Conservative Landslide in Spain

Econintersect:  Exit polls indicate a huge victory for the conservative Popular Party (PP) with more than half of the seats in the lower house of parliament.  According to the BBC, an exit poll by state broadcaster RTVE indicated the PP has taken 181 to 185 of the 350 seats in the lower house.  The country has been racked with a severe recession followed by very slow growth and an unemployment rate well above 20% of the work force.  More than 5 million are unemployed in the country with a total population of 46 million.  Interest rates have risen to about 7% for government bonds which is seen as unsustainable (BBC).

Polls earlier this month indicated the PP would win more than 45% of the vote. The Socialist Party (SP), which has ruled since 2004, had been projected in those polls to get about 30% of the vote. If the exit polls are an accurate reflection of the final outcome, the PP has gained in parliamentary strength far in excess of their share of the popular vote and will have 52% to 53% of lower house seats. Bloomberg reports the exit poll results indicate the popular vote for the PP is about 43.5%, with about 30% for the SP. Bloomberg reports that 115 to 119 SP seats are projected for the SP in the new lower house (33% to 34%).

The road for the new government will be hard. From the BBC:

Migel Arias, the Popular Party’s campaign co-ordinator, said Spain was “going to make all the sacrifices”.

“We have been living as a very rich country,” he told BBC News.

“People are used to a very high level of public services and it takes time to them to acknowledge the realisation that we now are a poor country, that we have lots of debts and in order to pay them back we must reduce public expenditure and then we must recover the confidence of the markets.”

Curiously, the BBC reports that many are angry with the Socialists for allowing the economy to deteriorate and then for introducing tough austerity measures. So the response has been to vote an outright majority to the party that campaigned for increased austerity. The only conclusion is that voters are taking a desperate gamble for change without understanding all the implications. It may be that their only logic is based on what has happened to others of the PIIGS. They may be thinking that if the financial system is appeased they can avoid losing sovereignty as have Ireland, Greece and Italy. That reasoning is suggested by the following from the BBC:

One voter in Madrid, 50-year-old hotel worker Luis Escobar, told Reuters news agency: “Thank God I haven’t lost my job. We have to do something.

“What we were doing was not enough, things were just getting worse and worse. The best social policy is to create jobs. The guys in power haven’t done anything so if you want things to change you have to do something.”

Another voter in the city, 38-year-old local government administrator Antonio Diaz said that without the election, which was called four months early, “the markets would have changed the government as they did in Greece and Italy”.

The following excerpt from Bloomberg expands upon the possible reasoning of the Spanish electorate:

Voters already bearing the deepest budget cuts in Spain’s three-decade democratic history are bracing for further austerity in exchange for Rajoy’s pledge to create jobs. The ruling Socialists are set to become the fifth government ejected because of the sovereign debt crisis, after Italy and Greece appointed technocratic governments and Ireland and Portugal fired their leaders after they sought bailouts.

“Rajoy will likely implement quick policy changes in an effort to impress markets and his European partners,” saidAntonio Barroso, an analyst at Eurasia and a former government pollster in Spain. “A strong PP victory, coupled with the swift policy changes, could send a positive signal to markets.”

The campaign, focused on the stagnating economy and 23 percent jobless rate, ended on Nov. 18 with borrowing costs near records. That prompted Rajoy, 56, to say he hopes Spain won’t need a bailout before the new government takes over in December.

So, the conclusion is that the new conservative majority government is expected to stop spending money and create jobs. The analysts quoted in the press are indicating that markets will drive job creation because of newly regained confidence of moneyed interests in the austere Spanish government. The big questions: Will Spaniards expect this improvement in employment in one year or ten? And if employment starts to improve at subsistence level pay will the Spanish be happy?

Editorial comment: The Spanish may have voted on the desire to avoid loss of sovereignty by following the route of Ireland, Greece and Italy, but will the path chosen be any less damaging to the economic wellbeing of the masses? It seems that when excess credit becomes too great, the pain of resolution is forced totally on the debtors (who may have been foolish) and none on the creditors (who may also have been foolish).  Is it all a matter of who has the power?  Is it all the “Golden Rule?”  If so, that implies a “gold standard” and the world runs on fiat.  So how did the bankers retain feudal
control and the governments remain serfs?

The official election results will start being announced after 9 pm when the polls close in the last voting precincts in the Canary Islands. GEI News will have another report on the results before midnight New York time.

Source: BBC and Bloomberg