When 3.5 million people protested on July 19 in more than 80 Spanish cities and towns ― against the austerity measures announced a week earlier by the Popular Party (PP) government of Mariano Rajoy ― it came as little surprise. It built on the growing wave of popular anger.
Rajoy’s latest package, imposed as a condition of receiving the European Commission’s 100 billion euro “line of credit” to Spain’s debt-ridden banking system, increases the pain for those already hurt by previous cuts. It also brings new sections of the population into the line of fire.
The measures aim to chop 65 billion euros off the central government deficit over 2012-2013 and to force further cuts from the country’s 17 autonomous communities (states).
Rajoy’s measures declared war on four fronts:
* On “privileged” public servants. Their extra month’s salary at Christmas has been “suspended” until 2015, when it is promised to be paid into their pension fund. Staff numbers will be cut, as will sick pay and leave entitlements. Finance minister Cristobal Montoro justified it all as “equalising” public and private sector working conditions.
* On the jobless and the poor. Unemployed workers who have made sufficient social security contributions will see their dole cut after six months from 60% to 50% of their previous income. A “safety net” minimum payment to people not eligible for standard social security benefits will now be available only to those who have worked previously ― and this in a country of 5.7 million unemployed. Rent assistance to eligible young people will fall by 70 euros a month.
* On public enterprise. The national railway system is to be “opened up” to private competition, airports and ports are to be privatised, and local and regional public enterprises eliminated or cut to the bone.
* On consumers. The package hopes to cut 22 billion euros from the national deficit by raising the two top rates of Spain’s three-tier consumption tax and shifting items that previously carried the middle rate (including cultural production) into the top (“luxury”) rate. Cuts in the social security fund contribution rate are supposed to offset these rises.
The brutal core of the package came wrapped in deceptive tinsel meant to show that the government is “requiring sacrifice from all social partners”. For instance, big business will have to pay an extra 10% on profits made abroad and also lose some tax exemptions on its losses.
The economic impact of the package will be crippling. It will not just cut demand, but further deepen the recessionary psychology gripping the country. The latest employment and national accounts figures show that the economy is shrinking faster than all predictions.
In the first quarter of this year, GDP fell by 0.4%. Household consumption was down 0.6%, investment down 8.8% and spending by all levels of government down 5.2%. In July, official unemployment reached historical record of 24.63%.
The latest International Monetary Fund forecast has the Spanish economy shrinking by 2.3% over the year to September. The government has revised its growth prediction for 2013 from 0.2% to -0.5%. And that was before the latest cuts were announced.
The “good news”, from a capitalist economic perspective, is labour costs have been plummeting since 2008 as wages fall. Yet, despite bringing down its current account deficit from 10% to 2% of GDP, in a context of slowing global growth, wages will have to fall even more, further dragging down internal demand and growth.
The dream of increased Spanish export growth offsetting stagnation at home is proving a silly illusion.
Meanwhile, the cuts deepen social misery. Nearly 2 million families have no breadwinner, and a third of these receive no income at all.
Here is a small selection of recent trends:
* The Platform of Mortgage-Affected People revealed in July that there have been more than 400,000 evictions since 2008.
* The Federation of Public Health Defence Associations says in many communities, the working week in the health sector will rise by 2.5 hours and salaries will be cut. “Illegal” migrants who used to have full access to health care if registered as living in a council area will now only have access to hospital emergency units and have to pay for treatments.
* Entire wards and surgeries have been closed. These facilities are increasingly being made available to private health providers.
* In Catalonia alone, a 57% cut in the disability support budget will cause 2500 disability carers to lose their jobs.
As people lose their jobs and homes, they return to live with their parents, taking their children with them. As a result, poor and working-class Spain is surviving by running down the savings of its older generations, who hope against hope that some light will soon reappear in their lives.
It is not only society that is hurting from the cuts. Between July 21 and 23, a savage bushfire raged across north-eastern Catalonia, burning out over 13,000 hectares of valuable forest and farmland, and taking four lives. It came three weeks after an even greater fire consumed more than 50,000 hectares in Valencia.
