Phoenix turned to ashes: the Spanish Socialists' response to the economic crisis.
| Author | Kennedy, Paul |
| Position | Features |
The Spanish Socialists entered 2011 in a state of crisis. Re-elected in March 2008, shortly before the scale of the international economic downturn became apparent, Jose Luis Rodriguez Zapatero's government initially appeared to underestimate the scale of the difficulties faced by the Spanish economy, with Zapatero claiming in April 2009 that Spain was already over the worst. By May 2010, however, under pressure exerted by the financial markets and the country's EU partners, Zapatero announced an austerity programme aimed at slashing Spain's deficit to 6 per cent of GDP by the end of 2011, a cut of more than [euro]50 billion over two years.
Despite the implementation of the programme, which included a 5 per cent reduction in the salaries of government workers and a freeze on public pensions, an EU bailout along the lines of that requested by Greece and Ireland cannot be ruled out during the course of 2011. With unemployment not likely to dip much below 20 per cent for the foreseeable future, and further unpopular measures in the pipeline such as the postponement of the retirement age from 65 to 67, the Spanish Socialists find themselves in an extremely difficult situation in the run-up to the general election which is due by March 2012.
This article seeks to chart the decline in the Socialist government's fortunes since it repeated its 2004 general election victory in 2008. Although an overall majority had eluded the Socialists at both elections, their achievements in office have been considerable, with the introduction of legislation aimed at combating domestic violence, the legalisation of gay marriage, and a significant extension of the welfare state in the form of a Dependency Law which provided financial aid to those requiring or providing care. Moreover, Zapatero had backed a wide-ranging reform of the statutes that govern the responsibilities enjoyed by Spain's seventeen autonomous regions, which had been broadly popular. The Socialists' social democratic credentials were also evident in a 40 per cent increase in social spending.
But the travails of the Spanish economy are the dominant theme of this article, given that they are likely to be the key factor in deciding the next general election, crowding out other policy issues. Whereas the very buoyancy of the Spanish economy during the Socialist Party's first term in office had the effect of dampening down debate on economic policy, the Socialists' subsequent term has been dominated by the economic crisis. As we will see, the economic downturn has served to diminish Zapatero's credibility and that of his government. Initially denying the gravity of the situation, as well as the serious structural weaknesses of the Spanish economy, the government was forced to reassess its approach, losing further credibility by having to implement tough austerity measures which, previously, it had emphatically ruled out. The impression was one of improvisation, ineffectiveness, and, ultimately, impotence.
The Spanish growth model
Economic policy prior to the downturn had broadly been in line with that pursued by the Socialists' centre-right Popular Party predecessors in government, led by Jose Maria Aznar. With Spanish economic growth outpacing the EU average since the mid-1990s, there appeared to be little incentive for the Socialists to reject a model largely based on the construction and housing sectors.
The Socialist Party's criticism of the economy's dependence on excessive levels of debt and the construction sector had nevertheless featured prominently in its manifesto in the run-up to its victory at the 2004 general election, with reference being made to the 'cult of bricks and mortar'; the 'escalation of private sector indebtedness, of both families and companies'; and 'the current risks concerning the Spanish economy, which is highly indebted and geared towards bricks and mortar' (PSOE, 2004, 103-4).
The prominent role played by the construction sector in Spain's buoyant economy prior to the 2008 downturn can be appreciated by the following figures: construction accounted for 10 per cent of GDP by 2007, well above the 5 per cent average figure of Spain's EU partners (O'Kean, 2010, 19). Employment in the construction sector rose from 1.2 million in 1996 (9 per cent of the labour force) to 2.7 million (13 per cent of the labour force) in the second quarter of 2007. This meant that there were almost as many people employed in construction as there were in the whole of the industrial sector in 2007 (Salmon, 2010, 46). Spain accounted for 40 per cent of the jobs created in the eurozone...
To continue reading
Request your trialCOPYRIGHT GALE, Cengage Learning. All rights reserved.
