Disappointing Bond Auction Knocks Confidence in Spanish Economy

(photo by aranjuez1404)

The Spanish economy took another slap in the face today, and with it so did the Government who had hoped that their defiance in the face of violent ant-cuts protestors last week would signal strength of purpose.However the markets once again had different ideas. In the first auction of government bonds since the announcement of the Government’s austere budget for 2012, the Ministry of the Economy sold €2.5 billion in three-, four- and eight-year bonds despite aiming to sell between €2.5 – €3.5 billon.

In a rallying call to those who oppose his proposed budget, Prime Minister Mariano Rajoy said today:

“Spain is facing an economic situation of extreme difficulty, I repeat, of extreme difficulty, and those who do not understand that are fooling themselves.”

He also went on to raise the threat of Spain requiring an international bailout should his budget plans falter altogether. Stressing that although “no on likes” the budget his Government announced last week, he added “the alternative is infinitely worse”.

To add to this disappointment, Spain’s risk premium rose its highest level since the Partido Popular took office in December. The stock markets also took a hit, with the Ibex 35 closing down more than 2 percentage points.

 

Snip, Snip, Snip…

Spain's PM, Mariano Rajoy (photo: lamoncloa.gob.es)

The Spanish Government, and in particular Prime Minister Mariano Rajoy, have continued to defend the planned cuts to the central government budget announced last week.

The Government’s announcement last week that it was looking to make reductions to €27 billion over the course of 2012 (equivalent to 2.5% of GDP) continue to dominate headlines.

On average, there will be a 16.9% reduction in spending by Government ministries. Yesterday, the Government revealed a further breakdown of exactly where those cuts would fall in particular Government ministries, with Spain’s Foreign Ministry receiving the largest percentage budget cut for this year, meaning the biggest cuts will be made in overseas aid and development programmes.

Furthermore, all civil servant salaries will be frozen, and they will be required to work and extra 10 hours a month.

The Government continues to insist that their planned budget, although extremely severe, is better and significantly less painful than having to receive a bailout from European counterparts.

On top of the €27 billion planned to be cut from the national budget, Spain’s Autonomous Communities are facing a cut of €15 billion to their budgets to reach the necessary deficit reduction targets.

Today’s El Mundo carries a useful breakdown of the planned budget. Among the key points are:

  • All Government ministers will have their salaries frozen.
  • The Royal Family’s annual budget will be reduced by 2%.
  • A 25% reduction in the investment into Research and Development – one of the areas of Government expenditure which has been hardest hit.
  • A 33% reduction in railway expenditure and 23% reduction in airport investment coupled with a 10% rise in airport duty.
  • A 16.9% average reduction in the expenditure of Government ministries. The Foreign Ministry sees its budgets slashed by 54.4%, with significant reductions also for the Treasury, Public Works, Education, Industry, Agriculture and Economy. Least affected are the Ministry of the Presidency and Ministry of the Interior.
  • A controversial “fiscal amnesty” in an attempt to recuperate €2.5 billion.
  • State funding of political parties is set to be reduced by 12.7%
  • A huge cut of 97.6% to the planned weapons modernisation budget at the Ministry of Defence.

El Mundo opinion poll shows PP on course for massive victory

Another great in-depth poll comes to us today courtesy of El Mundo and Sigma Dos. With exactly one week to go before polling day, it will make grim reading for the Socialists and give a confidence boost to the PP.

The full findings are behind a paywall (here), but the main points are as follows:

  • After last week’s televised presidential debate between the Partido Popular’s Mariano Rajoy and the PSOE’s Alfredo Pérez Rubalcaba, the PP has extended its lead to 17.8 points. (PP – 47.6% , PSOE – 29.8%)
  • The Partido Popular is on course to win 198 seats (currently 154) while the PSOE will fall to 112 (currently 169).
  • The PP will top the polls in every single Autonomous Community, except for Catalonia(where the PSC will come first) and Navarre(where the PNV will come first).
  • When asked to rank party leaders participants placed Rajoy first while Rubalcaba came third behind UPyD’s Rosa Díez.

If these predictions come true Rajoy will be very close to the record number of deputies for one party achieved at an election (202 deputies in 1982 by Felipe González’s PSOE). Conversely, the Socialists will suffer their worst defeat ever – worse even than the 125 seats they gained under Joaquín Almunia in 2000.

Rubalcaba takes his fight to Brussles

As the crisis in the Eurozone rumbles on, and Italy teeters on the brink of economic disaster, threatening to pull Spain with it, you would expect the issue of Europe andSpain’s relationship with the EU to be at the centre of the main parties’ electoral campaigns.

Socialist candidate Alfredo Pérez Rubalcaba has sketched out how he believes the Government should deal with its EU partners. Continuing the quasi-aggressive theme of his campaign (his electoral slogan is “Fight for what you want!”), he said he would “go to Brussels to fight and convince, and not to receive orders… I want to defend the interests of the country inBrussels– Rajoy has never done it and never will.”

Listening to Rubalacaba you would think his party belonged to one of the European Parliament’s political groups fighting for a looser union and a return of powers to Member States.

Rather the PSOE in the European Parliament recently voted to maintain first class travel for all MEPs despite the economic crisis, and one of their Members was caught signing in to claim her daily allowance and then heading straight to the airport to return to Spain. Well, at least his MEPs have listened to his slogan – they are clearly fighting for what they want.

Rajoy joins the Twitteratti

We commented a few days ago that the internet presence of the main political parties was still woefully low. As if he heard us, PP leader Mariano Rajoy has opened his own personal Twitter account. Launched on Thursday, the conservative leader was quick to create a stir in the social networking world. In little over half an hour he had 2,600 followers. By Friday he had smashed the 20,000 mark and as this post is published he is heading close to 30,000.

