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Spain Gets Mixed Reviews on Handling Economy

  • Caroline Arbour

People sleep outside the headquarters of Spanish nationalized lender Bankia, where protesters have camped for more than three weeks, in Madrid, November 20, 2012.

People sleep outside the headquarters of Spanish nationalized lender Bankia, where protesters have camped for more than three weeks, in Madrid, November 20, 2012.

One year ago Tuesday, November 20, Mariano Rajoy's Partido Popular (PP) won a landslide victory in Spain's parliamentary elections, but it is facing mounting criticism from voters on its handling of the economic crisis. Experts counter results will take time.

When Spain’s conservative Partido Popular won an absolute majority in the November general elections last year, the country’s economy was already sliding on a downhill slope, headed towards its second recession in three years. A record 21.5 percent of Spaniards were out of a job.

In his first speech as prime minister-elect, Mariano Rajoy promised to tackle unemployment, the deficit and the country’s excessive debt.

Within seven months, his government had announced $80 billion worth of cost-saving measures, including cuts to all ministries. And it made labor laws less rigid.

Streets and squares have been filling regularly with angry protesters. The leading unions and the opposition believe the government is irreversibly destroying Spain’s cherished social model.

Socialist party leader Alfredo Rubalcaba says Spaniards are worse off than a year ago.
Unemployment now stands at 25 percent. But some argue it was bound to get worse before it gets better.

Ramon Pacheco Pardo, a lecturer in European and international studies at King’s College in London, says it is too early to judge whether or not the government’s plan is good or bad.

“I think [what] the government has done right is that it has started to tackle some of the long-term problems of the Spanish economy," said Pardo. "On the other hand, I think some of the measures that have been taken, like cuts in the health sector, cuts in the education sector have been introduced far too quickly.”

Economist and former bank inspector Rubén Manso Olivar believes the reforms and economic measures have not gone far enough.

He says, for example, that banks should have been allowed to fail rather than the government transferring their toxic real estate assets to a newly formed entity, and it should have been more forceful in demanding autonomous regions rein in their spending.

Although talks of a bailout have subsided lately, both Manso Olivar and Pacheco Pardo think there will be calls again for Spain to seek help, as borrowing costs are likely to remain high.

“The central government and the regional governments in Spain really have no means to pay off their debt," said Pardo. The Spanish deficit is not as high, yeah, if you compare with other European countries. The problem is that there is a lack of confidence in the Spanish government paying off its debt.”

He says there will probably be more social unrest in the coming months because the economic situation will not improve in 2013.

Mariano Rajoy’s government seems determined to maintain its course. And it should, says Rubén Manso Olivar.

He says Spaniards voted to give the Partido Popular a four-year mandate, and the government should be afforded a chance to govern.
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