Daily Israel Report

Spain Overlooks Electoral Considerations to Reassure Investors

Spain passes a balanced budget amendment to reassure investors, dooming anti-Israel Socialist party's chances. Popular Party is pro Israel.
By Amiel Ungar
First Publish: 9/9/2011, 12:31 AM

Spain emulated its Iberian neighbor Portugal by achieving unity between the two major parties on major fiscal policy prior to elections.

Both the Ruling Socialists and the opposition Popular Party, who are expected to win the November elections, pushed through a constitutional reform calling for a balanced budget.

By doing so, outgoing Prime Minister Jose Luis Rodriguez Zapatero, who is not running for reelection, may have effectively sealed his party's fate. The Spanish Socialists, and particularly their supporters, have traditionally favored generous public spending as compared with their major rivals. Now the party is facing a situation that its supporters will not turn out for the election.

Some claim that in any case the Socialists are not in charge of the country as the International Monetary Fund and the European Bank are the true masters.

The government took this measure to reassure investors of Spain's economic stability and thus dampen interest rates on Spanish debts.

The Socialist Party candidate, Alfredo Perez Rubacalba,  is attempting to rally the faithful with a program that will tax the banks and the wealthy more heavily. "The wealthiest must pay more because we are in a complicated situation" said the candidate. The banks benefited from public loans and it is only fair that they repay the favor.

These pledges have not diminished the Popular Party's lead in the polls, ranging from 12 to 15%.

Another problem that the Socialists face as a result of the reform is the impact on Spain's autonomous regions. The Basque and Catalan regions of Spain enjoyed a good measure of autonomy that was made even more meaningful by relative autonomy in spending.

However, it makes no sense for the central government to impose austerity, only to have the money seep out as a result of spending by the regional governments. Catalan and Basque nationalism have traditionally been friendlier to the Socialists because the Socialists were more favorable to regionalism. This did not prevent the Popular Party from forming a coalition with the nationalists in 1996, though.

Mariano Rajoy, the leader of the Popular Party and as of now, prime minister in the making, promises budgetary belt tightening for both the central government and the regions. He points to the budget trimming that the party has already performed in regional government after it won the regional elections in May.

Although the Popular Party represents Spain's Catholic subculture, the party has not emphasized the social and religious issues in the campaign and has focused on economy.

The Popular Party apparently feels strong enough to announce that it will strengthen relations with the United States and restore the level of the relationship to what it was during the Popular Party governments of Jose Maria Aznar.

Spain under outgoing Zapatero attempted to curry favor with the Arabs and launched an "Alliance of Civilizations" (the antithesis to the clash of civilizations). It was distinctly cool to Israel.

Aznar, on the other hand, has emerged as one of Israel's strongest friends in Europe and if his party should return to power, this tradition will hopefully be incorporated in the new government.