Playing Politics in a Debt Crisis

With Spanish general elections on the docket for November 20, it is interesting to see how candidates from opposite ends of the political spectrum are reacting to the various policy options to reduce Spain’s government debt. First, a run through of the key players:

Jose Luis Rodriguez Zapatero
Outgoing President, Socialist Party
The outgoing President's 8-year reign has a critical influence on these elections. Lauded for a social policy that brought convergence with the rest of Europe, Zapatero will feel he was blamed unfairly for the economic crisis in Spain. However, he has proved utterly incapable of making Spain’s government more efficient, instead granting even more autonomy to regional governments.

Alfredo Perez Rubalcaba
Presidential Candidate, Socialist Party
A former pilot and chemist, Rubalcaba has been the socialist party’s utility man, first as Minister of Education under Felipe Gonzalez in the early 1990’s and then as Minister of the Interior for Zapatero. Has always served with distinction but never really become a champion of the people. He's had a hard time distancing himself from Zapatero's perceived failures.

Mariano Rajoy
Presidential Candidate, Conservative Party
Twice embarrassed by Zapatero in previous elections, Rajoy has largely kept his mouth shut and reminded voters that Rubalcaba and Zapatero are responsible for Spain’s problems. It’s been a good enough strategy to build a double-digit poll lead. He has attributed his silence on economic issues to an uncertain economic environment where promises are difficult to keep, but some suspect he is keen to avoid espousing unpopular measures.

And now, the issues...

Issue 1: Taxes
Here Rubalcaba and Rajoy break cleanly along ideological lines. Rubalcaba wants to institute a special income tax for wealthy individuals and raise sales tax for certain items. Rajoy opposes both, favoring trickle-down economics such as homebuyer tax credits and business tax breaks.

Issue 2: Privatization
Zapatero secured congressional approval to privatize Spain’s lottery and sell concessions to manage the country’s two biggest airports. These were courageous decisions meant to put overcoming the looming government debt over his political beliefs. Because both measures were unpopular, Rajoy stridently opposed them and the sales were eventually scrapped amid flimsy market conditions. It’s very probable Rajoy will do an about-face once elected.

Issue 3: Size of Government
Spain has one of Europe’s most complex bureaucracies. In a country of just 48 million people, many of the 17 provinces have full autonomy in spheres ranging from education to police forces to healthcare. There is a desperate need to trim the fat and reduce the paper pushing. But the issue is strictly political. Every time anyone speaks of reducing the size of government, the linguistic minority regions cry wolf because the memory of Francoist oppression is still relatively fresh. It’s unfortunate Zapatero did not tackle this because only a liberal leader could pull it off.

Issue 4: Healthcare
Rajoy’s conservative party quietly embraces privatization of healthcare, outsourcing management of public hospitals to the private sector in two large provinces. However, the national government does not have the right to legislate about healthcare for each province without a change to the constitution.