Spain: An election for nothing

Angela Merkel: "I see that on the 20th November the Spanish think they will choose something..."
Angela Merkel: "I see that on the 20th November the Spanish think they will choose something..."
18 November 2011 – El País (Madrid)

Mariano Rajoy's right-wing Popular Party is set to win the Spanish general election this 20 November and apply more austerity. But as long as Germany fails to assume its responsibilities at a European level, the new government will be powerless to solve the country's crisis.

Pure coincidence or faithful reflection of the world we live in, the two most recent election reversals in Spain, that of 2004 and, predictably, this Sunday the 20th of November, have proceeded in parallel with events (the 2004 Madrid train bombings and the worsening eurozone crisis) that reveal in stark fashion the utter impossibility of separating the national from the international. Today, as in 2004, the security challenges facing the public – of course, at different magnitudes: physical security then, economic security today – are as much beyond as they are within our own borders.

To restore the credibility of Spain internationally and place the country at the forefront of European leadership will, inevitably, mean returning to the path of growth, creating good quality jobs and boosting our productivity: in short, rectifying our past mistakes. But the truth is that the sacrifices resulting from budget cuts and structural reforms can turn out to be useless if they’re not accompanied by far-reaching European decisions.

Markets have discounted reforms at national level

If the polls aren’t mistaken, Spain is about to complete the changes in government in the four countries in the south of Europe that until now have suffered the greatest financial difficulties. The trajectories of each differ greatly: from the intervention in relatively stable Portugal to the constant intervention in permanently unstable Greece, passing through Italy on probation, under a government of technocrats and obliged to show up at the bailiff’s regularly; and finally to a Spain that, despite having undertaken major reforms, has found these were insufficient or ignored by the markets.

The governments of southern Europe have already revealed, or are about to reveal, all their cards: cuts, austerity, government by technocrats – whatever it takes, though there isn’t much left in the repertoire. In addition, the icy reception by the markets of the technocrats moving into office in Greece and Italy, plus the hike in the risk premium that Spain is getting hit by, are the best proof that solutions to the crisis are much more to be found beyond our borders than inside them.

It lends the impression that the markets have discounted the reforms at the national level; that is to say, the markets assume there will be reforms, and they’ll be hard ones, but seem to have arrived in advance at a conclusion that has so far evaded Europe’s leaders: the crisis will still be here so long as the markets continue to doubt whether Germany and the European Central Bank are willing to act as lenders of last resort. That is, ultimately, what’s being clarified these last few days.

The moment of truth

The German Chancellor, Angela Merkel, has said on several occasions, most recently this week: "If the euro fails, Europe fails…. Europe is going through its hardest times since the Second World War." Many traders suspect Merkel is bluffing. And they have good reason to, because at the same time Merkel is raising the dramatic tone with her grave statements about the future of Europe and World War II, she has reaffirmed that she’s not prepared to modify the two elements that undermine the credibility of this promise: first, by insisting publicly, for the umpteenth time, that the Lisbon Treaty prohibits the purchase of state debt by the European Central Bank; and secondly, to reiterate that issuing eurobonds is by no means the solution.

Nonetheless, now that the will to undertake reforms in southern Europe has been tested (successfully), what is being tested now is the commitment of Germany. The moment of truth arrived last week for Athens and Rome when Berlusconi and Papandreou were proved to be bluffing. Now the moment of truth is headed to Berlin. Merkel will have to show her cards very soon.

Translated from the Spanish by Anton Baer

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