A year after Mariano Rajoy’s landslide election victory on the night of 20 November the Spanish economy is in a much worse state. Which is not what the right-wing Popular Party (PP) leader leader promised the electorate on the campaign trail.
Mariano Rajoy made the economic crisis his springboard to the Moncloa Palace. Although during the election campaign in November 2011 he did say he had no “magic wand” and indeed famously said “I cannot promise anything”, the three and a half years leading up to that day, the current prime minister spent the rest of the time promising miracles.
Here’s his failures in 10 key economic indicators:
01. Runaway unemployment
Rajoy endlessly repeated throughout the election campaign that his government’s priority would be growth and jobs, and at one point even promised to half unemployment.. A year later the PP government has clearly failed on this front: in the third quarter of 2011 the unemployment rate stood at 21.52%, according to the Labour Force Survey (LFS), with 4,978,300 unemployed. A year later the rate has surpassed the psychological barrier of 25% (25.02%) and the number of unemployed is dangerously close to the six million: 5,778,100 to be exact.
Only a few months in power and the government effectively gave up the pretence that it was going to curb unemployment: in April the Minister of Economy, Luis de Guindos, announced that in 2015 the unemployment rate would reach 22.3 % in 2015-the year in which the government’s term ends, and that it would be almost as high as in 2011, the year that closed with an unemployment rate of 22.85%.
02. Families increasingly impoverished
Unemployment leads to exclusion and less wealth. In the first six months of 2012 household wealth fell by 18.5%. The National Statistics Institute’s survey of living conditions shows the percentage of families who are struggling to make ends meet increased from 27.3% in 2011 to 33.2% in 2012.
03. Bond spreads widen
For many months, when he was in opposition, the PP used the sky high spreads on Spanish sovereign bonds and Spain’s problems in obtaining financing in the markets a battering ram with which to beat the the socialist government. “The risk premium is called Jose Luis Rodriguez Zapatero,” the current Deputy Prime Minister Soraya Saenz de Santamaria said in November 2010.
So what happened when Rajoy entered the Moncloa Palace? November 18, 2011, Friday, the ‘risk premium’ closed at 441 basis points, a year later, on November 19, 2012, the spread was 454 basis points. During the first quarter of 2012 spreads narrowed slightly but from April widened dramatically again, reaching a record high in July, when they were well over 600 basis points.
04. Economic contraction
Another often repeated message from Rajoy in opposition was that the Spanish economy had to grow. However, the government’s economic policy has been pure austerity. Result? A year ago the Spanish economy was still growing, even if it had already began to show signs of stagnation. Spanish GDP in the third quarter of 2011 grew 0.8% – yet by the third quarter of 2012 it had contracted by 1.6%.
05. Public deficit: difficult to control
“We cannot spend what we don’t have.” Another Rajoy mantra before, during and after the election campaign. The PP harshly rebuked the socialist government for failing to meet deficit targets. The PP Government’s entire strategy has hinged on controlling the deficit with any growth predicated on first closing the gap between expenditure and income. But the PP is failiing as badly as the Socialists. In the fall of 2011 the deficit reached 3.42% of GDP and now, a year later, it is even greater: the latest data shows it at 4.39%. And the forecasts are pessimistic: the EU and most analysts believe that the public deficit at year end will be around 8%; the target set by the EU is 6.3%.
06. Increased public debt
Another indicator denoting the deep decline of the Spanish economy is the unstoppable rise in public debt. In the third quarter of 2012, just before the arrival of the PP to power, the public debt was 66% of GDP. The year closed with debt at 68.5%. By the end of the second quarter of 2012 public debt has risen to 76%. At the end of 2013 it will exceed 90% in all probability.
07. Inflation Grows
Inflation has been disappointing too. In October 2011 the Consumer Price Index (CPI) was at 3%, while in October 2012 it had reached 3.5%. The VAT hike approved by the Government in July, another broken promise of Rajoy, has contributed significantly to the rise in inflation. On account of this indicator, the Government will take in less than a month one of its most delicate decisions: upgrading pensions to catch up with inflation would force the government to pay out a €5 billion, or if not, allow pensioners to lose purchasing power.
08. Capital flight accelerates
Rajoy pledged he would restore confidence in the Spanish economy. But over the last year of capital flight has multiplied by 620 times. Investors are pulling out their money in the face of the country’s economic paralysis. Until August the net capital outflow reached €247 billion. In the same period of 2011, the balance was also negative, but only by €398 million, according to the latest balance of payments data published by the Bank of Spain.
09. Bad loans break records
The banking industry has been one of the great protagonists of the fiscal year. Not only for the bailout was approved last June, or with the injection of public money to plug the financial holes of several financial institutions, including the most important, Bankia. For the average citizen, 2012 has been the year of the evictions and arrears, which have continued to break new records month after month. On Monday, non-performing loans of the banking and financial institutions reached 10.71%. That is, one in ten loans can’t be paid back. The volume of these bad debts has reached €182 billion. That’s a 42% increase over the past year.In October 2011 the rate of bad loans was 7,41%, almost 3.5 points below the actual rate.
10. Evictions: 526 daily dramas
Closely linked to the problem of bad loans is that of evictions. It has taken nearly 400,000 evictions since the start of the crisis for the government to take action on the matter. Evictions have dominated the political agenda in recent weeks after two suicides in quick succession. The problem has worsened in recent months, acquiring dramatic overtones: in the second quarter of 2012 evictions soared to an average of 526 a day, a figure never seen before. In 2011 the already peaked: 58,241 were processed that year, but it was in 2012 when the public decided they had had enough.