Spanish centre-right Popular Party (Partido Popular - PP) has won a decisive victory in Sunday’s elections, making Spain the fifth European country to witness a change of government because of the continuing economic crisis.
If ever there was an election with no uncertainty over the outcome, this was it - the conservative Popular Party won with a large majority. The party has won around 44% of the votes, enough to secure absolute majority in the parliament. PP will have 186 seats in a 350-seat parliament, making this its biggest victory in history. The ruling Socialists have won around 29% of the vote, which gives them 110 seats. This is their worst electoral result ever.
Spain at Historic Crossroads
PP leader and the country’s next prime minister, Mariano Rajoy, said on Sunday night that with these results Spain will stop being part of the problem in Europe and it will become a part of the solution. “Spain is at a historic crossroads,” Mr Rajoy said.
Winning the elections was the easy part for Rajoy and his party. They now face a mounting task of calming the financial markets and taking the country out of the economic woes.
In the run up to the Sunday’s vote, Spanish bond yields have surpassed the 6% mark, indicating the markets’ worries over the country’s ability to repay its debt. While the levels of Spanish sovereign debt are not that high when compared with other eurozone countries, such as Greece, Portugal or Ireland. However, Spain is a highly decentralized country, with 17 autonomous and currently highly-indebted regional governments. Also, private debt among Spanish citizens is very high thanks to years of cheap home and car loans. Linked to that is the worry about the health of Spanish banks, burdened by bad debts and thousands of repossessed homes.
Tough Measures Expected
The new government will have to act fast and on several fronts at the same time. It will have to reduce public spending by introducing what is expected to be a range of unpopular austerity measures. Civil servants can expect to see further reductions in their pay packets and some of them will probably lose their jobs. There is also a talk of reduction in welfare benefits for the country’s five million unemployed people.
All of this may prove unpopular, but not impossible to achieve, given PP’s absolute majority in the national parliament in Madrid and in most of the regional ones. The real challenge, however, will be to create growth.
Spain has for too long relied on construction for its growth. At some point during its construction boom in the early 2000s Spain consumed more cement than Britain, France, Italy and Germany together. With the global financial crisis, the housing bubble in Spain burst leaving millions without work. Tourism and agriculture, Spain’s other major sources of income, were badly affected too.
Difficult Times Are Coming
In an effort to improve the economy and reduce unemployment, PP has promised to reform Spain’s quite rigid labour market and introduce more flexible job contracts. At the moment, Spain has a two-tier labour market, in which those with permanent contracts enjoy the protection guaranteed under collective bargaining agreements. While they are too expensive for companies to fire, there are also legions of those, mostly young people, who drift from one short-term job to another without ever getting up the contract ladder. This partly explains why the unemployment rate among young people is close to 50%.
Changing all this will not be an easy task, but with a comfortable majority in the national parliament and wins in 45 out of 52 Spain’s provinces, Mr Rajoy has a strong enough mandate to try. In an unusual move for someone who has just won a historic majority, Mr Rajoy said on Sunday night to his supporters: “Difficult times are coming.”
Aleksandar Kocic - I have worked as a journalist for over twenty years. My first job was with a local radio station in my hometown of Pancevo, Serbia, where ...
