Posts
It seems that
the class struggle, or at least the fear of it, is indeed
the motive force of
history. The EU has announced that it will not, after all,
impose a hefty Є2.2
billion fine on Spain
for repeatedly missing its budget reduction targets, as it
had been threatening
to do for months. EU hard-liners, particularly the Germans,
were until recently
demanding a Є5 billion fine. Spain has now been given
another
two years to get its finances in order.
EU Economic
Affairs Commissioner Pierre Moscovici, who made the
announcement, explained
that the Spanish people had already made sacrifices and it
was not appropriate
to demand more of them, particularly at a time when there is
a question mark
over the entire European project. Why
has Spain
been shown such largesse, when the Greeks were not? The
Greek people also made
sacrifices, larger than those imposed on Spain.
More
significant still is that, according to German press
reports, it appears that
the change in policy was promoted by none other than German
Finance Minister
Wolfgang Schäuble, the hard-line archduke of fiscal probity
and sticking to the
rules. The German business paper Handelsblatt reports
that
following a long discussion with French, Italian and Spanish
ministers at the
recent G-20 summit in Beijing, Schäuble himself phoned the
EU Commission
pressing for a policy change in favour of more carrot and
less stick. The
Spanish argued that a fine would undermine Spain’s Christian
democrats and
would only benefit the ‘populist’ Podemos.
The EU’s
problem is that the three areas in which it wants to see
some major traction – labour market flexibility, pensions,
and social spending – are
all very politically sensitive and disruptive. This limits
how far it can push
austerity. Spanish Economy Minister Luis de Guindos has been
bragging openly
for weeks that the EU would not impose a fine, which was
rather undiplomatic.
Greece, with only 2% of the EU’s population and of
little
economic importance, can be pushed around. Spain, the EU’s
fifth-largest
economy, is a different matter. Despite being wrongly
dubbed a
ruthless neoliberal by the Left, prime minister Rajoy has
been resisting on all
three fronts. Sledge-hammer
austerity can only knock Spain’s
social and constitutional order to pieces and push the
popular classes into the
arms of Podemos and possibly beyond.
Employment
Spain has around 30 different forms of employment
contract. Brussels
wants these cut down to three
or four to make hiring and firing easier. The
Spanish labour market is highly differentiated. About a
third is ‘protected’,
while two thirds form a ‘precariat’ surviving on very
short-term contracts with
only basic employment rights. The average duration of an
employment contact is
now 53 days. The effects of this are dramatic. While wages
in the protected
sector have dropped a few percent since the beginning of the
financial crisis,
the wages of the ‘precariat’ have dropped 14-17%. This
accounts for Spain’s recent
improvement in exports, in the absence of any significant
rise in productive
investment. So the employment contract reform Brussels
wants to see implemented is aimed
mainly at the protected sector. But this section of the
labour force, which
includes much middle class employment, is the bedrock of the
two mainstream
parties. Destroying employment protection hacks away at
political
stability.
Pensions
Spain has 9.42 million pensioners. Around
45% of the ruling conservative party’s voters are
pensioners, as are 40% of
socialist party voters. Only 16% of the
Podemos vote is made up of pensioners. Moreover, half of
those receiving
pensions are supporting their offspring’s families. So
pensions are a vital source
of income in a country where just under half the unemployed
no longer receive
any benefits at all as their entitlement period has
expired. So deep
cuts in pensions, as demanded by the EU, would push a
substantial number of
families over the brink.
State spending
Due to Spain’s
very late development as a modern economy, and the weakness
of its central
state, Spanish politics remains very regional, often
parochial, and is
dominated by local elites and parties, which are voted in
with the
express aim of getting as much as possible out of Madrid.
The regional
federations of both the main parties are very strong.
A significant
part of state spending, such as health and education, is
channelled through
regional governments, the majority of which are
conservative. Cuts in social
spending have an immediate effect on regional politics and
immediately create
intra-party revolt. For example, the main impetus behind
Catalans'
apparent bid for independence is really a ploy to pressure
Madrid to allow Catalans to keep all or a
larger part of their taxation, a privilege the Basques
already enjoy. So,
although the ruling conservative party is hostile to
everything Catalan that
smacks of independence, it continues to make large
concessions to the region in
the hope that those wanting only tax autonomy will curb
those backing complete
independence.
Susil Gupta, 28 July 2016
