Following is an email from reader David, an unemployed accountant who lives in Spain. He writes about the alleged recovery in “main street”, Catalan separatism, and the rise of a far-left political party named Podemos.
David writes…
Hi Mish
I’m a long time reader of your blog from Spain. I’m a 27 years old accountant, currently unemployed, and I enjoy reading your financial, economic and political insights because you are quite spot on the issues you pay attention to, especially the Eurozone and its impact the global scenario.
You sometimes refer to readers that communicate to you about the issues they know and live, so I’ve decided to do the same, hoping it can be useful.
I remember a few years back during the 2011/12 sovereign bond-spread crisis when you were pointing directly towards France and Italy for troubles, and how you got it right. The flaws of those two countries really hit the headlines in short order. Obviously, Spain is and has been in a mess for many time and you’re well aware of that, but I think Spain is going back to the headlines next year, so I wanted to explain why I think so.
Spain has been in a precarious yet somewhat stable course since the ECB decided to do something on the sovereign crisis. But unemployment has gotten an insignificant relieve and deficit levels keep soaring. “Main Street” is still deteriorating, but we finally have a bit of a relief on layoffs. Even so, the average monthly salary was €1,000 a month before the crisis and now it’s €800 or less. Also government largesse is still quite ample regardless of the public sector cuts so shouted by the left.
Nonetheless, the general feeling regarding the economy is that the hemorrhage has stopped. Of course the global downturn is going to halt any kind of “Spanish recovery”, if it has ever been one, but the two key risks from Spain in 2015 are political: the new-found Podemos party, and the Catalan separatism issue.
Municipal elections are set to happen in May. Like the 2014 European elections, I expect a massive protest vote against the current party in government, the conservative PP, as well as the the socialist PSOE, the second traditional party in our two-party system.
The Podemos party, a far-left populist party, has emerged strongly due to the massive media coverage of its leader, and the corruption cases now widespread in the Spanish politics. You cannot imagine how pervasive the media coverage on the numerous and unending corruption cases coming specially from these two parties is: you can zap on the TV the whole day from corruption case to corruption case until you go to bed.
Podemos is a bit like Syriza in Greece, in the sense that the larger the movement grows, the more moderate it turns out to be. Its initial talk on leaving the Euro seems to have banished, but their demands to end the corruption, the so-called political “caste”, and revert the austerity measures imposed by the EU and the ECB are not in question.
It’s not a moderate movement by any means, and whatever portion of power they can grab, they are going to raise a few eyebrows in the European Union. Plus, latest polls show that Podemos may be already leading the polls in a general election, and taking into account that December 2014/January 2015 is the limit date for the next Spanish legislative elections, they are going to keep a tough stance until that point.
President Rajoy now wants early elections to stop the ascent of Podemos and try to keep the government, even if he has to share power with PSOE.
And finally, there’s the Catalan issue. After the banned referendum was celebrated on past week with a moderate success from the part of the separatists, the regional government is going to call for regional elections. These elections are probably going to be celebrated before May, and the results will likely be a rise of ERC, the socialist separatist regional party.
ERC has stated many times that their goal is to open a constituent process in Catalonia together with the other separatist forces, then declare a Catalan state in the Catalan parliament (to claim independence while leaving a door open of a Puerto Rico style associated state).
A new Catalan constitution is being prepared as we speak. There are other parties in the picture, but the sum of separatists vs. unionists in the regional parliament seems to be a 55/45 split: sufficient enough for a majority but perhaps insufficient for the changes the ERC wants. In any case, there’s a high likelihood that Madrid will suspend the Catalan regional government in 2015, a move that would increase the tension and would fuel the Catalan movement even more in the future.
There’s plenty of backstage talk about a constitution change or even of initiating a constituent process in all of Spain to end the pervasive corruption, to put the country on a far-left path, and to provide more autonomy in Catalonia and the Basque regions.
Whatever it happens with these issues, it’s going to be a very turbulent year politically for Spain.
Thanks for your patience, and congratulations for your success.
Best regards,
David
Thanks David
I really appreciate these kinds of thoughtful emails. It was reader “Andrea” who tipped me off in regards to the stunning rise of Beppe Grillo, long before mainstream media was writing about his M5S – Five Start Movement.