El País, News from Spain

[Spain (JCU)]

El País is the highest-circulation daily newspaper in Spain, and one of three Madrid dailies considered to be national newspapers of record for Spain (along with El Mundo and ABC). El País based in Madrid, is owned by the Spanish media conglomerate PRISA.

Its reputation as a bastion of Spanish democracy was established during the attempted coup d'etat by Lieutenant Colonel Antonio Tejero of the Guardia Civil on 23 February 1981. During the uncertain situation of the night of 23 February 1981, with all the members of parliament held hostage in the Congress building and with tanks on the streets of Valencia, and before the state television station could transmit a speech by King Juan Carlos I condemning the coup, El País published a special edition of the newspaper called 'El País, for the Constitution'. It was the first daily paper on the streets that night with a clear pro-democracy position calling on citizens to demonstrate in favor of democracy.

The paper's ideology has always been defined by a leaning towards Europeanism. Politically it is situated in the centre-left and the left. El País has repeatedly supported King Juan Carlos I for his contribution to the consolidation of democracy, especially, for his decisive intervention in aborting the coup of 23 February 1981. The paper is characterized by the amount of space it gives to the reporting of international news, culture and information regarding the economy, as well as Spanish news. It has specific columnists and contributors from different social backgrounds contributing to the democratic and pro-European editorial line of the newspaper.

[Spain (JCU)]

PP Ekes Out Win in Andalusia


Javier Arenas (far left) will become President of the Andalusia Autonomous Community.

SEVILLE. Prime Minister Mariano Rajoy's ruling Popular Party edged out the incumbent Socialists for control of the southern region of Andalusia in elections yesterday, marking the first time since Spain's transition to democracy that the center-right coalition will govern the autonomous community. After several unsuccessful runs in years past, Javier Arenas of Almería will assume the Presidency of Andalusia.

The election is significant because it saw the demise of the PSOE's last remaining political bastion after being ousted in a nationwide vote last November, which returned Rajoy's Popular Party to power after nearly 8 years of Socialist dominance. The PP now holds 14 of the country's 17 autonomous communities (the others being occupied by local regionalist parities), along with the autonomous cities of Ceuta and Melilla. But the outcome was by no means certain, as recent polls saw the conservatives' comfortable lead eroding in the weeks prior to the election over discontent with the central government's tough new labor law, which the PP supported and is deeply unpopular here. The forecasted share of the PP vote dropped from 59 seats in early February to 53 as of yesterday. In the end Arenas and his party carried 55 seats, just barely enough to secure a majority in the 109-seat Andalusian Parliament.

The win will surely be welcome news for the Prime Minister, who is facing mounting resistance to painful economic reforms and austerity which he claims are necessarily for Spain's recovery. It is widely speculated that Rajoy's government has held off on submitting a formal budget request until after the election so as not to jeopardize his party's chances of winning. Now the Prime Minister has his work cut out for him, as the Spain grapples with a 5.8% budget shortfall--much of which can be blamed on profligate spending by autonomous communities such as Andalusia. The region was one of two (the other being Catalonia) which refused to sign an agreement with the central government for binding deficit targets in order to bring the country in-line with EU mandates. But shortly after declaring victory in Almería yesterday, Mr. Arenas reportedly placed a call to the Prime Minister during which he committed to abiding by the necessary spending cuts. It remains to be seen what other measures Rajoy has in store for improving the health of the Spanish economy, which currently faces the highest unemployment rate in the Eurozone and is expected to experience negative growth this year.

[Spain (JCU)]

Rajoy: "Things Will Get Worse Before They Get Better"


Rajoy speaks to EU delegates in Brussels.

MADRID. Prime Minister Mariano Rajoy spoke to the Congress of Deputies today in a major economic policy address--his first since returning from an EU summit in Brussels on the implementation of the newly-adopted European Fiscal Compact. Rajoy outlined a series of short-term and structural reforms which he claimed would jump-start the Spanish economy.

The Prime Minister spent much of his time rallying his party to action, acknowledging that many of his proposals may be unpopular.

"We recognize that the opposition will paint these measures as regressive and anti-growth. And at first it may even appear that way. I will not try to deceive you. Things will get worse before they get better. From the sacrifices we are required to make Spain will emerge a stronger, more vibrant, more competitive nation."

