THE BLOG

Two Ways To Fix a Country in Crisis

The two main Spanish political parties, the conservative Popular Party (PP) and the center-left Socialist Party (PSOE), have very different recipes to get out of the economic hole after the presidential election of November 20. With an unemployment rate of 21percent, 5 million people without a job and a risk premium that has reached historic levels, PSOE -- currently in office -- is doomed to lose the election. The crisis has hit socialists hard and the opinion polls show the worst results in the history of the party, despite the efforts of their new leader, Alfredo Pérez Rubalcaba. He has failed to convince the voters that he has nothing to do with the decisions made by PSOE in the last year. He has been trying to create a new brand. The conservative (PP) hasn't needed to prepare much of a campaign. Their strategy has been to wait until the crisis has terminated with the current president, José Luís Rodríguez Zapatero. Now, they are inviting voters to "join the change". A change that seems to be long awaited by Spaniards, as surveys show that Mariano Rajoy, the leader of PP, will be the next Spanish president backed by a broad absolute majority. But the question is: What measures will he take after the election?

The answer is, he will make cuts. Rajoy wants to meet the adjustment requirements imposed by the European Union, and his proposals consist of liberal economic measures. He will privatize telecommunications, airports, railways, regional televisions, the post and the energy sector. He will also allow private capital into public sectors such as infrastructures, education and the public health system and promises to lower corporate taxes. In his electoral program, all these measures are, nonetheless, very imprecise. All signs point, though, to cuts in almost every single sector, except in the pensions system. Some international media have appointed Rajoy as the "master of ambiguity", as he seems to hide his austerity measures and cuts behind a program full of euphemisms: for instance, for "privatizations", he uses the word "liberalization", and when he means "private investments", he says "public-private collaboration". A big unknown is: where will he make the cuts? Until now he hasn't specified it, but the education sector has already suffered cuts in the regions currently governed by PP. Regarding the employment sector, the conservatives have announced that they will make a structural change by increasing flexibility in recruitment and redundancy costs.

On the other side, Alfredo Pérez Rubalcaba (PSOE) has turned left after the disappointment of the electorate on the soon-to-be latest government. During the last weeks, his mantra has been that "getting out of the crisis means postponing the cuts in order to avoid a recession". So austerity but only to a certain extent: he promises not to touch the social benefits. For PSOE, policies against deficit have not brought growth. On the contrary, they believe they have destroyed many jobs. Rubalcaba proposes to ask the EU for a two year extension of the "Fiscal Consolidation Plan" which was put in place in May 2010 and that imposes cuts amounting to 30 billion Euros (around 40.5 billion Dollars) before 2012. According to this plan, Spain must set a public deficit cap of 3% by 2013. Other PSOE proposals include taxing the rich and the banks. According to Rubalcaba, that would save up to 2.5 billion Euros (3.7 billion Dollars), which would be used to create jobs, particularly for the younger population. Another of his propositions is to reduce the expenses of the public administration.

What seems to be non negotiable is the Spanish public health system, considered as one of the best in the world. "My main goal is to preserve it", Rubalcaba has said several times. Financing it is only possible by means of tax collection. PSOE suggests increasing 10 percent taxes on alcohol and cigarettes. PP, on the other hand, insist on creating jobs to finance the health system, although they do not clarify the secret on how to create those jobs. Rajoy has also announced the impossibility to maintain the Dependency Act, (approved by PSOE in 2006 which protects the elderly and handicapped by providing them free assistance).

Education is also a priority for both main parties. Rajoy affirms that there is a problem with the quality of teaching in Spain. Their policies focus on reducing early school leaving to 10% and making the study of at least one foreign language compulsory. The problem is that he doesn't say how he will manage to do that.

PP don't provide many details on what they will do with the social reforms approved by the current government, which they have openly criticized in several occasions. Some of them, like free abortion or gay marriage, have put Spain at the forefront of the world in terms of respect to civil rights and are now at stake.