‘No miracles’ warns Spain’s new prime minister-elect

After the victory cheers following Sunday's parliamentary election, prime minister-elect Mariano Rajoy is being pressed to flesh out the details of his plan to get Spain’s ailing economy back on track.


Spanish voters swept Mariano Rajoy and his right-wing People’s Party (also known as the Popular Party) into power on Sunday, giving them an absolute majority in parliament that should speed up expected debt-cutting reforms.

Largely forecast by opinion polls, Rajoy’s win came as Spaniards confront the country’s worst economic crisis in decades. But after jubilation on Sunday, the prime minister-elect was being pressed to flesh out with details his plan to get the country’s economy out of the gutter.

Rajoy's centre-right People's Party (PP) notched up its biggest election victory in 30 years on Sunday, with angry voters savaging the outgoing Socialists for a crisis that has seen unemployment levels soar to over 20 percent, the highest in the European Union.

Spain’s Socialists administration is the fifth eurozone government to be toppled by widespread voter anger at the spiraling debt crisis. The outgoing Socialist are following the well-worn path of other vulnerable European economies, with Greece, Ireland, Portugal and Italy all seeing a change in government.

Under Spain's long transition process, Rajoy will not take power until around Dec. 20 but he has little time to bask in the huge victory for his People's Party.

“There will be no miracles,” Rajoy told cheering crowds outside his party’s headquarters in Madrid late Sunday, “we didn’t promise any.”

Rajoy’s sober words and call for political unity stood in contrast to the flag-waving and victory chants at the PP party's headquarters on Génova street in Madrid. “My only enemies are unemployment, excessive debt and stagnation,” Rajoy told supporters.

With around five million unemployed, Spain has hit a jobless rate of 21.5%, its worst in 15 years and currently the highest in the 17-nation eurozone. The country’s important real estate market was battered by the 2008 global economic crisis and its economy is barely crawling out of a two year of recession. Many are forecasting a return to recession for Spain in 2012, with country registering zero growth in the third quarter of 2011. Spain’s credit rating was also cut in October by all the major international credit-rating agencies.

Europe’s debt woes already claimed two governments - Italy and Greece - in just the past week. But unlike Italian Prime Minister Mario Monti and Greece’s Lucas Papademos, who were appointed through parliamentary powers, Rajoy was picked to lead his country at the ballot box. His legitimacy to lead change is strong, and the expectation for improvement is equally high.

“Cautiously hidden” plan

During his campaign Rajoy consistently focused on returning the country’s five million unemployed to work, but was criticised for giving few details on how he will create jobs. Likewise he has remained vague about policies going forward and certain austerity measures. Pressed on the subject during a November 16 interview on the public TVE channel, he said “cuts will be across the board, except the budget for pensions.”

“The citizens, those who voted for him as well as those who did not, need to know as soon as possible the government’s plan for the urgent reforms needed, but he has so far kept them cautiously hidden,” wrote Jesús Ceberio, columnist and one-time editor of the leading El Pais daily, after Sunday’s poll. Caberio also underlined that the stock markets would lose patience if details of Rajoy’s plan were not forthcoming.

Bieito Rubido, editor of the conservative ABC daily, also urged expediency. “[Rajoy] must get down to work without delay, and announce as of today, or tomorrow at the most, the finance chief of his future government. The minister who must travel to five or six European capital to win back confidence and explain how we will overcome the crisis,” Rubido wrote on Monday.

However, according to Danielle Schweisguth, an expert on Spain at the French Observatory on Economic Conditions (OFCE), Rajoy’s reforms are largely foreseeable. For Schweisguth, cutting taxes for homebuyers, extracting bad debt from Spanish banks, and easing the country’s labour laws so companies can fire and hire more easily, will top the new government’s reform agenda.

Piotr Maciej Kaczynski, Research Fellow at the Centre for European Policy Studies (CEPS), a think-tank in Brussels, said Spain’s next government will have to revisit all the areas of public spending. “The retirement age, social benefits, all those issues are on the table,” Kaczynski said.

But despite a free hand in parliament to push through austerity measures, observers say the task ahead for Rajoy will not be easy. “The election clearly gives him a democratic mandate to implement austerity measures, but some will be painful… there will be social tension,” added Kaczynski.

Turning toward Brussels

While observers speculated on the nature and size of cutbacks in Spain, few had any doubt about Rajoy’s intentions and need to be an involved partner in the European Union. His predecessor, José Luis Zapatero, has been criticised for his unwillingness to engage his European counterparts.

The president elect addressed EU leaders specifically during his speech on Sunday night. “We want to be central to the EU. Our destiny is with Europe,” Rajoy said. “Spain's voice must be respected again in Brussels and Frankfurt... We will stop being part of the problem and start being part of the solution.”

According to the CEPS’s Kaczynski, addressing Europe’s debt crisis and strengthening Spain’s place in Brussels will be a major concern for Rajoy. “He wants to convey a message to Europe, that it should end the superficial division between North and South Europe,” Kaczynski said. “He wants to convince them Spain can address its problems.”

News of Rajoy’s resounding victory did not immediately boost European markets. Shortly after trading began in Europe after the weekend, Spain's main index was down 1.8%. Stocks tumbled even lower in other European exchanges, with London’s FTSE 100 down 2.06%, and the French CAC 40 and the German DAX both down 2.4%.


Daily newsletterReceive essential international news every morning