Wednesday, April 25, 2012

A Communication Problem

It's become a common feature for almost all governments with popularity problems to blame their troubles on poor communication rather than their policies. Spain's government is no exception to this, with the governing Partido Popular preparing a publicity campaign to attempt to justify Spain's disastrous economic course. Many of the PP's own supporters are deeply unhappy with some of the government's decisions, perhaps not surprising when you consider that Rajoy's administration has now broken almost every promise that the PP made before the elections. Party supporters are left trying to defend everything which they so loudly opposed when in opposition. 

There is another aspect to the PP's strategy. The last few weeks have seen a growing chorus from government friendly media for something to be done about the state television company RTVE. Not having much of a democratic tradition means that Spain's right is unable to understand how a state owned broadcaster isn't directly supportive of their government. Any report which smacks too much of pluralism or which doesn't toe the party line is automatically accused of anti-PP bias. The right wing got their way last Friday, as the government changed the law concerning the appointment of RTVE's governing body so that they can put the corporation under their control.

It would be going too far to describe RTVE as being independent, but the situation that existed until Friday at least meant that a single party couldn't impose their political control. Zapatero's administration had changed the law in such a way that that two largest national parties had to agree a consensus candidate for the presidency of RTVE, and neither party could have an outright majority on the governing board. That goes out of the window now, if there is no agreement on a consensus candidate then the government can impose whoever they want with their parliamentary majority. The pretext of austerity has been used to remove representatives of organisations like the unions from the board, allowing the government to appoint the majority.

This threatens to return us to the Aznar era, when RTVE news delivery was kept under tight political control. Although it's unlikely that news bulletins will begin, as they invariably seemed to do in Aznar's time, with the words "el presidente del gobierno ha dicho". Rajoy still seems to be averse to any kind of communication at all, although a more government friendly broadcaster will no doubt show the great leader delivering declarations without of course experiencing anything so uncomfortable as a journalist asking him a question he hasn't been prepared for. This is a move towards the Telemadrid model of television as a political tool, and those RTVE journalists who have demonstrated worrying signs of independence will now be wondering what future they have.

Despite the moves to control RTVE, it's still unlikely that Spanish television will be the chosen platform for breaking the really bad news. For that sort of thing you really need to be a reader of the Frankfurter Allgemeine, or perhaps occasionally the Wall Street Journal. Economy minister Luis de Guindos announces the government's measures first to overseas media, and then eventually the government gets around to telling the Spanish people what is about to happen to them. The latest example was with the additional health and education cuts which were announced first in the German paper. At least the sick can be reassured that when they have to pay more for their medicines it's really just a problem of communication.

Tuesday, April 10, 2012


Mariano Rajoy, the man who proudly proclaimed in January that he would always show his face and never hide from the crisis, left today's Spanish senate session by the back door to avoid having to answer any questions from journalists. This on a day when Spain has again been battered by the markets, to an extent that has previously provoked the dreaded EU "rescue" for other countries. All of which comes the day after an increasingly panicky government tried to placate the markets by throwing them a bone in the form of €10,000 million worth of additional cuts in Spain's health and education services. Because, as we all know, health and education services cause tremendous problems for a modern, 21st century, economy. Just as they did in the 19th century. These are services which have gone, in the space of just 3 months, from being "untouchable" to being top priority for cutting. The PP made very few concrete commitments, but they have already broken almost all of them.

Rajoy seems to have very quickly achieved the difficult task of making Zapatero look like a far sighted, long-term strategist by comparison. Those who so freely accused Zapatero of constantly improvising are now all over the place, although they maintain their ideological focus. Hence the offer of cuts in education and health in response to all the attention focused on the financial sector and its dodgy finances. The latest cuts figure was announced yesterday buried in the third paragraph of a press release, and with no indication of any sort of where the cuts are to be made. It's had no effect of any kind when it comes to improving Spain's situation, nor was it ever likely to. But now the government has created a situation where the cuts will have to happen, or they will be punished for not doing them.

