Hispania. & Pollo Financiero Global & Spain for dummies

A predictable election with unpredictable results

7 Nov, 2011 - - @egocrata

In a couple of weeks Spain will vote in its most predictable election in decades. After seven years in power, the Spanish socialist party (PSOE) will get clobbered by an angry electorate, and the conservative Popular party (PP) will obtain an ample majority. This defeat will follow the disastrous showing for the socialists in May, when they lost their grip in pretty much any regional and local government that was up for grabs. By the end of the year, Spain will truly be under new conservative management.

What we do not know, however, is what can we expect from this change. Mariano Rajoy, the conservative leader, has been notoriously mum on his plans once he reaches the Moncloa. His campaign has stopped short on saying anything that might be construed as risky or unpopular; party officials have even been remiss to even talk in general principles or ideas. The socialist candidate, Alfredo Perez Rubalcaba (Zapatero, the current Prime Minister, is not running) has been warning voters about the conservatives «hidden agenda» to no avail, as Rajoy has largely avoided talking policy. The lone face-to-face debate of the campaign this evening might offer a glimpse on Rajoy´s plans, but a big reveal is unlikely.

This would be slightly unsettling under normal circumstances, but in a country mired in a horrible recession is downright bizarre. Unemployment is at 21.5% and trending up, growth stalled during the third quarter, the economy is likely to slid down to recession in the coming months, public finances are getting harder to keep in check(the regional governments proving harder to discipline than expected), and the banking system, especially the cajas (saving banks) is loaded with bad potentially lethal real estate assets. In a continent struggling to cope with a potentially lethal debt crisis, Spain sports economic numbers that alreadly look like a worst case scenario.

Why is Spain in this mess? For starters,  it is important to remember that this outlandish unemployment figures are nothing new for the country. Spain´s unemployment climbed all the way to 24,1% in 1994 during what was an otherwise fairly mild recession in the rest of the continent. In the early eighties, unemployment climbed over 20% in 1984, and refused to come down bellow that mark for most of the decade. Even during the best of times in 2007, 8,1% of the workforce could not find a job. This is a country that does not just go into recession; it jumps off a cliff outright.

The main driver behind this horrific numbers is, above all, an incredibly inflexible, hopelessly confusing labor market. Spanish laws impose stiff penalties and high severance payments when dismissing workers under long term contracts, and zero protection for those on temp jobs. This has created an incredibly unequal market, with younger workers stuck in dead end jobs while insiders remain impossibly sheltered from the recession. To try to solve the problem, a long line of labor ministers have created new kinds of employment contracts, all incredible specific, equally convoluted, and usually making the problem worse by adding to the confusion.

The labor market, however, is only one of the many issues that make the Spanish economy a complete mess. Some sectors of the economy are hopelessly overregulated; in a country that is heavily reliant on tourism, retail opening hours are severely limited. Creating a new business is a tangled, expensive affair, involving downright absurd amounts of red tape. The energy sector is both expensive and heavily subsidized, with very little competition. Some expensive infrastructure investments like major airports or high speed rail lines are woefully underutilized, languishing under government ownership. The court system is slow and inefficient. Spanish universities are wasteful, dull affairs, producing very little useful research.

Spain, up until now, relied in two main engines for its growth: first, being as it is the sunny, pleasant and cheap corner of one of the wealthiest regions of the planet, attracting tourism and investors looking for a decently stable, well-educated, affordable country to build factories on. Second, when everything else failed, relying on competitive devaluations of the peseta to regain the right levels of cheapness when the country got ahead of itself. With devaluation off the table within the eurozone and a colossal real estate bubble making the country anything but cheap, Spain needs to learn how to thrive without resorting to its old monetary gimmicks.

Fortunately, the country is blessed with a fantastic location, decent services and tons of potential to be unleashed with the right reforms. What we don´t know, however, is what the soon to be Prime Minister Rajoy believes it is necessary, and if he would be willing to pass necessary but potentially unpopular reforms while trying to survive the whole eurozone mess.  The conservatives will have the votes, no doubt; an outright majority is out of question. Spain´s problems are vast, but getting the economy back to growth is not beyond reach. We can only hope that behind their calculated ambiguity, the conservatives know what needs to be done.

Nota: un amigo me ha pedido que le escriba algo explicándole qué podemos esperar de las elecciones en España. El artículo es un repaso muy general sobre dónde estamos, así que os sonará muy familiar. Sirve de resumen de la situación, supongo.

