Some months ago, the Socialist Prime Minister, Mr Rodriguez-Zapatero (or Zapatero as he is commonly known in Spain) decided to call elections for the 20th November. Since then, both main candidates, Alfredo Pérez Rubalcaba for the Socialist Party and Mariano Rajoy for the Popular Party struggled to convince the Spanish voters that their proposals were the right ones for the economic crisis. The truth is that the fight has been lopsided since day 1 and the result was already decided moths ago. The consequences of the economic crisis, specially the dreadful unemployment figures, made Rubalcaba’s triumph almost impossible. In the end, Rajoy obtained absolute majority of votes and he has now “carte blanche” to implement his proposals.
The problem is that Spain needs more than proposals. The economic situation has resulted in social unrest. The threat of a national bankruptcy frightens the Spaniards. A bail-out will not only mean new public cuts but also real problems for the Euro-zone’s stability.
The new government has at least three economic challenges:
-There are approx 5 millions of unemployed in Spain. The unemployment rate in youngsters is the highest in the developed world.
-Financial problems are huge: Public debt is high, international investors increase the pressure over markets, the banking sector is reluctant to grant loans, and the stock exchange fluctuates between quietness and depression.
– Structural reforms are needed. To improve the competitiveness of Spanish companies, fight against tax evasion, avoid convoluted bureaucracy and make the labour market more dynamic.
The challenge is enormous. I would not want to be in Mr Rajoy’s shoes right now but part of the future of Spain relies on him and his party. Will he able to succeed where others have failed? Time will tell.
This article has been written in colaboration with Manuel Baena Pedrosa, Spanish lawyer