occasionally hysterical, counter attack. The attempt by El País a few weeks ago to spin a revival in the PSOE's fortunes following the election of Pedro Sánchez as leader was widely criticised because of the way in which they found a 10% increase in support for the major parties that no other poll seems to detect. The pollsters in general have yet to offer any explanation for how they got the voting pattern so badly wrong in the European elections, and given that there have been no elections since you have to wonder how they are adjusting their polls to fit the new scenario?

The European elections in Spain are special in that they are the most representative, despite the low participation. This is because it is a national vote and therefore doesn't suffer the sort of deformation present in general elections here, that which allows Rajoy to have an absolute majority in parliament with well under 50% of the vote. Precisely the sort of system he now wants to introduce in municipal elections too. Incidentally, if you think that the Spanish electoral system has been brutally unfair in past general elections, just wait and see what happens in the next election if the two major parties have a lower vote but are still clear of any rivals. That could really provoke some democratic regeneration.

Wednesday, June 18, 2014

Felipe VI....A Profile Of Spain's New King

Son of his father, Felipe Juan Pablo Alfonso de Todos los Santos de Borbón y Grecia has successfully come through a rigorous selection process to be chosen as the new Spanish head of state. Some doubt has been cast, from those carping republicans, on his qualifications for the job - given that he appears to have reached the age of 46 without ever having had what could be described as a real job. His wife Letizia can tell him about that, although her decision to abandon journalism for life as queen to be suggests she wasn't that keen on a career either. Felipe sometimes has a beard, and sometimes doesn't, all of which leads to inevitable confusion. Perhaps it's false? We don't know. The elephants of Botswana were unavailable for comment at the time of writing this profile, although there has traditionally not been much love between them and la familia Borbón.

Friday, April 04, 2014

The Neighbourhood Goes Downhill

This used to be a nice area, before they moved in. There they are, with their funny food and that way of talking they have. Don't make the slightest attempt to integrate with the locals do they? 

Before we could be out and about doing whatever we wanted, it was a friendly area. The kids could be out on the street playing, now its not even safe to take the dog for a walk. What makes it worse is they think they're better than us. They certainly seem to live better than we do, god only knows where they get the money from. You don't ever see them doing any work do you?

Still, they've got those flashy cars and then they think they can park where they like and that nobody can tell them not to do it. We've always got the police in the area chasing after them at all hours, where's the respect eh? You can't say anything to them, in case they get aggressive and they set their TV station on you.

Don't get me wrong, some of my best friends are aristocrats but I think its all disgusting it really is....

Friday, January 10, 2014

The Spanish Austerity Disaster

Spain is in a dire economic situation. If you look at the economic data and especially at the unemployment figures you would think such a conclusion is beyond doubt. All of which makes it so strange to read frequent media reports, from inside and outside the country, which present a radically different picture. These reports talk of a country which has turned the corner and faces a bright future following a difficult period of implementing much needed structural reforms. It's bullshit. Bullshit based on highly selective cherry picking of data and misrepresenting the history of the crisis.  

A few weeks ago, with the publication of Zapatero's book, we finally got to see the content of the letter that was sent by the European Central Bank to ZP back in 2011 when the spectre of the dreaded 'rescue' seemed like a daily prospect. In that strange sort of proprietary attitude that Spain's prime ministers have towards government documents (see Aznar and the documentation about the Madrid bombings), Zapatero seems to have treated the letter as personal correspondence and taken it with him. What is striking about the letter is how little most of the demands contained within it had to do with addressing the immediate economic distress of the country. Instead, it amounts to a (hidden from public view) set of measures that more or less accurately represent the agenda of those who have championed the austerity approach that has now been implemented in Spain.

With the bond markets apparently so content, the stock market rising and the Spanish government busily (desperately?) trying to push an optimistic feelgood factor it seems like a good time to take a look at the results of the experiment. The bullshit really starts with the Rajoy government's bombastic claims about how they have taken the difficult measures necessary to avert the rescue. The extraordinary result of Rajoy's wise and determined leadership, if you have the tunnel vision necessary to believe in it, is that he hasn't just saved Spain from collapse but all the other countries affected by the Euro crisis too! Now there are some who would say that it was Mario Draghi's game ending we'll do what it takes to save the Euro statement that changed things, but that risks undermining the pro-austerity argument. We'll let the data do that.

