Prior to the debacle of 2008, Spain s economy had been

Transcription

1 isido lópez & emmanuel odíguez THE SPANISH MODEL Pio to the debacle of 2008, Spain s economy had been an object of paticula admiation fo Westen commentatos. 1 To epoduce the colouful metaphos of the financial pess, in the 1990s and ealy 2000s the Spanish bull pefomed much bette than the moping lions of Old Euope. In the decade following 1995, 7 million jobs wee ceated and the economy gew at a ate of nealy 4 pe cent; between 1995 and 2007, the nominal wealth of households inceased theefold. Spain s histoic specialization in sectos such as touism and popety development seemed pefectly suited to the age of globalization, which in tun seemed to smile on the county. Constuction boomed as house pices soaed, ising by 220 pe cent between 1997 and 2007, while the housing stock expanded by 30 pe cent, o 7 million units. All feeling of being meely the biggest county of the continent s peiphey was dispelled by a new image of modenity, which did not just catch up with but in some ways supassed standad Euopean expectations at least when Spain s dynamism was compaed to the igidities of the Euozone s coe. Add to this the 2004 etun to powe of the Socialist Paty, unde a youthful José Luis Rodíguez Zapateo, and the effect of such quintessentially modenizing laws as those on same-sex maiage, and the mixtue acquied the bouquet of a young ed wine: extemely obust on the palate. In stak contast, the financial cisis has given the county a completely diffeent image of itself, with effects on Euope that emain to be calculated. Ove the past yea, Spain has on seveal occasions hoveed on the bink of classification as a case fo Euozone bail-out, following Geece, Ieland and Potugal. Its constuction industy, which in 2007 contibuted nealy a tenth of the county s gdp, has suffeed a massive blow-out, leaving an ove-build of unsold housing wose than Ieland s, and the semi-public savings-and-loans secto watelogged with debt. The effects of the housing-maket collapse have evebeated thoughout new left eview 69 may jun

2 6 nl 69 the economy: unemployment is unning at ove 20 pe cent, and moe than double that ate among the unde-25s. A deep ecession has been compounded by daconian austeity measues, supposedly aimed at educing a deficit cuently standing at ove 10 pe cent of gdp to 3 pe cent by The political fall-out of the cisis is putting additional stain on Spain s decentalized govenmental stuctues, in which the seventeen Autonomous Communities administe a lage popotion of public spending; in Catalonia and elsewhee, the ac budgets ae also unning deficits. The Spanish bull s postation also caies implications fo the Euozone as a whole. At ove 45 million, the population of Spain is almost twice as lage as those of Geece, Ieland and Potugal put togethe; its economy is the fouth lagest in the Euozone, with a gdp of $1,409bn, compaed to $305bn fo Geece, $204bn fo Ieland and $229bn fo Potugal. The scale of a Spanish bail-out, wee Madid to un into difficulty in financing its debts, would be likely to capsize the Euozone s cuent tactics fo dealing with its indebted peiphey heavily conditional imf ecb loans, so fa made available to Geece, Ieland and Potugal with the aim of tiding them ove, while safeguading the exposed positions of big Geman, Fench and Bitish banks. So fa, the wage has been that, afte a dose of austeity and labou-maket efom, Spain s pe-cisis economic model can be esuscitated in leane, fitte fom. Is this a viable poposition? Phalangist achitects The genealogy of the Spanish maco-economic model has been complex; one might even say, ionic. Its oigins lie in the modenization pogamme of the Fanco dictatoship fom the late 1950s, pemised on the development of mass-maket touism fom nothen Euope and the adical expansion of pivate home-owneship. This solution to Spanish industy s etenal competitive weakness was a notable anomaly in the context of the manufactuing gowth that maked the post-wa boom elsewhee in Euope. But as Fanco s Ministe fo Housing, the Phalangist José Luis Aese, put it in 1957: Queemos un país de popietaios, no de poletaios we want a county of popietos, not poletaians. This Thatcheism avant la lette tansfomed the Spanish housing maket: 1 This aticle summaizes the main findings of the eseach and activist goup, Madid Metopolitan Obsevatoy, published as Fin de ciclo. Financiaización, teitoio y sociedad de popietaios en la onda laga del capitalismo hispano ( ), Madid The authos would like to thank Bian Anglo fo his tanslation.

