Political instability and social struggles will follow Spain’s general election

[Joanne98]

Latest polls suggest the Socialist Workers Party (PSOE) led by current Prime Minister José Luis Zapatero is just 1.5 percentage points ahead of Mariano Rajoy’s opposition right-wing Popular Party (PP) in tomorrow’s parliamentary election. Neither side looks likely to win an absolute majority in the legislature and will probably need to reach an agreement with smaller parties in order to form a government.

Irrespective of who emerges as victor on Sunday evening, the Spanish election augurs a profound lurch to the right within official politics and escalating class conflict. Spanish society is already highly polarised. Many commentators refer to the re-emergence of “the two Spains’ of the 1936-9 civil war” as the “consensus” created during the so-called peaceful transition from fascism to parliamentary democracy following Franco’s death in 1975 unravels. The economic downturn threatens to bring these tensions to breaking point.

Over the last decade, Spain experienced one of the highest economic growth rates of any country in Europe. But now the financial pages are full of warnings about a rapid slowdown, slump or stagflation—stagnant growth with rising inflation. Predictions of economic growth have fallen—from 3.8 percent in 2007 to an estimated 3.1 percent this year, according to the government, and only 2.7 percent, according to the European Commission and the International Monetary Fund. The Commission also said business confidence—expressed in its “economic sentiment” index—was plummeting across Europe but was “particularly gloomy” in Spain, falling to the lowest level since January 1994 when the country last suffered a full-blown recession.

The real estate boom is grinding to a halt. The Spanish Savings Banks Federation FUNCAS has warned that the slowdown will be “more traumatic” than expected. Credit Suisse and the Spanish construction association have forecasted a drop of 40 percent in construction activity this year. The consequences for Spain are far worse than for other countries since construction investment constitutes 18 percent of the Spanish gross domestic—nearly twice that in countries such as France and Germany. In addition, the construction crisis is spilling over into other areas of the economy, particularly the banking industry.

Financial institutions such as the International Monetary Fund are demanding that the next administration push through long demanded industrial reforms and raise productivity, which is amongst the lowest in Europe, introduce more modern technology and tackle the huge current accounts deficit now at 10 percent of gross domestic product and the second largest in the world after the US. They warned all the parties against relying on the record budget surplus to finance tax cuts. During the election campaign, the PSOE pledged a €400 ($600) tax rebate for all workers and pensioners, whilst the PP promised to exempt from income tax those who earn less than €16,000 a year, to cut the maximum income tax rate from 43 percent to 40 percent and to lower corporation tax from 32.5 percent to 25 percent.

University of Murcia political scientist Ismael Crespo explained: ”Now that the bubble-economy is largely defunct, the main challenge for the victors of Sunday’s election will be—apart from crisis management—the search for a new growth model, based on rising productivity. Unfortunately, that reality, too, has yet to sink in fully.”
http://www.wsws.org/articles/2008/mar2008/spai-m08.shtml