It's worth remembering that Spain back in 2011 was also at the point of exiting recession. The second recession of the crisis, which covers the last two years, was deliberately provoked by the adoption of those austerity measures that some would now like to credit with bringing about the exit from that same recession. Not just the recession, but the addition of close to another million people to Spain's already enormous unemployment total together with the destruction of productive economic activity that this represents. Companies which had weathered the storm of the first recession without realising (why would they?) that the country would then be pushed into a second one couldn't last any more and closed their doors. It's a terrible price to pay, even more so when you look at the meagre results.

All these measures have been adopted in the name of reducing Spain's budget deficit, the dogma insisting that huge cuts in public spending had to be implemented and ignoring all warnings of the consequences. Assuming Spain has hit its deficit target for 2013, and leaving to one side our generous assistance to the banking sector that counts as deficit, the country has managed a reduction of something under 3%. Not bad is it, 350-400000 jobs lost for each point of deficit reduction? Some might say it hasn't been worth it. Indeed, those insisting on recession as the route to deficit reduction eventually had to recognise it wasn't working, not openly of course but the relaxation of deficit targets was nothing less than an admission that it wasn't working and what ultimately prevented Spain from tipping into the catastrophic state that Greece finds itself in. Nevertheless, Spain's public debt burden is now massively higher than it was before the medicine was administered.

None of this matters to the spinners and the cherry pickers. Look at the exports, they say. The balance of payments is positive, proof that the medicine works. I admire the shallowness of this argument, people who write about economics as a profession but don't apparently understand that throwing hundreds of thousands of people out of work depresses consumer demand and reduces imports. Hey, make another million unemployed and it will get even better! If economic depression reduces petrol consumption to the level of the 1990's then marvel at the success for Spain's import bill! On the export side it is of course completely true that Spain's exports have been the success story of the crisis, the only success story to be told apart from the ability of the financial sector to suck us dry. The problem comes when the spinners try to attribute this success either to austerity or to the accompanying 'reforms'. The improvement in Spain's exports predates all of the austerity measures adopted, and the much vaunted labour market changes. We have to give credit though to austerity for finally putting an end to that export improvement, squeezing the economy of the entire Eurozone means that Spain's major export markets aren't in the mood for buying either. 

It's odd, because according to the destructive dogma Spain couldn't possibly be a successful exporter in the last few years. We've been told all along that the fundamental problem for Spain is that it has become uncompetitive, and the austerity programme has been a clumsy attempt to force through the internal devaluation (read reduced wages) that would restore the economic balance with its competitors. Ironic then that it should end up damaging the sector of the economy that dared to contradict the sacred theory. This disastrous strategy of destroying broad sectors of the economy in the belief that a dynamic new model will magically emerge from the wreckage hasn't worked anywhere it has been tried. The destruction of so many low productivity unskilled jobs doesn't mean they get replaced by better ones. Just look at the few new jobs being created. 

This is where we get to the grim reality. Spain's economy has changed as a result of the crisis but it has gone backwards rather than forwards. For all the talk of reforms, and it is mostly talk, the objective of Rajoy and company has been to weather the storm with as little fundamental change as possible. I laugh when I read articles in the press about the wide ranging reforms Spain is supposed to have undertaken, wondering about the use of the plural. If you disagree try to make a list of them without thinking too hard and see what number you get to. The main change is in the labour market and because people don't buy those nasty imports if they have no money we should of course be pleased that the move towards more precarious low-paid employment is showing signs of success. Just as we should be pleased that many of the better educated young people are leaving the country. The government is certainly pleased with this, it's one way of reducing the unemployment total short of a serious epidemic. PP supporters gleefully proclaim the benefits of a period abroad. Character building.

