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Unpaid Spanish workers have nowhere to go. If they quit, they don’t qualify for unemployment benefits. And despite being owed weeks or months of back wages, they know that facing a job market where one-in-five of their countrymen are unemployed is probably worse. Yet as last week’s demonstrations revealed, their patience is wearing thin with three years of austerity programs they blame on having to “pay” for the faults of irresponsible politicians and bankers who created the financial crisis. Apparently, the politicians recognized the severity of the anxiety: despite a government ban on protests extending past midnight, law enforcement officials made no effort to break them up. Interior Minister Alfredo Perez Rubalcaba, who had initially insisted the government would “enforce the law,” backtracked. “The police are not going to resolve one problem by creating another,” he said.
Many of the protesters echo a concern, first expressed during the bailout of Ireland, that they’re being held hostage by “international financiers in the bond markets” who are more concerned with getting repaid than they are with the plight of the average citizen in any of the affected countries. Yet the protesters themselves, while having a legitimate point, are apparently unable to come to grips with the limits of socialist ideology: parts of the austerity package they’re protesting include raising the retirement age, and making it easier to fire workers. Some of the “reforms” they’re demanding center around the unrealistic efforts to abandon ailing banks and government-guaranteed access to housing.
Perhaps there is another way. U.S. economist Warren Mosler suggested an alternative to the current system. “For the euro zone, I propose a distribution from the European Central Bank to the national governments of perhaps as much as 20 percent of GDP to be done on a per capita basis so it will be fair to all the member nations,” he said. This would allow governments like Spain to stimulate employment and pay for services without being beholden to the international bond market. If the EU refuses? Once again, the specter of a country withdrawing from the union and re-establishing its own currency rears its head.
In the meantime, the PP is calling for an immediate general election instead of waiting until the regularly scheduled one next March. “Zapatero and the whole Socialist party must reflect on what has happened. Spain cannot waste another year like this,” said PP General Secretary María Dolores de Cospedal. Zapatero, who is resigning at the end of his term, has avoided both losing budget votes and having to call early elections due to PSOE party support from smaller parties like the Basque Nationalist (PNV). And despite its victory, the PP does not have enough seats in parliament to currently win a vote of no-confidence and force an election.
So Zapatero stays. “They’re waiting for the rain to stop. If the economy improves in the third quarter and unemployment also improves, they can say it’s because of their economic reforms,” said Antonio Barroso, analyst with Eurasiagroup consulting firm, who believes Zapatero will weather the storm.
Perhaps he will. But financial markets around the world were down on Monday, reflecting the concern, not only with Spain’s election results, but the downgrading of both Italian and Greek debt as well. The EU also announced it will be selling $6.7 billion worth of 10-year bonds to help fund the bailouts of Ireland and Portugal, who received its own bailout in order to reduce its reliance on European Central Bank funding. The bonds will be funded through the European Financial Stabilisation Mechanism (EFSM). The European Financial Stability Facility (EFSF) will subsequently issue five-year notes to both countries. Including loans from the IMF, Portugal will be getting a total of $73 billion, while Ireland will be getting $56.3 billion.
Where does it end? Impossible to say. But if this election and the recent one in Canada are any indication, it would appear that being the incumbent party in a time of financial turmoil is toxic. Given that the term “right-of-center” has different meanings in both Canada and Spain, compared to its meaning in the United States, it would be somewhat premature to characterize both elections as a defeat of socialism. However one interprets these elections one thing is beyond dispute: “it’s the economy, stupid” resonates more now than ever.
Arnold Ahlert is a contributing columnist to the conservative website JewishWorldReview.com.
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