3 lópez & odíguez: Spain 7 Figue 1. Pivate home-owneship ates, Spain and England, % / / / Spain England Souce: ine (National Institute of Statistics) and Ministeio de Fomento (Ministy of Infastuctues); and uk National Statistics. duing the 1950s, ented accommodation was still the nom; by 1970, pivate owneship accounted fo ove 60 pe cent of housing, 10 points above the uk level (see Figue 1). The legacy of the Fanco dictatoship and the enomous shotcoming of the county s industial stuctue did not augu well in a scenaio chaacteized by inceasing competition in intenational makets. The ecessionay cisis beginning in 1973 was moe sevee in Spain than in most Euopean counties, ovelapping with the political tansition that followed Fanco s death in But the advent of paliamentay democacy bought no change in maco-economic policy. The Patido Socialista Obeo Español (psoe), in powe continuously unde Felipe González fom , had no altenative model to popose. Indeed, the stategy fo elaunching the economy in the 1980s was based on deepening Spain s existing specializations in touism, popety development and constuction, as competitive advantages neatly adapted to

4 8 nl 69 the new appoaches of the emeging global economy, i.e. high capital mobility and gowing competition to captue financial incomes. This appoach was effectively sanctioned by the othe Euopean powes in the negotiations that peceded Spain s accession to the eec. In these pacts, which effectively constituted a stategic agenda fo the county, the González govenment accepted its patial de-industialization in exchange fo extemely geneous subsidies, which would account fo an annual aveage of 1 pe cent of Spain s gdp between 1986 and As we shall see, these funds would play a key ole in building the infastuctue tanspot, enegy, etc. undelying the late constuction boom, which consumed moe than half the total subsidies. The un-up to integation into the Euopean Community on 1 Januay 1986 saw a fenzy of investment, as Euopean capital ecognized the maket oppotunity opened up by the Ibeian counties enty into the eec. Geman, Fench and Italian multinationals took up key positions within Spain s poduction stuctue, buying up most of the big food-industy companies and the public-secto fims that wee being pivatized, taking ove much of the supemaket secto and acquiing what emained of the majo industial companies. Only the banks, constuction fims and the state-owned electicity and telecommunications monopolies emained immune to the buying fenzy fo Spanish assets. The upshot of this wave of investment which bought the fist peiod of sustained gowth since 1973 was a apid oveheating of the makets. The Madid Stock Exchange saw inceases of 200 pe cent between 1986 and 1989, while the capital s popety maket became one of the most pofitable on the planet. In paallel with Reaganism in the us and Thatcheism in Bitain, the economic cycle in Spain unde González fom 1985 to 1991 was the fist attempt in continental Euope at gowth by means of a financial and popety asset-pice bubble that would have a positive knock-on effect on domestic consumption and demand without any significant suppot fom industial expansion. 2 The euphoia did not last long, howeve; the gowing extenal deficit and the lack of a solid foundation fo gowth ended up unleashing speculative attacks against the Spanish peseta, whose value the govenment was pledged to maintain at any cost. A massive publicity campaign aound the pomp and 2 See José Manuel Naedo, La bubuja inmobiliaio-financiea en la coyuntua económica eciente ( ), Madid 1996.