Rajoy used the speech to present his new budget proposal for fiscal year 2012, which has been operating at 2011 levels for the past three months. The Prime Minister had originally intended to submit a budget request with a deficit equal to 5.8% of GDP, a far cry from the EU target of 4.4%. But after being rebuffed by European leaders in Brussels last week, Rajoy vowed to 'revisit' the general budget in an attempt to find an additional $13 billion in deficit reduction on top of $20 billion already programmed for this year, mostly in the form of higher employee pension contributions and lower disbursements to regional governments. Doing so would bring the country's deficit down to 5.2%, a level below which he said would be "impossible, unacceptable, and impractical," this year. Still, the Prime Minister reaffirmed that Spain would meet its EU-mandated target of 3% in 2013.

Mr. Rajoy also laid out his plan to fundamentally reform the Spanish economy in order to make it more competitive. First on his list is amending the Statutes of Autonomy for the autonomous regions, concentrating fiscal powers in the hands of the central government. Also planned is legislation concerning wide-ranging pension reform, labor market liberalization, and regulation of the nation's largest banks.

The fallout is not likely to be positive. The Prime Minister was overheard at the Brussels summit predicting a general strike, a possibility that is very likely to materialize in coming weeks. Some more regional-minded PP members have exposed doubts over reversing the devolution of powers to autonomous communities, which may require a constitutional amendment depending on its scope.

Markets also reacted poorly to the news. The yield on Spanish sovereign 10-year debt inched up to 5.12% on jitters that the country will be unable get its deficit under control. Interest rates on Spanish bonds also exceeded Italian 10-year notes for the first time in 8 months, although both are significantly off their 52-week highs of 6.7% and 7.3%, respectively, in large part due to a trillion-dollar injection of liquidity to the continent's largest banks by the ECB. Interest rates and bond prices move in opposite directions.

A spokesman for Rajoy told reporters that legislation could be expected in within a month.

[Spain (JCU)]

Spain to Oppose Third Greek Bailout


A second bailout was approved for Greece just last month.

MADRID. Economy Minister Luis de Guindos laid out his opposition to another bailout for Greece, a subject which came into focus after reports surfaced that the country had begged for renewed assistance from Germany.

"What we support is Greece getting the help it needs. But Greece has offered no justification as to why a third round of financial relief is necessary. After the release of €33.5 billion from the €130 billion Greek rescue fund approved in February, the country has more than enough liquidity to meet its March 20 bond repayment and immediate public obligations. What is needed now are fundamental structural reforms in the Greek economy: simplifying the tax base, enhancing competition, and reducing government involvement in the private sector. These are the same reforms the Rajoy administration is aggressively pursuing here at home, and they form the only path to return to growth and competitiveness."

The comments came after a spokesman for the Italian government announced that country would also not support another Greek bailout, preferring instead to rely on "private and government initiatives to bolster their local economy and businesses." A statement from Britain's David Cameron was similarly vague, appealing to the IMF without taking a position on the bailout.

De Guindos' reaction to fellow EU sentiment was muted. "While Spain favors a coordinated response to curing Greece's fiscal woes, more specific policy prescriptions are required. We look forward to advancing our solutions at the March meeting of the EU Council."

The EU Council is comprised of the European Union heads of state and meets at least twice a year. Prime Minister Rajoy will be in attendance at the Council's meeting next week in Brussels.

[Spain (JCU)]

Markets Tumble on Iranian News


Spain is Europe's second-largest importer of Iranian oil.

MADRID. Spanish markets fell this week after Iran unexpectedly halted oil exports to the European Union, a little over a month before the trading bloc was scheduled to boycott Iranian petroleum over that country's nuclear program. The announcement came as China inked a deal to buy an additional 450,000 barrels per day from the Islamic Republic, although widely suspected to be at below market prices.

In the immediate term, the impact of the loss in supply is expected to be minimal. After the EU decision to end imports from Iran, member states were given six months to find alternate suppliers of oil. That process was already well underway at the time of the announcement, and Spain cut imports from Iran by 37% in the last month of 2011 alone, with much of the shortfall being filled by Saudi Arabia. The world's largest oil producer is one of the few countries with excess capacity, and has become the exporter of last resort for many countries seeking to comply with Western-backed sanctions. In the mean time, CORES, the Spanish strategic oil reserve, has stated that is has enough oil stockpiled to last six months without Iranian supply.

