Category Archives: IP Journal

Deficit Theatre

After the curtain drew on the European fiscal pact meeting in Brussels on March 2, Spanish Prime Minister Mariano Rajoy announced that Spain would miss its European-imposed government budget deficit target of 4.4 percent of gross domestic product (GDP). Instead, he said, Spain’s national government would aim for a 2012 deficit of 5.8 percent of GDP, down from 8.5 percent under his predecessor in 2011. Some Spaniards described his announcement as an assertion of Spanish sovereignty and a rebuff of German Chancellor Angela Merkel’s continual demands for austerity. Outside observers speculated that Spain, the second-biggest economy of the so-called PIIGS countries, might lead a revolt against new fiscal rules.

No politician wishes to take the blame for collecting new taxes or making painful spending cuts. In Spain, then, politicians could find it convenient to blame iron-fisted Germany, or at least ham-handed eurocrats in Brussels, for the budget cuts they must announce by the end of March.

But that is not happening. While Rajoy’s theatrical timing may earn him some popularity at home, he has not tried to blame the present austerity on Europe. He does not need to: Rajoy’s Popular Party (PP) won an absolute majority in November’s national elections. While the PP held off on releasing its 2012 budget until after last Sunday’s regional elections, the party already treats its widespread victories as a mandate for tough reforms. Pointing the finger at Europe is not a very successful strategy in Spain anyway, says José Ignacio Torreblanca, a senior fellow at the European Council on Foreign Relations in Madrid. “Since politicians know that citizens won’t listen to anti-European messages, they don’t bother with inflammatory statements,” he says.

Polls agree. Spaniards are vocal critics of the crisis, but they place more blame for economic difficulties on their own institutions, such as the government (40.0 percent), the Bank of Spain (38.0 percent), and commercial banks (60.8 percent), than they do on European institutions such as the European Union (28.8 percent), the European Central Bank (34.1 percent), or the euro (31.7 percent) according to a December 2011 poll by the Center for Sociological Research in Madrid.

If Spaniards resent Germany for its leadership on European fiscal reform, they still prefer it to the alternatives. Germany earned the highest popularity score (6.5 out of 10) among Italy, the United States, Greece, Portugal, and Russia in a December 2011 poll by the Elcano Royal Institute. Even Merkel comes in second only to Barack Obama when compared to the heads of state of Britain, France, Portugal, and Russia.

Torreblanca assigns some of that goodwill to history: unlike Greece or Italy, Spain has no recent history of military confrontation with Germany. Both Spain and Germany underwent traumatic dictatorships driven in part by excessive nationalism which may have also shaped their attitudes toward Europe and each other. Torreblanca says that in post-dictatorship Spain, as in post-war Germany, “nationalism has only been acceptable in the framework of Europeanism.”

Still, Spaniards are not complacent about the cutbacks. One protest against labor reforms swept Madrid on March 11, displacing even commemorations of the 2004 Atocha train bombings. Indignant Spaniards are calling for a general strike on March 29, the third since this recession began and the first since the formation of the new government. Yet that is a form of theater, too: it will take place after last Sunday’s two regional elections and only a day before the government must release its 2012 budget, too late to change the outcome of either. The tension there is national, between those with comfortable employment contracts and those trying to make it easier to fire existing employees and hire the young and the long-term unemployed.

Spaniards do resent European stereotypes about being lazy southerners, Torreblanca says. They are proud that unlike Greece and Portugal, which required European bailouts, or Italy, which appointed a technocrat government, their elected officials began enacting reforms on their own, he says. Those internal steps have helped keep interest rates on government debt at bay and may help mollify European deficit hawks, Torreblanca argues: “The government had the space to change the deficit objectives precisely because they had the credibility of having made large reforms.”

Yet by mid-March, in a show of deference to Brussels, Rajoy agreed to trim the deficit another half percentage point to 5.3 percent. So first Madrid saved face and then Brussels saved face and now both can continue the long slow process of fiscal harmonization.