5 lópez & odíguez: Spain 9 ceemony of the Bacelona Olympic Games and the Seville Univesal Exhibition in 1992 poved unable to pevent the cash of the makets followed, eventually, by a seies of aggessive cuency devaluations. By the ealy 1990s, the Spanish economy was once again faced with the poblem of finding a path to gowth. Euo-boost Hencefowad, howeve, Spanish maco-economic policy would be inceasingly detemined at Euopean level, stuctued within the famewok of the convegence citeia set fo monetay union and the neolibeal doxa consolidated in the Maasticht Teaty and its successos, to which both psoe and pp govenments gave thei full suppot. The eduction of public spending, inflation-tageting and the deegulation of labou makets laid down by Maasticht enabled a ecovey of financial pofits, but geneated new poblems of stimulating demand in Euope s athe slack economies. The pace of the Spanish economy s post-95 ecovey acceleating fom 1997 onwads to gow by an aveage 5 pe cent pe yea between 1998 and 2000 cannot be explained, theefoe, by the local implementation of neolibeal pesciptions. It lay athe in the capacity of the new ounds of popety development and financial engineeing to esolve, if only tempoaily, a numbe of contadictions inheent in the chaotic aticulation of the neolibeal ecipes themselves. Fou factos poved decisive hee. Fist, low inteest ates, as Maasticht and the contol of public deficits as well as the demands of the big financial companies, moe inteested in touting thei new poducts (such as pension and investment funds) than in stengthening the positions of the typical ceditos of the 1980s led to a continual fall in the pice of cedit. Spain thus began a long jouney that would take it fom a position of boasting the highest inteest ates in Euope to becoming the county with the highest levels of intenal indebtedness on the Continent. Second, monetay union and definitive incopoation into the Euozone in guaanteed the Spanish economy an intenational umbella, endowing it with stong puchasing capacity aboad and maginalizing the impotance of its extenal deficit in the context of the Euopean Union s elative suplus. Thid, the eu libealization policy set the seal on the pivatization of publicly owned companies in stategic sectos such as electicity and telecommunications. Lastly, the pivatization of the equivalent public-secto companies in Latin Ameica,

6 10 nl 69 often imposed on those counties by the imf s adjustment plans, opened up significant oppotunities fo the intenationalization of leading Spanish fims. With the aid of the Euo s puchasing powe, Spain s gande bougeoisie went global, ecolonizing the Latin Ameican makets sticken by the cisis and snapping up local companies at bagain pices. The two majo Spanish banks, bbva and Banco Santande, became the biggest in Ibeo-Ameica, just as Telefónica and the Madidbased electicity companies became the biggest in thei sectos in that egion. In othe wods, the famewok established by Maasticht and the Euo opened the doo to the financial epositioning of the Spanish economy within the intenational division of labou and also to what was to become its cental element: the popety-development cycle. Fom an analytical viewpoint, the mechanisms that enabled the popety bubble to become the domestic moto of economic expansion in that peiod, obviating the poblems of demand fomation in a context govened by neolibeal austeity policies, lie beyond the gasp of othodox economics. Asset-pice Keynesianism, to boow a suggestive concept fom Robet Benne s analysis of the Ameican economy between 1995 and 2006, offes a moe fuitful pespective. 3 Indeed, asset-pice Keynesianism, togethe with the mechanisms linking inceased value of pivate assets to the gowth of intenal pivate consumption, enables us to explain the elative success of the Spanish economy duing this peiod. Its moto lay pecisely in the so-called wealth effects geneated by gowth in the value of households financial and popety assets. So long as this continued to incease, it could sustain a double vituous cicle of ising aggegate demand and financial pofits, without aising wages o public spending. In this espect, the Spanish case can be egaded as an intenational laboatoy. Unlike the ealy tials of the financialization of household economies elsewhee, the novelty of the Spanish expeiment was the scale of its model, which was based fom the outset on the vey extensive natue of homeowneship. By 2007, the figue fo pivate home-owneship stood at 87 pe cent. By contast, in the us and uk the popotion of home-owneship neve ose above 70 pe cent. In addition, some 7 million Spanish households the 35 pe cent that compise the eal middle class owned two homes o moe. The sustained appeciation of house pices, ising at an aveage 3 Robet Benne, The Economics of Global Tubulence, London 2006, pp ,