But financial markets still took the news poorly, on fears that higher oil prices will cripple the already fragile Spanish economy. The Madrid-based IBEX, Spain's most followed index, briefly fell below 8,000 for the first time this year before recovering to 8,071 in heavy trading. Crude climbed to $117/barrel on Spanish exchanges, well above the start of year average of $110. A spokesman for Economy Minister Luis de Guindos declined to comment on the development, but admitted that prolonged high oil prices could force a downward revision of projected Spanish growth rates.

There are signs of hope, however. A Turkish-led proposal to restore IAEA inspectors to Iran has gained the approval of both the U.S. and China. Foreign Minister Jose Garcia-Margallo expressed optimism for the deal going forward, as long as Iran holds up its end of the bargain.

"We certainly support this proposal advanced by Turkey on behalf of the Islamic Republic. The goal of previous European measures with respect to Iran can in no way be interpreted as intended to punish the country, but rather to incentivize constructive dialog. That appears to have been the outcome in this case, and we are encouraged by the fact that the Iranian government has taken the initiative to advance reconciliation. Indeed, I only regret that the European Union has not been more involved in this process from the beginning. But if the effort proves successful, Spain has no objection to the lifting of sanctions on the Islamic Republic and normalization of relations."

Mr. Garcia-Margallo also backed away from controversial comments made by Italian Prime Minister Mario Monti before the Israeli Knesset supporting a united Israel, including occupied lands claimed by the Palestinian Authority and other Arab nations.

"This certainly does not reflect the sentiment of the EU at large nor in away European policy. Spain supports the efforts of the Madrid Quartet and the Roadmap for peace, which include an eventual independent Palestinian state and repatriation of the Golan Heights to Syria. As such, the Italian comments are counterproductive at best, antagonistic at worst."

The Italian Prime Minister made the remarks on a recent trip to Israel that produced an agreement for closer military ties between the two nations, which Garcia-Margallo labeled as "unnecessary." Monti's comments have caused a firestorm in the Muslim world and specifically Iran, where the Italian embassy was evacuated before being violently attacked by protesters. All Italian nationals have been ordered to leave the country, a development the Spanish Foreign Minister termed "regrettable."

[Spain (JCU)]

Parliament Approves Sweeping Economic Measures


Prime Minister Mariano Rajoy with a copy of his far-reaching legislation.

MADRID. It has been described as the most dramatic legislative reform since Spain's transition to democracy more than three decades ago. After months of haggling and behind-closed-doors negotiations, the Spanish parliament debated and passed Prime Minister Mariano Rajoy's ambitious economic agenda amid widespread protests and a general strike.

The omnibus law addresses virtually every facet of the Spanish economy and comes as Spain is struggling to achieve its EU-mandated deficit target of 3% of GDP this year. Government sources and outside analysts agree that Spain will most likely be in compliance by the end of the year, but that the country will suffer decreased growth due to tight austerity measures, some of which were amplified with the passage of Mariano's reform package.

First on the list is tax policy. Exemptions and preferential treatment for some goods under the VAT will be eliminated, with slight across-the-board increases in rates. These will be partially offset by lowering Spain's marginal corporate tax rate and eliminating special treatment for small businesses. Real estate taxes will also no longer be levied on transactions but on property value, in an effort to clear the glut in the Spanish housing market.

Other measures in the housing market are meant to improve regional labor mobility and fix the country's dysfunctional rental market, which is severely underdeveloped compared to the rest of Europe. Regulations on rental contracts will be scaled back, while protections will be added for landlords. Fiscal incentives for buying over renting will be removed, and from now on social housing will be rented instead of sold.

Perhaps Rajoy's most sweeping reforms deal with liberalizing Spain's notoriously rigid labor market. Under the new law, collective bargaining (which encompasses some 90% of the country's workforce since the Franco era) at the regional and sectoral level is no more, and negotiations will now instead take place at the firm level. Labor unions fought this provision harder than any other saying it would allow companies to shed jobs, but PP legislators claimed it necessary to allow individual firms to adjust to shocks rather than conform to regional agreements they may or may not have participated in.

The law also seeks to break the so-called dualism in the labor market by eliminating the disparities between permanent (long-term, well compensated, and well protected) and temporary contracts. Financial incentives for the hiring of permanent contracts will be cut, and restrictions on the length of temporary contracts will be eased. The number of days of severance pay for permanent contracts will be drastically reduced, from 45 days for every year of seniority to 28. Ex post wage indexation will be prohibited.

