Monday, 2 April 2012

Spain's Catch-22 - Strikes and the 'Summer of Discontent'

Friday in Madrid, the morning after the strike. The paving slabs of the central plaza are covered in the papery mulch of discarded leaflets from last night's protest. Bins are still unemptied,  overflowing with red plastic flags bearing union logos. Buildings are pock-marked with anti-authoritarian slogans in black spray paint.

This was the sixth general strike in Spain's history and the first since 2002. Unions claim 900,000 took to the streets. Police put the numbers below 100,000. The real figure, - somewhere between six and seven hundred-thousand, is still enormous.

Spain is losing patience with her government. Although the rally passed without violence, the vehemence of the protesters and sheer weight of numbers present will worry Spanish authorities. Placards bearing “No hope, no jobs, no money” neatly encapsulate the country's problems. Banners with the message “total violence: let’s steal food and rob houses” carried impact but were meant more in jest than as a call to arms for widespread anarchy.

But this second mantra could become more real as the problems worsen. The simmering anger of the Madrid residents could be a portent of more animated protests as government cutbacks and reforms begin to bite harder.

Tellingly it was the younger generations who made their voices heard. Spain has approaching 50% youth unemployment and faces the prospect of a lost generation who will pass into middle age with little work experience. Young people, some only sixteen, led the anti-authoritarian charge, with chants and banners carrying unprintable messages directed at police, banks, and the newly-elected Prime Minister, Mariano Rajoy.

Rajoy's conservative Partido Populista is feverishly cutting back to reduce the national debt, - currently almost 9%. In 2011 the country fell 2.5% short of its reduction target and now the 5.3% proposed by the EU seems wildly optimistic. The PP has stepped up its efforts, with a so-called 'rationalisation' of the banking sector and new labour reforms.

The latest reforms are the main source of anger for Spanish workers and the reason for strike. The crux of the proposals is the reduced compensation package available to workers after being fired – which makes it easier for companies to lay them off and so reduce overheads. In effect, jobs in an already shaky market are now even more transient.

The proposal also increases the levy on jobs for large and medium-sized companies, to help increase government revenue.

Rajoy and his cabinet have set out their austerity plan using the UK's as a model – though taking it further with more severe public investment cutbacks. But while Cameron's austerity measures (and the Bank of England's periodic injections of capital via Quantative Easing) are slowly and painfully clawing the UK out of debt, Spain is a different case entirely.

Whereas the UK’s national debt sits near 3% with the economy slightly growing (0.8% in 2011), Spain is still mired in deep recession. For a population already at breaking point with tax hikes and cutbacks, the idea of further squeezing seems impossible. Rajoy’s government seems fixated on meeting the EU’s unrealistic targets at all costs – even that of his people’s welfare. On Thursday the rhetoric of the unions was damning – branding the EU and Angela Merkel “tyrannical” for insisting that Spain meet its outlandish targets, whilst castigating Rajoy as “spineless” for submitting to their demands.

In reality he has little choice. The government has a near-irreconcilable balancing act between the demands of the EU and its own people. PSOE, the socialist party in favour of the strikes, suggests suspending the cutbacks for a few years to stimulate job creation. But this would only prolong the pain, leaving Spain swamped in debt for years to come and extending the repercussions for the eurozone, whose bailout strategy depends on Spain returning to the black.

For Spain there is no magic formula. It is likely to be several years before its debts are paid and the road to recovery is littered with obstacles. The remedy – higher taxes, more cuts and perhaps even more drastic reforms – will likely make Mariano Rajoy's PP politically toxic and usher in the return of the socialists. The regions of Asturias and Murcia have already rejected the PP in local elections.

Short term public outcry could make the next few months Spain's 'summer of discontent'. The air of unease on Thursday was almost palpable. Mounted police paced towards the crowds of striking workers. Beret-clad police officers stood uneasily in front armoured riot vans next to the city hall.

In the event there was no need for heavy-handed tactics to keep civil order. But the situation could become more heated if the government turns the screw further. Rajoy's next move will be decisive in keeping his people in check. 

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