7 lópez & odíguez: Spain 11 Figue 2. Real house pices & gowth ate of nominal cedit elative to GDP Pe cent change in eal house pices ( ) New Zealand Spain Ieland Belgium Fance UK Denmak Canada USA Sweden Austalia Finland Geece Gemany Switzeland Austia Potugal Nethelands -20 Japan Aveage pe cent gowth ate of nominal cedit elative to GDP ( ) Souce: Pakash Kannan et al., Macoeconomic Pattens and Monetay Policy in the Run-Up to Asset Pice Busts, imf Woking Pape, Novembe 2009, p. 31. of 12 pe cent pe yea thoughout the boom decade, and a ecod-beaking expansion of cedit, suppoted a histoic incease in household consumption among the popety-owning stata which, in Spain s case, constituted the vast majoity (see Figue 2). 4 To put it synthetically, deficit spending in the yeas was decisively tansfeed fom the Spanish state to pivate households, which, in the final yeas of the cycle, became net demandes of financing. (This position of negative savings, coupled with high investment in housing and infastuctue, again stains the intepetative famewok of othodox economics.) Paallel to this, nominal wealth in the hands of pivate 4 Between 2003 and 2006, house pices in Spain ose by an astonishing annual aveage of 30 pe cent. Souce: ine (National Statistics Institute).

8 12 nl 69 households gew moe than theefold on the back of the spectacula ise in house pices, the expansion of cedit and the apid gowth of the housing stock. 5 Accoding to the imf, the Spanish wealth effect tanslated into an annual aveage incease of 7 pe cent in pivate consumption between 2000 and 2007, compaed to 4.9 pe cent in the uk, 4 pe cent in Fance, 3.5 pe cent in Italy and 1.8 pe cent in Gemany. Meanwhile employment, diven by both constuction and consumption, ecoded an accumulated gowth ate of 36 pe cent, highe than in any othe histoical peiod and well above the ates of othe eu counties. And all this against the backdop of a 10 pe cent fall in aveage eal wages, such that the enty of 7 million new wokes into the labou maket poduced an incease of only 30 pe cent in the total wage bill. The Spanish economy appeaed to be adapting itself advantageously to the new context of intenational financial deegulation. The elative stagnation of poductivity thoughout the whole decade and the etenal lack of intenational competitiveness of its industy wee no obstacles to gowth. On the contay, in so fa as the lion s shae of economic development took place in sectos whose goods ae non-tansfeable, such as popety-development poducts and pesonal sevices, poductivity and competitiveness became pactically ielevant vaiables. It might be said that Spain s success was founded on a pactical evesal of the classical Schumpeteian stategy of income fom innovation. At the same time, the fomula gowth of pofits without investment 6 which some have used to summaize the financialization of the cental economies is less applicable to the Spanish model, in which what David Havey calls seconday-cicuit accumulation played a key ole. 7 Indeed, the Spanish miacle can only be undestood as a combination of a estoation of pofit and also of demand though financial avenues, with the 5 Popety assets, which play a cental ole in highly financialized economies, ae still not consideed a pioity fo statistics in most oecd counties national accounts. In the case of Spain, use has to be made of the estimates by independent eseaches such as José Manuel Naedo, Ósca Capinteo and Camen Macos, Patimonio inmobiliaio y balance nacional de la economía española , Madid The fomula is used by Michel Husson, Un pu capitalisme, Lausanne Accoding to Havey, when poblems of ove-accumulation appea in the accumulation pocess, capitals switch fom the pimay accumulation cicuit the poduction of suplus value in expanded epoduction schemes to the seconday accumulation cicuit : the ciculation of capital in the built envionment. The teitoial foms this shift can take ange fom majo public woks to house building. David Havey, The Limits to Capital, London 1999, pp

