“We are going to have to be brave, but also prudent.”
— Mariano Rajoy, to Spanish newspaper El Mundo, quoted by BBC Online
Mariano Rajoy is a great survivor. After all, some years back he escaped death when his chopper crashed near Madrid. Now politically too, he has landed squarely on two feet. Though he entered politics at the age of 26 and rose through the party and ministerial ranks in quick time, Rajoy missed the top post by a whisker at least twice. But as they say, nothing can stop an idea whose time has come. The conservative Popular Party, led by Rajoy, now 56, swept the parliamentary polls held in November and has taken over the reins of Spain at a critical juncture in the European nation’s history.
Over the course of last three years or so, Spain has been in somewhat of an economic free fall, with the elections marking the high point of probably the worst economic crisis Spain has witnessed in several decades. Not surprising then that the country is mentioned in the same breath as its fellow southern Euro-zone nations, commonly referred to as the PIGS*. Yields on 10-year Spanish government bonds rose to a high, touching 7% in November. The housing bubble burst in 2008, triggering a spike in jobless numbers. The unemployment rate reached 22.6% as of November, the highest rate in both the OECD and the European Union. Worse, about half of the nation’s young population is not able to find jobs. As The Economist points out, the country is widely expected to miss its budget-deficit target of 6 percent of the GDP for 2011, while economic growth has ground to a halt. Quite naturally, the beleaguered nation looks up to their new captain to steer them to safer shores.
Though not known to be a man of action, the doughty Spaniard was optimistic and ready for battle in the aftermath of his election. After all, Rajoy successfully negotiated the infighting within his party during his years in the opposition. And Rajoy has many things going for him. First, his party has an absolute majority in Spanish parliament. Moreover, the party has control over many of the 17 autonomous regions of the country. Unlike Greece and Italy, which have unelected technocrats for their leaders, Spaniards have voted for a change in government, hopeful that their country will benefit in the long term.
It would be an understatement to say that Rajoy has his plate full. Though the task appears daunting, Rajoy spelled out his reform plans even before he was sworn in. The proposal included measures to improve the labor market during the first quarter of the current year and revamp the banking sector in the first half of year. Also making Rajoy’s to-do list is the setting of a long-term deficit cap as mandated by a recent amendment to the constitution.
Notably, Rajoy affirmed the country’s intention to remain in the Euro-zone come what may. The prime minister also said he would work hard to bring down the deficit to 4.4% of the GDP in 2012 and to 3% in 2013, a task easier said than done with a recession staring the nation in the face. The reduction in the deficit would also require a raise in taxes and big spending cuts.
He’s a long-distance runner, not a sprinter, and the economic crisis needs long-distance runners.
— Popular Party MP Jose Maria Lassalle referring to Rajoy, quoted in a BBC Online report
As is the case with some of Spain’s troubled neighbors, any reforms initiated by Rajoy will no doubt aim to make the public sector more efficient and boost economic growth, albeit without much scope for spending. But Spain’s path to economic expansion has been mired in bureaucratic red tape. And the decentralization of the country into 17 autonomous regions, which was touted to be a big-ticket administrative reform, has only led to wastage of public money.
Still, there are some silver linings amid the dark clouds which hover over Spain. The country is home to some strong, diversified multinational companies and its exports are holding steady. Moreover, the private sector has a golden opportunity to step in to fill the gap as public spending shrinks. Spain’s well-educated crop of engineers and scientists also form a good resource base.
It is true; Rajoy carries the weight of the Spanish people’s hopes and aspirations on his shoulders. But Rajoy’s detractors point out that his victory was more a function of the electorate’s disillusionment with the incumbent Socialist government rather than any real fascination for the enigmatic Spaniard. Notwithstanding Rajoy’s lack of charisma, it would be too early to write off this native of the Galicia region. On the contrary, Rajoy’s gentle manners and conciliatory style may actually work to his advantage as he embarks on a series of austerity measures to resuscitate the ailing economy. And now it remains to be seen if Rajoy, known to be a walking enthusiast, will be able to take his fellow Spaniards by the hand as he sets out on a long, painful march forward.
* A four letter acronym that refers to the European countries Portugal, Italy, Greece and Spain, which are at the center of the European debt crisis. Including Ireland, the countries are often referred to as PIIGS.
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© Thomas White International, Ltd. 2018