In February, the firefighters’ section of the Workers Commissions (CCOO) in Catalonia denounced the two-thirds cut in funding to the fire service. It warned that, when combined with the coming hot summer, it would make for a “complicated” situation.
In Valencia, the PP government sliced 15 million euros off the firefighting budget for 2012.
The protests on July 19 marked an unprecedented scale of mobilisation against austerity. Preceded by the coal miners’ powerful “March for Dignity” from the northern mining districts to Madrid and by a week of public servant protests in the capital, July 19 gave voice to the rising indignation of the 75%-80% of people shown by polls to oppose the cuts.
Some of the biggest contingents were made up of public sector employees, railway workers, firefighters, tax office employees and police.
Cultural workers also turned out massively on July 19, chanting “Culture is not a luxury”. So heated is the reaction to the raised taxing of culture that the secretary of the culture ministry has told national TV that he disagrees with the change.
The protest was also helped by the decision of the main trade union confederations ― the CCOO and the General Union of Labour (UGT) ― to share the convening of the day with other unions and social organisations.
The combination of the severity of Rajoy’s attack and the miners’ electrifying march into Madrid also convinced the indignado movement to drop its tactic of building “critical blocs” in protests convened by the main union confederations.
This unity dynamic took a further step forward on July 25. A “Social Summit” of 100 union and social organisations undertook to “intensify the social and democratic mobilisation”, by using “all the tools that the constitution places in our hands”.
The next step will be a September 15 national convergence on Madrid, which will formally ask the Rajoy government to submit its austerity package to referendum.
In case of refusal “we, the organisations of the Social Summit, will carry out a popular consultation, and act on the basis of its result”.
That will set the political grounds for a general strike against an increasingly isolated government, probably in October.
But what alliance of political forces might replace Rajoy? It is certainly true that after seven months of promise-breaking, the PP government is losing support. The latest polls showed it receiving 35%-37% (down from the 44.6% with which it won last November's elections).
However, the only “replacements” available on the present balance of forces is either an internal PP coup against Rajoy or a “grand coalition” of the PP and Spanish Socialist Workers Party (PSOE).
A key question is whether Rajoy’s latest austerity package will set off a collapse in support like that suffered by the PSOE’s Jose Luis Rodriguez Zapatero after he introduced Spain’s initial austerity package in May 2010.
There are many similarities between the two situations. Like Zapatero, Rajoy’s commitment to Brussels has forced him to break nearly every single election promise. Spanish social networks are now full of YouTube clips comparing his “no tax increase” promises of 2009-2011 to his vicious tax hikes of today.
The PSOE is increasingly being torn between those, such as opposition leader Alfredo Perez Rubalcaba and former prime minister Felipe Gonzalez, who want to take the party into coalition with the PP, and those who fear the PSOE following the fate of the Greek PASOK ―overtaken by a radical left alternative. In Spain's case, that means the United Left (IU).
Those opposed to a grand coalition point to the PSOE’s polling results, which despite unprecedented PP attacks have consistently fallen below the miserable 28.7% it scored in last November's election.
The IU, on the other hand, has doubled its support in the polls over the past seven months of Rajoy government to 12%-13%. It is moving to engage with the key problem of closing the gap between the majority social rejection of austerity and its still partial political expression. That is, it is seeking to do what the Coalition of the Radical Left (SYRIZA) managed in Greece.
A further complicating factor is that with its latest cuts, the PP has also had to attack parts of its social base, especially among public servants and professionals. This should result in a rise in support for the Spanish-centralist Union, Progress and Democracy (UPyD), now at 5%-6%, as the society increasingly polarises.
All Spanish political forces are now engaged in a furious race against time in a context where it is not even clear that the euro crisis will take a break over the European summer.
[Dick Nichols is Green Left Weekly’s European correspondent, based in Barcelona. Read more of Dick Nichol's articles.]