Spain: Anti-Zapatero vote tests market nerves

 
Mass protest against austerity in Madrid, 22 May 11 "Burnt by the system": Crowds have been venting their anger in central Madrid

For a period European officials feared Spain. They worried that if Portugal needed a bail-out, Spain would be next. And if Spain needed rescuing no one could be quite certain where the funds would come from.

And then the government in Spain got smart. It got serious about reducing its deficit, about labour reforms, about stress-testing its banks. Bond traders gradually classed it differently to Portugal and it was removed from the eurozone casualty department.

But nerves are back. In weekend elections the governing Socialist party took a thrashing. Even in strongholds like Seville and Castilla-La Mancha it was defeated. There is a pattern emerging in Europe. Given a chance, the people turn on the incumbents.

In Spain national elections do not have to be held until next March, but Prime Minister Zapatero is a lame duck. If further reforms are needed he lacks the authority to implement them.

What has really unsettled observers, however, is what the new conservative administrations will find when they start peering into the accounts in the town halls and regional governments across the country. There are stories of undisclosed debts, of payments not made. This is precisely what happened after elections in Catalonia. The deficit was found to have been much greater than acknowledged.

If that were to happen on a significant scale it would be easy to imagine a crisis. The markets are very sensitive to hidden debts. There could be tension between central and local government.

Zapatero has said there will be no more austerity measures, but he is committed to reducing the deficit to 6% of GDP next year. And even if further tightening were needed he might be unable to implement the measures.

The Spanish people have finally found their voice. For over a week they have been occupying squares across the country to protest at unemployment. For 16- to 24-year-olds, 43% are without work. In Madrid they have turned Puerta del Sol into a tent city.

What unites the protesters is a desire for a change, a sense that the "establishment has failed an entire generation". Having taken to the streets they might not accept further austerity if it was needed.

So Spain is once again troubling markets and officials. A weak government is caught between needing to enforce spending cuts and protesters demanding work.

 
Gavin Hewitt Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    0

    Comment number 56.

    Re #55 "There will be no relief until we throw off this yoke, imposed on us by Europa fanatics like Heath, Howe, Haseltine and the rest of these traitors."

    In your alliteration you've forgotten Howard. :-)



    [no, I won't go back to (Sir) Roger Hollis, for he served another superstate. Just like Harold Wilson.]

  • rate this
    0

    Comment number 55.

    Nearly all our frustrations, be they financial, judicial, social or constitutional have their origin in EU policies. There will be no relief until we throw off this yoke, imposed on us by Europa fanatics like Heath, Howe, Haseltine and the rest of these traitors.

  • rate this
    0

    Comment number 54.

    margaret howard advises re eurozone crisis:" Head for the hills"





    Unless you already live in Highlands and still use British pound. :-)))

  • rate this
    0

    Comment number 53.

    I read somewhere that the illusion is being created of a liquidity crisis when in reality it is a solvency crisis.

  • rate this
    0

    Comment number 52.

    Matt, the socalled 'CDS' has not had a meaningful influence on this here crisis. Structural government overspending and perpetually increasing debts however have.

    With CDS, its really nothing more than a bet that requires one side to bet on something, and another side betting against it. There isn't some shop where you can buy them, you need someone willing to bet on what you want to bet against.

  • rate this
    -2

    Comment number 51.

    36 Manneken writes:
    "The end of the Euro is nigh! It was ordained, for erm, last week, no next week, no next month ! But sell now, seriously!"
    ---------------
    There is no shortage of nuts in America! Only last week they prepared for yet another 'rapture'. It must be the most neurotic country on the planet. Head for the hills.

  • rate this
    +2

    Comment number 50.

    49 I say what I said before this first started a long time ago, Europe is in a death spiral. So far that possibility has not been entertained by those in control, it is too unthinkable to those who dreamt up this brainstorm in the first place.They are not asking the question of how to unwind this lunacy with the least degree of chaos.When it collapses, they won't have an answer to that either

  • rate this
    +1

    Comment number 49.