This seems like a suitable time to recall how little Spain's public services have to do with the crisis here, which is above all a problem of construction related private debt. From the creator of the admirable Españistan we now get Simiocracia.

via Graham Hunt

Wednesday, April 04, 2012

A Budget Which Will Change Nothing

One of the comfort blanket beliefs of Partido Popular supporters as they finally start to come to terms with the true nature of Spain's crisis has been that their government is doing things properly and that the reward for this has been a decline in market pressures on Spanish bonds. Well they've just lost their blanket. Today's not very successful bond auction shows that once again it's the turn of Spain to be pushed a bit further along the path which the Irish, Portuguese and Greeks have already taken. The recent lull in such pressure has had everything to do with the "barra libre" policy adopted by the European Central Bank in terms of giving huge sums of money to the banks whilst of course doing nothing to help the countries most affected by the debt crisis.

But surely the Spanish government is doing everything asked of it, supposedly what the markets want? Leaving aside the almost incidental 0.5% difference between the deficit target the Spanish government wanted, and the one they have been given by the European Union. The much vaunted labour market reform, which is already helping Spain progress towards 6 million unemployed, and now a budget which aims to slash 3.2% off the deficit in a single year. It is always either too little or too much. Usually the former, but once it becomes clear that Spain's chances of economic recovery are being fatally crippled by these measures then the excuse for making it ever harder for the country to finance its debt will become the poor prospects for economic growth. It's this wonderful Catch-22 that allows the roulette wheel to keep on spinning. 

So the idea that slashing public spending to cut the deficit is going to let Spain escape is lacking any credibility. Even less credibility can be given to the arguments from the government that this lays the basis for economic recovery. Apart from this, it's extremely unlikely that the government will get anywhere near the deficit target this year. I haven't seen one serious analysis of Spain's situation which suggests it is possible for the government to achieve such a big reduction of the deficit in the midst of a recession. The government doesn't believe it, hence their strenuous efforts to change the target for this year. The combination of spending cuts and tax increases announced in the budget is the minimum amount (a mere €32,000 million) needed to get to the target, but the downward spiral that these cuts set off is more likely to increase the deficit than reduce it. 

The IMF estimate of a 1.7% GDP decline for the Spanish economy this year is already outdated. Revisions of these estimates are almost monthly events these days. With the latest measures announced in a budget that was delayed for electoral reasons, it is reasonable to start thinking in terms of a 2.5-3% decline for 2012. If, as may well happen quite soon, the response to the failure of the first package is more of the same then it becomes distinctly possible for this provoked recession to match that which we already saw in 2009. Even some of those who blindly followed the dogma and assumed this madness was bound to work are now revising their positions when faced by the bleeding obvious. Not that they acknowledge the shift.  All this pain to achieve nothing but further destruction of productive capacity can in the end only be justified with a narrative that distorts reality beyond all recognition. 

Much of the damage to be caused by the cuts is still to be revealed, almost half of the cutbacks have to be made by the regional governments who are the authorities responsible for education and health services. The way the government has presented the new budget makes it all seem relatively painless, but hidden in the details are measures which can only make life harder for many. Despite the talk of a general percentage cut across ministries, some of these are doing much worse than others. International aid has been brutally slashed, public works investment takes a huge hit and the money spent on scientific research is also heavily cut. Out the window goes the budget dedicated to assisting job seekers, and that which assisted young people in finding somewhere to live. We wouldn't want anyone to start thinking that Rajoy's government has an economic model in mind that isn't based on cheap labour, concrete and tourism. 

The government claimed that it has no intention of cutting public sector salaries, although the decision to freeze these is in effect a cut in living standards. Not that prices are likely to fall as a result of the budget, RENFE will have to fill the gap left in their funds with significant fare increases for trains. Both the public television service and state support for the cinema industry are seeing significant reductions. Support for the most vulnerable who receive support for being dependent on others for their care has also been cut back. Some measures are a bit perplexing. If the government intends to maintain unemployment benefits as they claim then it is odd that they have assigned less money for this purpose at a time when the numbers of the newly unemployed have been increasing again. 

The sacrifice is far from equally shared. The royal family gets a reduction of just 2%, something the king will probably forget to mention next time he makes one of his "we all have to pull together" speeches. The interior ministry also gets off lightly, those police helicopters, rubber bullets and gas canisters are expensive and are needed to dissuade people from protesting against their situation. The defence budget also came out relatively well. Then comes the star proposal. A tax amnesty for those fraudsters who pocketed so much of the profits from the boom years. They can now regularise their situation paying just 10% with no questions asked. Not that many of them will, the way things are going they almost certainly have their euros stashed outside of Spain. Meanwhile, the honest taxpayers who have had their income tax increased earlier this year are left paying a much higher percentage than the crooks.