Seguramente voy a escribir más en inglés en los próximos días; si se volviera algo habitual, miraría de separar los artículos en otra columna.

16 comentarios

  1. I guess you’ve forgotten our inefficient educational system, the slow and expensive health system, the duplicity of procedures between Communities and the central Government, the mix between public and private debt (in my opinion, private debt is key), the taxes, the city halls financing, and it’s very difficult to run away and move abroad without speaking English.

    Well… it wasn’t about to write the Holy Bible.

    It’s incredible: I know how to be a pain in the ass in, at least, two languages.

    Sorry for the faults.

  2. Vellana dice:

    Yo a lo mío.


    Si, como dice Espada, el momento procesal es el mismo ¿cómo no se os cae la cara de vergüenza (al menos Roger y Ala)? Ya no es que sean casos similares, es que serían 15.000€ contra 200.000€.

    Ciertamente, me gustaría conocer los procesos mentales que hacen a alguien despotricar contra uno (Camps) por algo, y obviar algo 7 veces más grande que hace otro (Blanco).

    Un saludo.

  3. Roger Senserrich dice:


    todo lo que dije a Camps es aplicable. Si Italia, Grecia o similar no implosionan hoy, te debo un post.

  4. rafael dice:

    Sorry to tell you that your friend will not get an accurate nor clear assessment of Spanish economical issues. Above all, because you have failed in matter you ascribe prime importance: the labor market. As many others, you have confused causes with consequences: the Spanish labor market is not the main cause of those outlandish unemployment figures. Those figures are the main consequence every time a labor intensive production system as the Spanish one slows. Please tell your friend that Spanish economical structure is still, unfortunatelly, too similar to a developing country one and, in the same way a labor market reform alone will not get a developing country out of the mess (partly beacause is not the its main problem), this is not going to happen in Spain without undertaking deep structural economic reforms as to transform a labor intensive production system into a capital intensive production system.
    Remind your friend what Henry Kissinger said when he was asked what did he think about Spain: «I think Spain is a country of excellent waiters».

  5. Roger Senserrich dice:

    And labor market legislation has absolutely nothing to do with what kind of businesses and production arrangements the country has, of course.

    Spain is focused in low-productivity, labor-intensive stuff because the labor market legislation favors low-productivity, labor-intensive temp contracts. It is not that hard to understand.

  6. What’s the rate of graduated who are running his own business? What’s the goal of any youngster? To get a cleric job, to be a bureaucrat. The more entrepeneurs you get, the more sectors you cover.

    How can we make easy money? In Spain, a person with no idea to do with his life creates a bar. OK, it’s a topic.

    I think labour market has nothing to do with our focus on tourism. However, employment law is allowing the touristic sector to survive, but only that one. This one, and building, were the only ones capable to survive in this context. One of them is crushed because of the bubble, and the other one is still here until the end of the Arab Spring.

    Sorry for the mistakes.

  7. francisco dice:

    ¿Camps igual que Blanco?

    Aún no he visto una sentencia judicial que diga que Blanco se llevo el dinero, y de Camps ya sabemos que no se pagó los trajes por hecho judicial.

    No se que pruebas hay de lo de Blanco (aún no he visto ninguna) pero desde luego ahora mismo no están en la misma situación ni de coña.

    Y es una discusión muy off-topic del post, por eso ni intento comentarla en inglés.

  8. francisco dice:


    In each country where i have travel in my life people with no idea creates a bar. From Ireland, Italy (ok, pizza in Italy), England, Costa Rica, Scotland, Peru or Turkey.

    Easy money in Spain, and the difference with the world is that in Spain every stupid build a house to sell it with a 100% margin.

    Bars are not the problem of Spain. In fact, bars are part of our best industry.

  9. Yes, Francisco, you are right. The problem is that we are not capable to do anything else competitively. Well, maybe, cars, but it’s not usual, or infraestructures. It’s OK, but it is not enough to solve an structural unemployment of a 14%, and the question is how we are going to solve it.

    By the way, we are not talking about the structural unemployment in some regions. Now, in some regions the rate of unemployment is about a third of the population. The structural unemployment is the 20%. What are we going to do? Waiting for the next generation? Emigrate? Do we bomb Seville with napalm? Do we use Vx gas in the public offices of employment? I think that even the whole Roger’s blog is capable to explain all the mess.

    I’m sorry, but I had to say it.

  10. Vellana dice:

    Hola, Francisco.