  • rate this
    0

    Comment number 48.

    We are being ripped off by the bent financial press which aides it financial paymasters in ripping off European citizens for the benefit of Credit Default Swap speculators.

    It is about time the journalists advocate the immediate stop of these instruments, which make hedge funds, speculators and bent journalists richer, driving Europe into misery.

  • rate this
    0

    Comment number 47.

    Re Barroso:

    "He was one of the leaders of the underground Maoist MRPP (Reorganising Movement of the Proletariat Party, later PCTP/MRPP, Communist Party of the Portuguese Workers/Revolutionary Movement of the Portuguese Proletariat). " (Wikipedia)

  • rate this
    0

    Comment number 46.

    When governments exercise greater control of banking and financial services and the size of those institutions, things may get better. Right now they are all laying the groundwork for the next great theft. This is all still playing out and there will be a point when the people say, no more. The wave washed over the ship and it is upright, but still leaking.
    Protecting the wealth of the wealthy.

  • rate this
    0

    Comment number 45.

    Nobody talks much about the social impact or the economic impact the failed Euro would cause throughout Europe. When trouble comes there is always a flight to safety and security, the USA. America is the refuge people seek when there is real trouble. Wars, persecutions, financial calamity, social upheaval. A brain and money drain flowing one way to America like a magnet for energy, talent, wealth.

  • rate this
    -2

    Comment number 44.

    41 How will the dangerous game of chicken being played between the Reps and Dems turn out? A last minute save? End of the world?Who knows? Some compromise seems likely.

    Collapse of the Euro like the nuclear disaster in Japan will prove a windfall for the US IMO. Europe is America's competitor.We have a trade war in a number of areas already. We have ALL the advantages. Dead Euro is one more

  • rate this
    0

    Comment number 43.

    Angela Merkel is a lame duck since the Baden-Wurttemberg election. Zapatero seems to be a lame duck too. By crisis time, the IMF may well have just got Lagarde into post over the objections of what looks to be a sullen Asian contingent.

    Maybe Barroso will be the man. How popular is he in Spain ?

  • rate this
    0

    Comment number 42.

    Capitalism demands austerity. Whether via the free-market devaluing capital, i.e. banks go bust, or via governements bailing out the banks & then incerasing taxes & cutting spending. Either way the people suffer.
    Capitalism is breaking down. Now the politics is catching up with the economics.

  • rate this
    -1

    Comment number 41.

    d_m
    23rd maja 2011 - 21:13
    MAII@16

    Perhaps the Euro will collapse before the US defaults, causing a mess that might persuade the US Congress to raise the debt limit.




    Congress will raise the debt limit, all right.

    As soon as O'Bama cut his projected budget by a similar amount.

  • rate this
    -1

    Comment number 40.

    GH: "And even if further tightening were needed he [the Cobbler] might be unable to implement the measures."




    And what then my love?

    A bail-out of Spain would cost eurozone countries more than bail-outs of Greece, Ireland and Portugal combined.

    [next land election in Germany: September 4th, in a large and populous Meklenburg-VorPommern.

    September 18 - Berlin itself.]

  • rate this
    0

    Comment number 39.

    Wow....I am impressed at just how badly the new set up fails to deliver.

  • rate this
    0

    Comment number 38.

    36 "It's obscene. We should act now."

    Any suggestions other than the use of bits of rope and lamp posts?

    Although that does have a certain appeal... ^^

  • rate this
    +1

    Comment number 37.

    cont..
    Once the PIGS are sorted (well plans set in to action) we turn our attention to Italy and 'the core eurozone', can Italy be adapted, does it want to be adapted? We need to put this to free and fair referendums accross the Eurozone and let the people determine their own fate through the ballot box. I want the Euro core to survive because I believe it can be made to work for all inc Germany!

 

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