For pensions, which currently account for more than 9% of GDP, the retirement age will be raised to 67 as planned under the previous government but will now be automatically indexed to the life expectancy rate. Eligibility for early retirement (except for government workers, for whom it will be encouraged) and transferability will be restricted. The period of earnings over which benefits are calculated will be expanded from the last 15 years to 35. All of these measures aim to bring down Spain's pension replacement rate, which at 81% is the highest in Europe, and bring down pension spending to a sustainable 3% of GDP in the long run.

Spain's popular single-payer healthcare scheme, which is widely perceived as one of the best-functioning in Europe, was largely spared from cuts except for a slight increase in prescription drug frees and greater restrictions on access to foreigners.

Finally, the new law tackles the problem of the Autonomous Communities, which account for 50% of all government spending and 20% of its debt. The People's Party became a vocal opponent of the Socialists' decentralization efforts from 2004-2008, reflecting a changing platform in the party from regionalism to a more nationalist outlook.

All unemployment benefits will now be the province of the central government, which has long been responsible for the monitoring of work placement efforts. Procedural changes will better incentivize job search activities, while generous benefits for out of work permanent contract holders will be cut in favor of job training programs for temporary workers. Economic development spending, which constitutes 12% of regional budgets, will now be subject to strict central government approval at the project level. And administrative budgets will cut, with restrictions on regional presidents' spending on travel and personal staff. Autonomous Communities will additionally be forced to privatize loss-making enterprises and be given greater latitude in finding education savings through larger class sizes and extended teacher hours. They will likewise be required to conform to the same accounting procedures and schedules as the central government.

Upon passage of the mammoth, thousand-page legislation, the Prime Minister acknowledged that many of its provisions may be unpopular at first but were necessary for long term economic growth.

"At this point, it's not about politics. If we lose the next election and I get hit by a bus the next morning I'll die happy knowing that we've fundamentally transformed the Spanish economy into a more equitable, more sustainable, and more prosperous state."

At first glance, the Prime Minister's predictions appear to be right, however. Polls show that the majority of Spaniards oppose the new law overall, specifically the provisions on pensions and collective bargaining. There is more support for reining in Autonomous Communities, but it is clear that the public views the reform package as a political liability. Recent approval ratings for the ruling People's Party have dipped to 34%, the lowest since taking office, with Far Right and Far Left parties making up most of the gains.

Markets were exuberant on the news, however, with Spanish 10-year borrowing costs falling to 4.4% despite fears of political turmoil in Greece. The spread between German and Spanish sovereign debt is now at its lowest level since 2010 on confidence that the country will be able to get its fiscal house in order given the recent austerity package.

[Spain (JCU)]

Rajoy Proclaims End of the 'Dark Ages'


Rajoy's message was one of thanks to voters for giving him time for reforms to take effect.

MADRID. Prime Minister Mariano Rajoy highlighted some of his government's economic accomplishments during a major speech this weekend, in what is largely perceived as a kickoff to the 2015 campaign season.

At a rally held on the campus of the Complutense University of Madrid, Rajoy heralded what he called the "tough but necessary choices" made by his administration, which he claims are the cause of Spain's return to economic growth.

"This year, we expect the economy to expand by 1.7%--the highest level in 8 years! Unemployment has also plummeted to 13%, and I expect that number to decline to pre-recession levels by the end of this term. All of this is due to those Deputies [members of parliament] who bravely voted for the omnibus economic bill in the face of massive opposition. And we have done all this while at the same time bringing our finances back into EU norms. Our deficit is now below Union regulations at 2.4% of output and dropping. To those who thought that it could not be done, to those doubters who insisted additional debt with no end in sight, Spain stands as a shining example of the power of fiscal discipline and liberalization. There is still much work to be done, but we have conquered the Dark Ages, and now there is nothing we cannot do. We invite all countries to join us on the path to prosperity and security through greater openness and freedom."

Polls show that voters have partially forgiven the ruling People's Party for its deeply unpopular reforms in light of the accelerating economy, with the PP holding a steady 15-point lead over the opposition Socialists (approximately in-line with the ending results of the 2011 election). Although elections are technically not required until the end of the year, it is widely expected that Rajoy will call them relatively soon to capitalize on the people's current goodwill towards his party.