This article first appeared in IP Journal: [html] [pdf]

IP-global-2011-3

Letter from … Madrid: Ambition trumps tradition in one Spanish family

Visitors to Madrid soon learn about Spain’s glorious long lunches, from the cozy cocido soup to hefty heaps of saffron-laced meatballs. They may even make the connection, through the haze of a food coma, between the country’s midday meals and its notorious siestas, often blamed for Spain’s sleepy economy. But for Madrileños, a good lunch is about more than escape from work or filling bellies. For older Madrileños, lunch, called la comida, or “the food,” is a time to luxuriate in la familia. But tugged one way by their traditions and another by their rising ambitions, many Spanish families are leaving the table empty at lunch.

Last week burnt-out trash bins in the street, together with the latest figures from the National Institute of Statistics (INE), attested to the growing wedge between generations in Spain. It’s no secret that the worst damage to the country’s economy has been to its youth: the INE lists around 80,000 new jobs in the last quarter of 2010 among those aged over 35, but 217,000 fewer jobs for workers aged 16-34. National unemployment is just over 20 percent, but for those under age 25, it’s over 40 percent. Contracts for the young tend to be short-term or part-time. So when Spain’s grandparent class, in the form of union leaders and government negotiators, agreed at the end of January that the next generations will have to contribute more to the national pension plan, some young Spaniards hit the streets.

Police blocked a march to the Senate, so protestors trashed Tirso de Molina, a cheerful plaza whose graceful curved street lamps overlook terrace cafes. They lit trash containers on fire, blocking an intersection, and hurled bricks at bank windows. It’s possible that a father and a son could have broken bread that night, wearing shoes covered in dust from opposite sides of the same scuffle, one a pair of loafers worn to work at the bank and the other a pair of steel-toed boots kept from a briefly-held construction job.

Other young Spaniards vote with their feet. Equipped with more training than their parents but facing fewer opportunities, these recent graduates chase jobs abroad. One of my Madrileño cousins just got an internship in Santiago, Chile, a first post-graduate stop that he figures will be more of a jumping-off point than a high point. His father, in contrast, lives in a leafy neighborhood near the Retiro park and continues to take Sunday lunch with his wife and childhood friends, who all grew up nearby. My cousin won’t be appearing at that lunch table anytime soon, though.

The loss of our family lunches is uncomfortable, but I suspect it’s also part of an irreversible trend across Spain, whether the economy continues to stumble along or picks up pace. Young Spaniards have had a taste of the good life, whether that means ditching the fields of Andalusia for a bartending job in Valencia or earning an MBA in Milan and joining an internet firm in Seattle. Maybe part of the problem is that when their parents tasted the good life, they held on—securing well-protected employment contracts and mortgages in their hometowns, and leaving little room for another ambitious generation.

Another cousin, pushing 30, lives under his parent’s roof—in a second apartment they’ve bought in the same building. The kitchen of his gilded cage is pristine: he still nips upstairs for meals with his folks. He’s employed full-time by means of cobbling together part-time, fixed-term contracts. I once asked him whether he was angry at his parent’s generation for grabbing such a disproportionate share of Spain’s economy. He looked at me, mystified. He may still have a few cozy meals at home ahead of him.

Of course, nobody forces Spaniards to emigrate or commute—they are driven by a combination of education and narrower professional interests and enabled by the lower barriers to travel that have flattened Europe’s labor landscape in the last couple of decades. Again, examples from among my many cousins: one chose to pursue an obscure scientific field and found a matching research group in Newcastle. Yet another settled in Berlin with her Dutch boyfriend.

Mobility and prioritizing your profession are both revered where I grew up in southern California. There, people brag about having a “reverse-commute,” or driving against the main flow of traffic to and from work every day, as if driving a long distance to work every day is somehow commendable because others driving the same long distance to work every day are slower.

I still haven’t gotten anyone in Madrid to offer me a suitable translation for the word “commute.” But I fear that won’t last. More and more Madrileños know what I mean when I describe commuting because it’s what lets them afford a larger home on the outskirts of the city or to put their kids in a better school. That’s probably good for the country, but I wonder what it will mean for la comida and la familia.

 

See this essay in Internationale Politik – Global (now IP Journal) online [html] or as it appeared in print [pdf]