This is not to say that Spain hasn't touched bottom on job destruction, just that reaching that point still leaves it far away from anything resembling sustained job creation. The labour market now requires detailed attention to see what is really happening. It is clear from the difference between social security figures and drops in the unemployment total that many people have simply dropped out of the labour force for one reason or another. It's also clear that many of the (overwhelmingly temporary) jobs created in 2013 were due to an unexpectedly good tourism season. Emigration, seasonal work in tourism and agriculture. Remind you of anything? Yes! A bonus point to the person at the back who said the 1960's. We've done the 1930's revival in terms of economic 'theory', so its time to move forward through the rest of the last century. Shame the construction leg has been blown off, let's hobble forward on tourism, good harvests and the distant hope of ridiculously oversold pelotazos like the Olympics and Eurovegas just to show how things have changed. 

Things get grimmer. Any Spanish emigrant who finds a good job overseas should hold onto it for at least 10 years and just enjoy the holidays back in the old country. No serious prediction can be found showing promising economic growth for Spain in the next decade. Next year the official prediction is currently (these things change almost monthly) for 0.7% growth. It doesn't get much better for the following years and the 2% growth that might indicate conditions for making a serious dent in that unemployment total looks far away. 2020 is the year I see quoted commonly for Spain's GDP to reach pre-crisis levels, but don't even imagine pre-crisis employment levels for that date. 12 years of crisis is some, cough, business cycle. Stagnation is the outcome for the next few years, sluggish growth at best. If you think or hope otherwise then ask yourself about the attention paid to pensions. Spain's public pensions are sustainable with high employment, so why so much attention focused on reducing their value (apart from the obvious commercial interests of the contracted experts)?

The markets and the banking sector seem very happy with this prospect, who wouldn't be after the vast sums of public money pushed their way. Hedge funds picking over the few bits of flesh left from the construction boom are presented as if they were investments in the future of the country. The electricity companies can raise energy bills 10% a year and still have the government claim that we owe those same companies ever greater sums of money. Seats on the board await the valiant ministers who indulge them. That thick layer of 'comisionistas' - notaries, registrars and other 18th century leftovers who are extremely well represented in the government not only remains intact but will be given extra sources of income for hitting a piece of paper with a stamp. No need to wonder why Spain has such low salaries for a high cost of living. A brutally unfair tax system remains fundamentally untouched, rewarding fraudsters and the wealthy whilst those with low to medium incomes bear the brunt of the tax burden.

Managing expectations and declining living standards for the majority of the population is the challenge. Spain's government has it hard in this respect, they have a spectacularly greedy and corrupt elite and little chance for the next few years of keeping the masses content with an asset bubble like the last one. I remember those on the right who used the ridiculous taunt that the left just wanted to redistribute wealth instead of creating it. How things have come full circle, this is effectively now how many European governments are working with the tiny detail that redistribution goes from the poorest sectors to the wealthy. There's no money to pay for anything you see, unless you represent part of that elite. Nobody travels down the toll roads built by your company, we'll sort that out with compensation which we can add to the deficit. You have this expensive and useless arms contract to pay for? We'll just slip a special provision into the budget to pay for that. You need a new hospital! Didn't you hear us when we said there's no money!

Spain never had a significant welfare safety net, but austerity has bitten a big chunk in what existed. Payments to dependent people, so they can be properly looked after, have been almost killed off. The PP always hated a measure that did so much to help some of the most vulnerable who should be shivering in the cold outside churches anyway. Pensions are declining, their real value undermined in a typically underhand manner, just at a time when unemployment means many households are dependent on the income of their retired members. Hundreds of thousands of people have been left without any guarantee of health care, with all the consequences for public health that this entails. Who knows how many habitable homes are kept empty whilst families lose their home because of mortgage evictions. Anything linking incomes to prices is being removed, a link never needed by those who can award themselves huge bonuses for each successive year of failure.

The pro-austerity party have got everything they asked for, although you sense it will never be quite enough. There will always be something lacking that stands in the way of the coming Spanish economic miracle. That final labour market change perhaps, although I did see a job advert on Twitter yesterday that advised anyone expecting payment not to apply. The gloomy economic predictions don't come from the anti-austerity side, they are produced by the same organisations and companies that championed the austerity process. Even their own economists don't believe the propaganda when it comes down to it. What began as a private financial crisis is still a private financial crisis and the critics of austerity have been been right about everything they said would happen. The real austerity disaster is that the people who got it wrong are still in charge. Determined to learn no fundamental lessons from the failures that caused the longest economic crisis since the 1930's, the only route they offer leads towards the next one.