Spain: better economy, worse policy

Joan Tapia (Barcelona) | The crisis caused by the coronavirus, which has been going on for over a year now, is far from over. But perhaps the worst is that latent pessimism – unwarranted but real – too often obscures data and realities that lean towards cautious and reasoned optimism. If we add to that the political turmoil, we find ourselves – even more in Spain, but not only here – in front of an extreme confusion which alters reality.

In Spain, there is data, now that Easter has passed, that should tip the scales towards moderate optimism. Unemployment fell by 59,000 people and 70,000 jobs were created (low for a month of March). But at the same time, 140,000 workers left ERTE protection, bringing 210,000 people back to real activity.

We have 400,000 more unemployed than a year ago, which is serious, but the ERTE system has mitigated the social effects of the crisis. We had 3.5 million workers at ERTE and there are only 740,000 left. And the number of people affiliated with Social Security at the end of the last quarter, 18.9 million, is quite similar to last year.. It is true that the 740,000 still in ERTE are a potential threat, because there will be companies – especially in the service and hotel sectors – which will eventually close. However, the vaccination outlook, once the EU appears to have resolved the serious first trimester supply problem, indicates that the worst is not the most likely scenario. March once again showed that when mobility restrictions are relaxed, the economy and employment recover.

This is confirmed by the proven March PMI index, which has been very good for the European Union, including Spain. Highest in 171 months since late 2006.

And there’s more. In his April outlook, tThe IMF raised Spain’s growth forecast for the second time (the first was in January) to 6.4%, higher than that of Germany (3.6%) and the euro zone. Of course, we will grow more this year because we contracted more last year. But we will grow strongly and according to the IMF – it’s a shame to write it down – the same as the United States. That said, we will continue with high unemployment (as always) and fiscal deficit problems (as always).

Economic data encourages cautious optimism despite a social climate tending to defeatism. What’s more, Spain is immersed in great political tension. And there are plenty of reasons. In Catalonia, the PSC won the elections but the independence movement, split into three parties, revalidated its absolute majority. And almost two months after the elections, they are not in a position to elect a president of the Generalitat and it cannot be ruled out that the elections will have to be repeated. And a very divided Catalonia can do little to contribute to the governability and stability of Spain.

And Spain would need it. The early elections in Madrid, called by Isabel Díaz Ayuso, could paralyze political life until May 4.

These elections – in principle only regional – are already considered as primaries for the next legislative elections. There is a right wing with few complexes and waving the flag of tax cuts and anti-communism (with Iglesias as an excuse). It faces a Spanish government chaired by a Social Democrat allied to the left and with Basque and Catalan nationalists. A “liberal” management of the coronavirus faces a more restrictive management, inspired by Pedro Sánchez.

The result will have consequences. If Ayuso gets an absolute majority, or can get it with minimal support from Vox (without integrating him into the government), it will be a great triumph for the president of Madrid. Sánchez will have an implacable counter-power in Madrid.

If Ayuso needs a coalition in which Vox has a significant presence, things will be less clear. Sánchez will emerge defeated, but with the strength to embody “salvation” in the face of a right which merges with the extreme right.

And there is a third possibility. Ayuso, as the polls suggest, could come out on top, or she could win the election but not have an absolute majority and lack of partners to turn to. In the latter case, the right would be in serious difficulty. Ayuso would have won the election, but lost his risky bet.

Waiting for, everything is blocked, or conditioned, while awaiting the results. Will the political “deadlock†hurt the economy and jobs? Hopefully not. Or not too much. What is certain is that it will not help.