Spanish elections bolster Rajoy's austerity policies
Prime Minister Rajoy's ruling, pro-austerity party was a winner in Spain's regional elections this weekend, but so were independence-minded parties that could hurt his economic measures.
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In the Basque Country, the ruling Socialists shed nine seats in its 75-member parliament, now having 25, while the Basque conservative nationalists won the most seats with 27. In close second with 21 seats came Bildu, a coalition of pro-independence left-leaning parties, led by the political branch of ETA, the terrorist group that renounced its armed struggle in 2011.Skip to next paragraph
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The anti-austerity campaign of Socialists thus backfired, while the PP’s economic policies got strong support in Galicia. And while pro-independence forces made strong gains in the Basque Country, the winning party is the regional economic equivalent of the PP.
Still, the government of Prime Minister Mariano Rajoy knows that dealing with the passionate issue of independence could be more lethal than economic policies.
Earlier this month, rating agency Standard and Poor’s downgraded Spain's debt to the lowest investment grade possible, just a notch from junk status, citing among other things “rising unemployment and spending constraints [that] are likely to intensify social discontent and contribute to friction between Spain's central and regional governments,” S&P said.
The government has tried to contain regional independence aspirations, at times diplomatically and at others confrontationally. But mostly it has chastised its regional conservative counterparts for manipulating nationalist feeling at this juncture because it adds instability to a worsening economic crisis that is spurring social unrest.
Even if in the Basque Country the results “are tainted by the nationalist undertone,” Professor Oliver said, the winning party also won on an austerity-driven economic platform. “Markets should welcome this.”
The results will inevitably weigh in on Spain’s decision to request a bailout. The government wants guarantees that it won’t be shut out of global capital markets, as in the cases of Greece, Ireland, and Portugal. Spain’s hand is strengthened, although Germany insists Spain doesn’t need a bailout yet, even if markets and most European countries say it’s just a matter of time.
The Spanish government also got official confirmation from European overseers that its economic crisis is as bad as international institutions suggest. The statistical office of the European Union, Eurostat, revised the country’s deficit in 2011 to 9.4 percent of gross domestic product, almost a point higher than the government’s previously reported 8.5 percent, once the bank recapitalization is added.
Only Ireland, with 13.4 percent, has a higher deficit. Greece also has 9.4 percent. The government in September had already acknowledged that for 2012 its deficit would be 7.4 percent and not 6.3 percent as previously estimated.
The International Monetary Fund earlier this month also warned that the government’s forecast of a 0.5 percent contraction of its GDP in 2013 is far too optimistic, forecasting instead a 1.3 percent contraction, while S&P expects 1.4 percent less.