Tag Archives: Partido popular

Spanish Scandal Could Force Energy Strategy Change

ImageAfter a turbulent first year of cuts aimed reducing a crippling deficit, Spain’s energy sector could see a shift in direction as a corruption scandal threatens the current conservative government.

Since taking office after early elections just before the New Year in 2011, the government led by Prime Minister Mariano Rajoy has led a campaign of cuts and adjustments meant to drive down an energy sector deficit that greeted them around $30 billion.  Attributing the daunting amount to unsustainable government subsidy programs, Rajoy and his Minister of Industry, José Manuel Soria set out a series of cuts that have spurred appeals to the European Commission and lawsuits from investment firms.

However, the fate of Mariano’s party leadership in Madrid has recently been cast into doubt amid allegations that senior officials had received secret cash payments after the practice was made illegal in 2007. Rajoy denied any wrong-doing following an extensive report published in Spain’s national daily, El Pais detailing payments to him as late as 2008. The El Pais report was quickly followed by calls for Rajoy’s resignation and denials from party officials.

While it is not yet clear whether a return to the Socialist leadership that led the country for eight years before Rajoy would signal a change in pace, it is even less clear whether voters would hand the reigns back to the left should the conservatives be forced from office. Recently, both of the country’s largest political parities have seen support erode thanks to their handling of the economic crisis. On the local level, this has allowed support to shift to smaller, less centrist parties.

However, even if Rajoy remains in power – which regional observers expect he will – the government’s approach to the energy sector will likely see a change in the New Year. Despite the government’s cuts and general deficit reduction strategy, the energy sector’s deficit has continued to rise in recent months casting doubt on their approach. While Soria and company predicted a slowdown as a result of the cuts, which have focused on solar and wind subsidies; the deficit has actually grown at double the expected rate. Soria has signaled a different approach in the coming year and insisted once again that further cuts will not include retroactive actions.

This expected reversal reflects a broader trend in Spanish economic improvement, which has largely relied on cuts in spending and services across the country’s seventeen communities. With unemployment continuing to rise and economic growth stagnant, Madrid and Brussels alike have suggested an approach that does not focus so much on austerity and may include additional efforts aimed at growth.

Image: Iberosphere.com

Originally Posted: Newsbase Euroil Monitor

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Spain and Rajoy: Still Waiting

 

 

Over two weeks on from the landslide election that gave Mariano Rajoy and Spain’s conservative Partido Popular a seemingly unstoppable majority and details about just what they plan to do to help put the country back on track remain vague. This week saw the first meeting of the national parliament and two cabinet postings, coming from, as expected, two long time party figures. However, short of again pointing out what the country now faces and promising no miracles as Spain looks ahead to almost non-existent growth in 2012 and a possible slip back into recession, Rajoy remained coy about what exactly he plans to do after being sworn in on December 21st. Given the scope of the challenges ahead and the reality that much of the country’s market stability and ability to continue borrowing under sustainable rates are now subject to forces beyond their own borders, it is not terribly surprising that Rajoy is taking his time unveiling actual policy proposals or appointees, including the highly anticipated finance minister. However, given the dour mood the country now finds itself in and the run-up time Rajoy and the PP had with the confident knowledge that they would indeed hand the outgoing PSOE a significant defeat, its difficult to understand why the new prime minister would hold out on offering even a hint that he came to the table with a few solutions. Instead, the incoming head of state has simply said he would offer no new revenue streams through taxes and would expand cuts to government services, though he left the deeply unpopular hits to health and education to the community level. Already hitting communities hard in Catalonia and Castile and Leon, these cuts will likely rise to make way for planned tax cuts aimed at small and medium sized businesses that Rajoy has placed at the center of his plan to kick-start job creation and chip away at the country’s 21 percent unemployment rate.

There is undoubtedly some sense to being clean and clear with a population that will be called upon to sacrifice for the greater good over the next few months but I find it hard to understand why Rajoy would offer so much salt without a little sugar. Is there not some plan he can offer to raise spirits and allow people to look beyond the difficulties of 2012 beyond, if we work hard, we’ll soon be back to zero? Is there not some solution he could offer that would help the Spanish economy adapt and evolve rather than, I plan to do exactly what the last party has been doing, but more? Furthermore, given the heavy evidence that has emerged to suggest simple austerity in the name of deficit reduction will do little to spur the growth Spain so desperately needs now, is it out of line to ask, beyond more of the same and broad promises to “reform the banking sector, the public sector and the labour market, and introduce greater competition in communications, energy and transportation, and open the way to economic growth starting after 2012, creating jobs,” what exactly does Rajoy plan on doing to move Spain forward?

As the holidays approach and businesses shutter for the new year, it seems increasingly unlikely any real answer to that question will come before 2012 arrives, leaving Spain to do what they are growing sadly accustomed to doing – waiting for a leader with a plan.

Image: Financial Times

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Election Day Hangover – Spanish Resaca Pt. 2

Forty eight hours on and the narrative that’s emerging is, I am certain, not quite what the conservatives may have hoped for. Yes, the new government has officially been chosen and yes, they have the largest Parliamentary majority that anyone can remember but any hopes that a Rajoy-led transition would calm the markets and give investors some semblance of confidence as debt yields shot up to a 14 year high this morning, making Spanish debt nearly impossible to sustain should this continue. Rajoy, it seems, will have to do more than just show up to make much of a dent in the current wave of uncertainty about Spain’s ability to weather the storm and bounce back in the coming weeks. In the meantime, we get lukewarm reactions from across the globe that amount to “congratulations, welcome to the top, now do something dammnit”.

On a highly opinionated note, observing the traditional month long transition period at this particular juncture seems naive at best and deeply oblivious of the situation at worst. If there was ever a national emergency that demanded swift, unconventional action from the government, I would think this would be it.

This possible state of emergency is made all the more pressing by the announcement today that Greece has much less time than once thought to convince international creditors to hand over the next installment in their financial support program, amounting to about 8 billion euro. Once thought to have until mid-December until the coffers emptied in Athens, the new government has announced they will likely run dry in eight days.

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