    El único pronunciamiento de los tribunales fue en 2009, «3 de agosto: la Sala de lo Civil y lo Penal del Tribunal Superior de Justicia de la Comunida Valenciana archiva la causa interpuesta contra los cuatro acusados por la trama en la Comunidad Valenciana, tras estimar sus recursos. La resolución incluye un voto particular de un magistrado que cree que sólo se debería archivar la causa contra Ricardo Costa, secretario general del PPCV y portavoz del grupo popular en Les Corts. Ese mismo día, María Teresa Fernández de la Vega anuncia que la Fiscalía General del Estado recurrirá el fallo del TSJCV.19»

    Pero ése no es el tema; el tema es que sin una sola prueba, sin imputación de por medio, hubo gente que se dedicó a juzgar y condenar a Camps, y de Blanco (si se atienen a la rumorología periodística como hicieron en su momento, estamos con importes unas 15 veces mayores) ni se acuerdan. Entre ellos supongo que tú.

    Y ya mi opinión; sí, como dices, veremos que Camps y Blanco no son lo mismo. Uno, en el peor de los casos con una multa y el otro, también en el peor de los casos, a prisión. Pero esa es mi opinión y desde luego ni pido la dimisión de nadie, ni la inhabilitación ni el fusilamiento hasta que no se pronuncien los tribunales.

    Supongo, si hay algo de respeto por uno mismo, que jode mirarse en el espejo que nos da Blanco y ver que somos sectarios en estado puro.

    Un saludo.

  11. Francisco dice:


    No, no es la unica


    El supremo ha dicho «por existir suficientes
    indicios racionales paa estimar que los hechos que se les imputan
    pudieran ser constitutivos de un delito de cohecho previsto y penado
    en el artículo 426 primer inciso del Código penal».

    A lo mejor lo del supremo para ti entra dentro del apartado de opinión, no soy jurista, pero para mi eso es más que la opinión de un fanático socialista que pulula por Internet.

    Y yo nunca he pretendido ser objetivo, dios me libre, yo tengo opinión propia y tremendamente convencida.

    Camps es más culpable que una rata, si, lo prejuzgue, pero es que los que lo hicimos lo clavamos.

    Veremos con lo de Blanco, a mi después del Faisán y el rapapolvo que ha dado la audiencia a los voceras de la derecha creo que me satisface verlo de modo muy escéptico.

    Creo que si quieres hablar del caso Blanco te puedes abrir un blog y comentarlo, venir al blog de otro a enmierdar los comentarios no se si es muy coherente.

    Pero Roger quiere ser un santo. El blog es suyo..

  12. rafael dice:

    Roger said:
    «Spain is focused in low-productivity, labor-intensive stuff because the labor market legislation favors low-productivity, labor-intensive temp contracts. It is not that hard to understand.»
    Unbelievable statement. Magically you have related legislation to the productivity level of a economy. Hummm let me guess…you are stating that, for example, the low productivity of Morocco is due to a poor labor legislation…
    No more comments.

  13. Francisco dice:


    Por cierto, ya que estas interesado en temas de corrupcion…


    Seguro que este te apasiona.

  14. Vellana dice:

    Sí, sí, Francisco, sí… indicios. Indicios, indicios, indicios. Como indicios hay en lo de Blanco. Sí, exacto, indicios. Nada más.

    Y sí, con los indicios de uno, aquí se hicieron entradas y entradas y más entradas. Y con los del otro, quién sabe si quizás.

    Ya sabes lo que ha dicho el santo… que uno y otro son iguales. Y yo estoy de acuerdo, pero no veo que se les trate igual. Yo sí los trato igual. Hay indicios y sólo indicios, y, por tanto, pueden seguir en sus cargos hasta que haya otra cosa.

    No sé, Roger, ¿estoy enmerdando tu blog? Este señor dice que sí. ¿Habla en tu nombre?

    Un saludo.

  15. Vellana dice:

    ¡qué tierno! Seguro que te crees todo lo que se dice en losgenoveses, en el país, etc. etc.

    Esto supongo que te dejará alucinado, ¿cómo, la secta es peor que el pp?


    Siento repetirme, pero es que hay gente que no entiende nada, y hay que repetírselo mil veces.

    Te dejo enlaces que no te permitirán justificarte con la supuesta manipulación del mensajero…



    Un saludo y a disfrutar.

  16. francisco dice:


    Opino en mi nombre igual que tú.

    De los genoveses he traído un pdf del tribunal supremo. Sí no lo es mis disculpas, sí es correcto donde está en el enlace es irrelevante. Lo busque en google por cierto.

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