Mariano Rajoy has only been Prime Minister of Spain a touch more than one year – since December 21st 2011 – even though it might seem much longer. In that period of time, he has lived by a Euro-crisis-guided political byword: austerity, austerity and more austerity. He’s enjoyed little success so far. (Indeed, by his own recent admission, the nation he leads is in for a “very tough” 2013.)
Rajoy won election as the candidate for the conservative Popular Party, promising to bring Spain out of its economic crisis, reduce the deficit, create more jobs and burnish international confidence in its finances. Twelve months later, the country has seen the unemployment rate surpass 25% of the population. Rajoy has broken many of the campaign promises aimed at fiscal soundness, the latest one being his confirmation in November he would raise pensions by 1 to 2 percent in 2013. He also vowed to not raise taxes; that promise went by the wayside in July, when he announced a 3 percent hike in the country’s Value Added Tax – a levy on sales and service – and the elimination of property tax breaks, part of a $79.85 billion austerity package. And that harsh measure came only five months after a $36 billion deficit-reduction package. These actions have fostered the idea that Rajoy and his economic team have been improvising their next steps as they attempt to satisfy officials in Brussels.
His belt-tightening measures combined with tax hikes led to almost daily anti-austerity demonstrations, some of them with mass repercussions. Civil servants, teachers, firefighters, students, doctors – all have been made very public their frustration and disenchantment with the prime minister. The Spanish government has also experienced two general strikes in the last year – a record. All of which has gone some way towards producing the impression that Spain is in as parlous a financial situation as its Mediterranean neighbor, Greece.
It would be easy to condemn Rajoy as a deficit-hawk drone, but he has only been following his political conscience and taking such steps as he believed would cut the public deficit and create jobs. In his endeavor to achieve budget targets agreed to with other euro zone countries, set at 4.5 percent of gross domestic product, he has been scrutinized, so to speak, from above, by the the so-called troika of the I.M.F., the European Commission and the European Central. German Chancellor Angela Merkel has joined the chorus as well. But so far Spain has not asked for a full state bailout, a move which would have larger consequences on Europe’s rescue fund – although the country did negotiate a 100 billion euro tranfusion to its ailing banks. The question remains whether a national bailout will arrive in 2013; with Angela Merkel campaigning for re-election it might be a tougher sell .
Despite the dismal numbers his policies have so far generated, Rajoy has stayed loyal to his fiscal convictions. As he said on December 18th: “the course that we have set is the correct one and the measures that have been put in place will be useful.” Your euro zone compatriots are still waiting to see the evidence, Mr. Prime Minister.