21st Oct 2016

Anti-corruption pact holds key to Spain deadlock

  • Madrid metro station. Companies holding back on investments that could create jobs due to political uncertainty (Photo: Calvin Smith)

Spain’s prime minister Mariano Rajoy could secure a second mandate, ending months of political deadlock, if his party agrees, on Wednesday (17 August), to anti-corruption conditions set by the liberal newcomers in parliament.

Ciudadanos (meaning “citizens”), the fourth-largest force in parliament, said last week it would negotiate on making Rajoy prime minister if his People’s Party (PP) - which lost its absolute majority largely because of corruption allegations – agrees to six measures to clean up Spanish politics.

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  • Rajoy emerging as compromise candidate (Photo: Partido Popular de Cantabria)

The proposals include creating a commission to investigate allegations that two former treasurers ran a slush-fund, and scrapping parliamentary privileges that prevent the ordinary criminal justice authorities from launching corruption investigations against MPs.

The PP’s executive committee will decide on Wednesday whether to agree the conditions. It has 90 members, including Rita Barbera, a senator accused of money laundering in Valencia.

The PP must also let the parliamentary speaker, who would be a PP member, set a date for the investiture vote.

Rajoy had earlier accepted the king’s mandate to form a government, but he has yet to say when or if he will seek the confidence of parliament.

The offer by Ciudadanos’ leader, Albert Rivera, whose party has 32 MPs in the 350-seat chamber, could help end the deadlock that arose after an inconclusive general election last December.

It would give Rajoy 169 votes in an investiture vote - seven shy of a majority - and make it more palatable for other parties to agree to facilitate a PP government.

“Rivera’s demands seem very acceptable and, in general right for the country’s necessary democratic renewal,” the right-leaning El Mundo newspaper said in an editorial. “Everything suggests the PP will accept them.”

A PP-Ciudadanos deal would be welcomed by many investors since it would reduce the uncertainty of yet another election in the eurozone’s fourth-largest economy, and would increase the likelihood of a business-friendly PP budget and reforms.

Until now, the entrenched positions of the four largest parties made it look as if the PP could at best build a minority, short-term government.

Ciudadanos had previously offered to abstain at a second investiture vote, but now the party leader, Rivera, is not ruling out entering a PP coalition if conditions are met.

The most urgent task for the next government is to draw up a spending limit and budget to present to the European Commission by 15 October.

Slowing growth predicted

So far, the markets have been relatively sanguine about the political impasse. The economy is growing faster than the eurozone average, boosted by consumer demand, tourism and low interest rates.

The PP government approved the 2016 budget last year when it had a majority.

However, economists have sharpened their warnings in recent weeks.

“Spain might remain without a functioning government for longer than expected,” warned risk management service Moody’s Analytics in a report released earlier this month.

“As confidence sours, investment growth will decelerate to 3.9 percent in 2016 and further to 2.5 percent in 2017.”

Companies are delaying the sort of investment decisions that could help cut Spain's unemployment, which is currently at 20 percent.

They want to see what measures the next government will implement. Above all, it needs to make cuts worth 0.5 percent of GDP in 2017 and 2018 to bring its deficit down to a commission target of 2.2 percent, said a research note by Spanish bank BBVA.

“The increase in the uncertainty of the economic measures that will be adopted over the next few years could take seven percentage points off the growth of private consumption in 2017,” said the note.

The PP and Ciudadanos, a centrist party, may be able to find common ground on economic policy.

However, if the two parties agree a pact, they will still need the Socialist Party to lend a few votes to reach a majority, since support from regional parties looks unlikely.

Former Socialist prime minister Felipe Gonzalez has urged the Socialists to stand aside in order to let Rajoy govern. He said the Ciudadanos’ offer was “the first act of political responsibility since the elections”.

The left-wing newspaper El Pais has also called for the Socialists to abstain from voting in a Rajoy investiture in order to allow him to form a government, writing in an editorial that the focus should be on making Spain governable again.

In a sign of the public mood, even one of the Socialists’ media friends, actor Antonio Banderas, urged the party to abstain for the sake of the national interest.

"I don't think that by abstaining at a certain moment, that means you support the other [party’s] policies”, he said.


Europe ready to tackle Greek debt relief

The Greek government has built and broadened alliances in EU institutions and member-states that acknowledge the need to restructure the debt and deliver another economic model for the eurozone.

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