Global Observer

Will Sunday's elections boost Spain's economy?

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MADRID -- With Spain's national elections this Sunday November 20, SmartPlanet offers a brief overview and their impact of the struggling international economy.

MADRID--With an unemployment rate of 23-percent and the market not looking like it will turn up any time soon, the Spanish are saying that any change could be better than nothing.

SmartPlanet sat down with a few Spaniards to discuss their predictions for Sunday's elections. Essentially, they are not confident that the results will do much to dig Spain out of its financial hole.

Miguel Igualada Mena, a Madrileño business developer for a major construction company, says he does not predict a wide margin or an obvious winner, but that the elections could provide a small economic boost. "Yes, I think that there will be a slight change in the market because it will provide more confidence. I don't think it's a real confidence, but it's maybe a rush of confidence." Mena says likely winner the People's Party will decrease taxes. "If you have less taxes, you invest less money (into the government.) For me, now it's a good thing because there is a consumer crisis. Although it's not always a good solution, at least from my standpoint."

Mena also believes that PP will foster entrepreneurship in the short-term by decreasing taxes for start-ups.

Patricia Ruiz, an employment recruiter from the Canary Islands who works in Madrid, wants to vote for an unknown party because "I think it's dangerous for us to give all the power just to one party."

Election or not, Ruiz does not predict the Spanish economy to turn up soon because she does not have faith in its workers. "People in Spain don't want to work, and, if you don't work, you can't change our economy. It's obvious. Not everybody, but many, many, many people in Spanish prefer to have the help of the state than to work. Spain is different."

Ruiz is unsure if a change of power will boost the economy. "I think this is a complicated situation because we'll see the changes with time. One political party can't change everything. We are affected by the international economy, and if the international economy doesn't make a big change, we cannot change."

Jose Maria Bueso del Pino agrees that any solution to the financial crisis must involve the European Union.

"I think that they (the Spanish government) don't have too many things they can do because their hands are tied by the EU," said Bueso del Pino, a financial controller. "There will have to be a European economic policy. It's impossible that we have a different IVA (sales tax) in Paris and Berlin and Brussels, etcetera. The property taxes and the corporate taxes are all different. I think it's unsustainable because companies move from one country to another to lower (their) taxes." He says that if Germany reduces autonomy, then the rest of the EU will follow. "I think nothing is going to change until January, that is for sure." December 20 will see the new government sworn in, following an official month of transition.

The Spanish elections were moved up from their original May 2012 date because of pressure from the EU for a change. It remains to be seen if Greece and Italy's changes in power will have a positive impact on those economies, but certainly a continent and much of the world will have their eyes on Spain this weekend.

Now, in order to understand the election results, you need a little background...


Spanish politics in a chestnut

As the fall air fills with the scent of roasted "castañas" on every corner, it is rather surprising that the Spanish elections are just two days away. As SmartPlanet walks the streets of Madrid, there are only one or two fliers handed out and some banners flapping off street lamps. Occasionally, a car might drive by, topped with indecipherable loud speakers attempting to compel voters. The People's Party--the likely victor--only opened its office off the Castellana business district two weeks ago. Wednesday saw a rally of about 20 supporters in the same area for the third party Progressive and Democratic Union (UPD.)

The only true sign is in the newspapers, on TV and all over the posters monopolizing ad space at bus stops and in some Metro stations.

This is no American election that starts 18 months out. The two major parties--the Spanish Socialist Workers Party (PSOE) and PP--agreed to limit the campaign to merely a month in length to stay focused on solutions to the crisis and to save money. Technically, today, Friday, November 18 is the last day of the campaign. Spain observes the "Day of Reflection," which prohibits campaigning the day before an election.

To fit the complicated Spanish political world in a nutshell, Spain can be described as a new or renewed democracy. The parliamentary democracy began to be restored in 1975, after the death of dictator General Francisco Franco, who held absolute power for 36 years.

The currently outgoing president, who in everything but name is a prime minister, is José Luis Rodríguez Zapatero, the current head of PSOE. He was first elected on March 14, 2004, three days after the Atocha train station bombing in Madrid. He was then reelected in April 2008. His main opponent in both elections and current PP candidate was and is Mariano Rajoy. Rajoy was vice president to José María Aznar from 1996 to 2004. Aznar was known for increasing competition and decreasing monopolies in the country, especially in the important telecommunications business. He is also known for his staunch support of President George W. Bush's War on Terrorism, including sending Spanish troops to Iraq.

Looks like the third time's a charm for Rajoy and PP. This party, which is further to the right, but still to the left of the American Democratic party, wants to lower taxes to foster consumer confidence. They are in favor of investing less money into public healthcare, externalizing some aspects of the system. PP is the traditionally more Catholic party and is in favor of relabeling same-sex marriages as civil unions.

The more liberal party PSOE's main economic policy is to raise taxes and to invest in public works and public healthcare. The current deputy prime minister Alfredo Pérez Rubalcaba is the PSOE candidate. He says that he will ask the EU to lessen their austerity measures, to foster more public investment.

These are Spain's main two political parties, but some of the significantly smaller third parties hold powerful stakes in the national government.

"I'm not really into it (the election) because it is very clear that the PP is going to win," said Bueso del Pino. "The thing is how many votes they are going to win."

There are 350 seats in Parliment. It is probable what PP will win a majority, but there is a chance that they will not win the 176 seats necessary to have complete control. There are multiple third parties vying for around 25 to 50 seats.

The most popular third party Left United (IU) will receive about half these seats, giving their support to PSOE. The regional parties of the Nationalist Basque Party (PNV) and the Convergence and Unity (CIU) party from Catalonia will likely lend their support to PP. The conservative Canarian Coalition party has been a major decision maker over the last few years with their mere handful of seats. The female-led Progressive and Democratic Union (UPD) party will probably end up a major power player at the end of the election because, while left-leaning, it is still unknown who they will support.

To complicate the circumstances even further, parlimentary slots are not allotted based solely on popular vote. Spain uses the D'Hondt method, which means that certain third parties and certain geographical areas have different weight to their votes.

"In Spain, a vote in Malaga doesn't weigh the same as a vote in Barcelona for example," Mena said. "Because of the D'Hondt system, separatist third parties have more power than national third parties."

In the end, as in the last British elections, deals with smaller parties will probably end up having more of an impact on election results than the voters. We will have to wait until Monday to see the future leadership of Spain and the world market's reaction to it.

Photo: Singular Spain
Alfredo Pérez Rubalcaba is pictured on the left. Mariano Rajoy is on the right.

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Jennifer Riggins

Correspondent (Barcelona)

Jennifer Riggins is the content manager and community builder for two SaaS Quote Roller and PandaDoc, as well as she teaches sales, English, and public speaking for Spanish small business. She holds a degree from William Paterson University. She is based in Spain. Follow her on Twitter. Disclosure