The Pain in Spain

MADRID – There is not a crisis in Spain today. Well, not just one. The country is beset by a series of crises, which makes the task of merely enumerating them a challenging exercise. Financial analyst Nicholas Spiro tried last week, telling the New York Times, "Spain is the only country in the world that must contend with a banking, economic, sovereign debt, political, and constitutional crisis all occurring simultaneously." Off hand, it is hard to think of any other country able to match that.

But, of course, these five problems are interconnected, as the presence of thousands of disgruntled protesters around Madrid’s Congress building most evenings last week served to demonstrate. Taking up the messages of the 15-M protesters — who in the spring of 2011 (beginning on May 15, hence the name) sparked a wave of similar anti-capitalist demonstrations in many Western countries– the "indignant ones" (or indignados, as they are known here) outside parliament last week were not demanding jobs or handouts. With unemployment at 25 percent of the workforce (and double that for those under age 25), many might be in need of such things, but they chose to join in a collective finger-pointing at Spain’s politicians, making no exception between the ruling Popular Party (PP) and the Socialist opposition.

The political crisis resonating outside is less apparent inside Madrid’s parliament, where the rightist PP of Prime Minister Mariano Rajoy can simply deploy its absolute majority to reel off austerity measures aimed at reassuring the markets that Spain’s debt load is sustainable. What’s more, the European Union, which has already approved a 100-billion-euro bailout for Spain’s stricken financial sector, has conditioned its support on budget-deficit targets being met — orders that Madrid passes on to the Spanish regions, which are responsible for spending on basic services such as health care and education.

But the malaise can be clearly seen in the street protests — which harness a growing sense of disenfranchisement on the part of the citizenry — and in local authorities across Spain who are questioning the harsh medicine they are being asked to swallow. The extreme example is Catalonia, where the traditional party of power has felt the need to move in sync with a popular groundswell of separatist sentiment and call for a referendum on self-determination. Never mind that in the months preceding Sept. 11’s massive march for independence, the same center-right nationalist government in Catalonia had caused the streets of Barcelona to seethe with angry teachers, health workers, and others as it slashed at the public sector with a gusto that smacked of ideological zeal. But now the region’s budgetary problems cannot be explained away by the crisis and the need for belt-tightening, and deep-seated inequity in the state financing model is roiling tensions.

And it is not just Catalonia and its quest for greater independence that is challenging Rajoy’s dictates. This summer, five of Spain’s 17 regions, including Catalonia and the Basque Country, declared themselves in rebellion against the central government’s instructions that illegal immigrants were no longer to be given health care unless they paid for it. Andalusia is resisting Madrid-imposed cutbacks in public education, and PP-run Extremadura recently attempted to make its own stand by not applying across the board a recent hike in the value-added tax.

More colorful, no doubt, is the campaign of resistance being waged by the leftist mayor of Marinaleda, in Andalusia. Juan Manuel Sánchez Gordillo has led his band of farm laborers to occupy large estates owned by the government and rich landowners, as well as launch "subsistence theft" raids on supermarkets to feed his followers.

In effect, these local administrations are taking a cue from some of the civil disobedience tactics that have proliferated among protest groups since the initial 15-M coalescence last year. Activists in several cities now use mobile social networks to gather quickly at protest sites before police or authorities can evict them. And they have a lot to protest. Rising unemployment and the bursting of the property bubble have combined to leave hundreds of thousands unable to finance their homes, while the banks have sucked up billions of euros of bailout funds from the government. There is a kind of vacuum, with central government on the one hand enacting policies to meet the external demands of financial markets, while, on the other hand, individuals on the ground and local institutions try to provide solutions to the grave social ills arising from a prolonged recession.

For César Molinas, a well-known financial consultant whose recent essay, "Theory of Spain’s Political Class," enjoyed phenomenal success when published in El País last month, Spain’s institutions are incapable of dealing with the current crisis. "They have yet to adapt to the fall of the Berlin Wall and globalization," he argues. The institutional pact between major political parties, business groups, and labor unions that grew up in the post-Franco transition of the 1970s and early 1980s did work, says Molinas, in terms of uniting the country around the goals of consolidating democracy and integrating Spain within Europe. But, echoing the arguments of the 15-M movement, Molinas claims those interests have now become "entrenched" and "dysfunctional."

In the essay, which is an advance extract of the book ¿Qué hacer con España? (What to Do With Spain?), to be published next year, Molinas describes how political parties have created a self-serving network of regional authorities, savings banks, and other subsidized institutions that have led to disastrous investment decisions and a lack of economic flexibility and competitiveness — all of which was cruelly exposed by the bursting of the real estate bubble on the back of the global credit crunch.

But not everybody accepts that the country’s plight has such endemic roots. José Ignacio Torreblanca, a leading political commentator and director of the European Council on Foreign Relations’ Madrid office, contends that this is not a specifically Spanish crisis, dismissing what he sees as "gloomy" arguments that hold that Spain is predestined to underachieve, a common theme down the ages. "There was even a theory about chickpeas [a Spanish staple], which went that they didn’t give enough protein," says Torreblanca. "But in the United States there was also a real estate bubble, and they are much cleverer than us and eat more proteins."

"It is not a problem of a lack of scientific knowledge, like a meteorite approaching and no one has the answer. The techniques are known," Torreblanca argues, though he accepts that the nexus of financial and political power, the unraveling of which can be seen in the 60-billion-euro hole in Spain’s banking system, still requires attention. "We have reformed everything except two powers: the financial sector and the political sector, which, what’s more, are highly interconnected. What we do not know is if in the end the agent of change is going to be Spain’s angry people or it is going to come from the outside, from the troika," he adds, in reference to the possibility of Rajoy requesting a new bailout overseen by Brussels, the European Central Bank, and the International Monetary Fund.

But beyond the need for internal reform, Torreblanca fears a Spanish Catch-22: Austerity policies will only depress the country further unless external demand prods the economy into life, yet at the same time, Spain is unable to bring about a change in European policies to make growth the new focus. "You can bring in reforms to reduce labor costs all you like, but if there is no demand, people do not start up companies. We are always hearing that businesses create employment, and that’s a lie; it is demand that creates employment."

Meanwhile, Rajoy continues to play for time and tries to do good political business even with the poor hand he has been dealt. Presented Sept. 27, the state budget for 2013 includes a 1 percent pension increase with an eye on October’s elections in Galicia — a region with a high proportion of seniors — though Finance Minister Cristóbal Montoro refused to confirm that the customary end-of-year consumer-price-index inflation changes would be administered to pensions. Reforms to boost competitiveness or stimulate new areas of the economy were once again conspicuous by their absence.

Spain’s ultra-cautious conservative leader does not seem to be the man to "rethink Spain," as Molinas insists is imperative at this juncture. The analyst argues that the country is crying out for a "new political and social pact," starting with electoral reform to do away with the closed-list system that foments the gravy-train tendency that packed savings banks’ boards with politicians and brought about financial disaster. "It’s make-or-break time," Molinas says. "And the answer has to be ‘make’ because the ‘break’ is already here."