Rajoy and his team have also been sure to avoid the pit falls that have befallen other political tweeters, many of whom it has been revealed, have not tweeted themselves but leave it up to their staff. All tweets posted by the leader himself will be followed by a signature “MR”, the rest will not, and will be written in the third person.

Finally, Rajoy’s team are clearly aware that celebrity sells, and one of the first tweets was a photo (pictured) of the PP leader on board an aeroplane with actor Santiago Segura and singer (and son of Julio Iglesias) Julio José Iglesias.

If you’re desperate to follow Rajoy’s Twitter account, you can do so here.

Díez faces challenge for leadership of UPyD

Rosa Díez, spokesman of the UPyD in Congress is facing a challenge from within her party today for the right to head the electoral lists at the forthcoming general election, and thereby become the de facto UPyD presidential candidate.

The party rules allow for any member to contest primary elections for the key posts without the need for a minimum level of support. This has allowed five members of the party to put their names forward to challenge Díez for first place in the lists for Madrid. The election will take place today, and all party members in the country will have a chance to vote.

Similar primaries are taking place in all the provinces across the country, as the UPyD seeks to establish which position each candidate will take in the forthcoming election. In Valencia, actor Toni Cantó (pictured) is seeking to head the lists.

Rajoy visits Catalonia to meet business leaders

Mariano Rajoy, leader of the main opposition party Partido Popular is visiting Catalonia today to meet with business leaders. As favourite to win the forthcoming general election, Rajoy will be fully conscious of the need to instil confidence in a region with which his party has had a sometimes difficult relationship.

The nationalist leanings of many Catalans have clashed with the solidly pro-united Spain conservative party, and Rajoy’s visit comes at a time when feelings are running high over a Supreme Court ruling which has ordered the Catalonian regional government to favour Castilian Spanish over Catalan in the education system.

Among the business leaders with whom Rajoy will hold a private dinner are the Chief Executives of banks such as La Caixa, Bankia and Banco Sabadell, and leading companies such as Repsol,Iberia and Pronovias.

The PP will be looking for a better showing in Catalonia at the general election than they achieved in 2008 – and this will be the first of several visits by Rajoy to the region during the campaign.

Spain’s political parties attempt to harness internet as electoral tool

Ever since the Obama campaign ignited America thanks to its creative use of social networks and the internet, European political parties have tried to ape the success in their own general elections. The UK’s last general election in 2010 was billed as the “Internet Election”, but the effect of the internet turned out to be a bit of a damp squib compared to expectations, and in comparison to the 2008 US Presidential elections.

And now, with their own general election just ten weeks away,Spain’s main parties are looking to extract maximum advantage from the World Wide Web. Yesterday, PP spokesman Esteban Gonzalez Pons, revealed that his leader and presidential candidate Mariano Rajoy was fully prepared for a “Twitter debate” with the PSOE candidate, Alfredo Pérez Rubalcaba.

And this morning the PSOE themselves have launched their own internet initiative, launching a special web portal for people to communicate their “ideas, opinions, solutions and proposals”. This virtual political conference will be running from 30th September to 2nd October, and can be accessed here.

However, the political parties’ internet presence is on the whole pathetic, compared to other Western democracies. All the main parties have decent websites and tick the boxes with their Twitter pages, Facebook accounts etc, but their efforts so far have been, frankly, unimaginative.

In addition, very few elected politicians have their own personal website or blog, and there are few internet debating sites of any renown outside of those provided by the main stream media.

So although these initiatives are welcome in part of the much-needed process of bringing citizens closer to their politicians in Spain, it would be safe to assume that the internet is not going to change the course of the election in any significant way.

The first party that truly cracks the problem of engaging effectively with voters online will be set to reap the benefits

Aznar warns Eurozone faces break-up because of “bad decisions”

Former Prime Minister of Spain, José María Aznar, has warned that the European Union is facing a severe and profound crisis because of the “very bad decisions” taken by its leaders in recent years.

Speaking in Washington, the former conservative premier who served between 1996 and 2004 said: “Europe is going through a very deep crisis, but we are capable or coming out of it. There is a serious risk that the European Union as we know it today could be unsustainable [because of] very bad decisions taken in recent years”.

The “wrong decisions” of the EU which Aznar alluded to were:

–    Tying itself up in endless institutional debates which have impeded the ability to see the economic reality clearly.

–    Forgetting necessary compromises and not respecting established rules and procedures.

–    Ignoring the seriousness and the depth of the economic crisis.

These errors, Aznar suggested, could lead to the possible “disintegration” of the Eurozone.

His speech can be read in full here (available only in Spanish)

PSOE failing to emit confidence as polls point to defeat

The PSOE seems to be suffering a self-confidence crisis. As all the polls point to a huge victory for the conservative Partido Popular in November’s General Election, the Socialists are bracing themselves for heavy losses – with only die-hard loyalists such as José Bono trying to keep the flame of hope alive.

Newspaper ABC reports today that PSOE sources are expecting to lose as many as 15 of their 36 seats in Andalusia- traditional socialist heartland.

According to the paper, the party leadership is so concerned about the effects of a possible electoral bloodbath in Andalusia ahead of next year’s regional elections in the region that their presidential candidate, Alfredo Pérez Rubalcaba, is making repeated journeys to the area to try and prevent haemorrhage.

Rubalcaba himself has done little to stem the feeling of despondency in his camp today. When asked about what he will do in the event that his party loses the General Election, he did not dismiss the question as hypothetical as politicians so usually do, but rather said that he would make a decision about his future “on the night” of the election.

The PSOE will need to rediscover self-belief, and start emitting confidence – if they do not to see a landslide PP victory in November.