Contributed by Joe Montero
After a difficult year and more, the Spanish government is turning the corner and achieving significant success.
The coalition of the Socialist Workers Party (generally called the Socialist Party) and Unidas Podemos (United We Can), came into office in 2018 an found itself beset with a range of problems. Last year’s budget did not get through the parliament.
Then Covid-19 hit early this year. Spain came in just behind Italy as the worst hit in Europe. In country with an already faltering economy, the result was an 11.2 percent contraction.
The Spanish economy has been declining since well before Covid-19
A short respite after the first wave allowed better preparation. When the second wave did hit, the damage was far less.
It still left the need to make some serious decisions for economic recovery. For the coalition this meant finding a solution meets this with its ambitions for social change.
Much of the world will come to face a similar decision if it hasn’t so already. This includes Australia. Spain is the fourth largest economy in Europe, and its response will provide an important lesson. Most of all to other developed economies.
This year’s €239 billion budget has just gone through the Spanish parliament.
Major public investment will be put into building infrastructure and developing a digital and environment friendly economy. Some of the money will be used for seed capital to help new ventures.
Pensions are to increase by 29 percent. The guaranteed minimum income for everyone brought in temporarily in May will be made permanent. This will be backed by a new rent control law due next February, to make housing more affordable.
Photo from ZUMA Press Inc/Alamy: Holding placard in Madrid demanding basic rent and universal income
More than €5 billion in extra spending will go health care and the employment of more health workers. A 34 percent of €600 million increase will go to into aged care, and a further €700 for home help care.
The corporate cluster health system will begin to be replaced by local clinics, which are much closer to the communities they serve. A big €1 billion extra funding will go to these clinics.
There will be a 44 percent increase in scholarship funding for public universities, directed at lower income students. A free universal public pre-school system will be unrolled, and there is a 60 percent increase in spending directed at attacking child poverty.
Social spending overall has risen by 47 percent.
Pablo Iglesias Deputy Prime Minister and leader of Unidas Podemos said this is “a new era in the country’s political economy, one that makes a definitive break with the neoliberal period of cuts and austerity”.
Unidas Podemos, with the support of the Basque Bildu and Catalan Esguerra parties, is undoubtedly the main force behind the new direction. Every indication suggests that the section of the Socialist party behind its leader and Prime Minister Pedro Sanchez, is pulling in the same direction.
A reluctant wing of the Socialist Party remains, and that meant a deal had to be hammered out through backroom and sometimes heated discussions.
At the end, to get the budget passed, the reluctant faction had to concede major compromises against the united force of Unidas Podemos, Bildu, Esguerra, and the other part of the Socialist Party.
Unidas Podemos poster says history is written by you
The final deal also involved a last-minute concession to the reluctant faction. The plan for increases to tax on corporations and the rich will be temporarily shelved.
This is not the problem that it might at first appear. Spain can take advantage of the €72 billion Covid-19 stimulus grant offered by the European union and another €72 billion in available loans. The European Union has given 2 years before repayments on any loans taken must begin.
This provides a needed breathing space.
But if the payback of any money that might be borrowed, and the economic and social measures in the budget are going to be met, there is little choice but to proceed with the tax changes within the next 12 months.
By bringing this is, the ability to pay for the outlays will be assured.
The Spanish opposition and critics from abroad have slammed the budget, as an irresponsible move that will wreck the economy.
Contrary to their claims, the road taken by Spain might just provide the economic stimulus needed, while it ensures that the distribution of the gains is shared fairly.
What is the alternative being offered? To continue along a path of pandering to big business and austerity for everyone else? This road is a proven failure?