9 lópez & odíguez: Spain 13 geneous involvement of accumulation mechanisms opeating though the built envionment and esidential poduction. Within the Euozone, meanwhile, Spain s ole duing the bubble yeas was to povide ecod etuns fo nothen Euopean capital, above all fom Gemany, Fance and Bitain. Between , foeign capitals invested an aveage of 7 billion a yea in Spanish popety assets, o the equivalent of nealy 1 pe cent of Spain s gdp, much of it in second homes o investments fo Bitish and Geman nationals. High levels of domestic demand, boosted by asset-pice Keynesianism, also offeed impotant makets fo Geman expots. Along with Italy, Geece, Potugal and Ieland, Spain expeienced a gowing balance of payments deficit, eaching ove 9 pe cent of gdp between 2006 and 2008, most of it due to Euopean impots. 8 Hence the paadoxical effects of the ovevaluation of the Euo fom 2003, which while it undemined the Euozone s capacity to expot beyond its bodes actually ensued the intenal puchasing powe of its peipheal and southen counties, not least Spain. Accoding to Euostat, eckoned in tems of puchasing powe paity, Spain s pe capita income was highe than Italy s, almost the same as Fance s and just 10 points lowe than those of Gemany and Bitain. On a scale minuscule compaed to the monetay ciculation between China and the United States, a symbiosis was established within the Euozone between suplus and deficit poles of Euopean capitalism. In this case, impots by the southen counties, mainly fom Gemany, wee patially financed by nothen puchases of popety and financial assets in those counties, paticulaly Spain. In this context, it is not supising that the geneal peception in Spain was of having left peipheal status behind, once and fo all. Fo the young geneations, it was enough to tavel aound Euope to ealize that the diffeences had become maginal and that pospeity and modenity, if they existed at all, wee to be found as much on the Spanish side of the Pyenees as beyond. State backing State intevention played a cucial ole in lubicating the diffeent pats of the popety cicuit to maintain a pemanently inceasing housing supply. The 1998 Land Act, moe commonly known as the build 8 The one Euozone county whose balance of payments swung conclusively in the othe diection was, of couse, Gemany, which went fom a modeate deficit in the late 1990s to a suplus equivalent to ove 7 pe cent of gdp by 2007.

10 14 nl 69 anywhee law, enomously speeded up the pocedues fo obtaining building pemits and made available a huge amount of land fo constuction. Similaly, policies of educing the public-housing stock, maginalizing enting and poviding tax elief fo home-buying had become the cental planks of govenment housing policy duing the pevious 25 yeas. Successive efoms of the motgage maket and the legal famewok also facilitated the expansion of secuitization, a field in which Spain is second in Euope only to the uk. The huge investment in tanspot infastuctue, which has given Spain popotionately moe miles of motoways and high-speed ailway netwoks than any county in Euope, has played an impotant ole in opening up lage aeas of ubanizable land that wee peviously lacking in eal maket value. If to this is added a lax envionmental policy, little inclined to put obstacles in the way of ubanization, and subsidies fo squandeing enegy and wate on inefficient popety developments, the cicle is closed, with the state guaanteeing and egulating the smooth unning of the financialpopety development cicuit. The dependence of economic gowth on the popety asset-pice bubble has had a majo effect on the county s social-geogaphical divisions (see Figue 3). In the context of Spain s highly decentalized administative stuctue, in which the egional Autonomous Communities and municipal govenments have wide-anging powes ove uban development, the envionment and tanspot, local units have typically opeated as gowth machines in competition with each othe. Indeed, local govenments have become boostes of thei localities, the main advetises of the miaculous benefits, fo both the populations and the entie class of investos, flowing fom often dispopotionate o pooly planned gowth. In illustation of the numeous cases that have combined iational inflation of investment with unealistic futue pojections, suffice it to mention the plans (still going ahead) to build a casino megacomplex, afte the manne of Las Vegas, in an aid inland aea of the Ebo valley; o the development of eight supe-pots, with thei espective logistical centes, on a coastline that has at most oom fo two facilities of this type. The envionmental costs of this gowth model ae incalculable. The effects of mass housing constuction in the taditional touist egions the coasts and the two achipelagos: Canaies and Baleaics have geneated stips of continuous uban fabic along the coastline, between two and five kilometes wide, and stetching uninteuptedly fo 100

11 lópez & odíguez: Spain 15 Figue 3. Spanish Regional gdp pe capita and Newly Built Homes GALICIA ASTURIAS CANTABRIA BASQUE COUNTRY NAVARRE LA RIOJA CASTILE AND LEÓN ARAGON CATALONIA EXTREMADURA MADRID CASTILE-LA MANCHA VALENCIA B A L E A R I C I S L E S MURCIA ANDALUSIA CANARY ISLANDS (shown at half-scale) miles key gdp pe capita, 2009 Newly built homes, Up to 18,000 18,000 to 23,000 23,000 to 28,000 Moe than 28, , ,000 10,000 Souce: ine (National Institute of Statistics) and Ministeio de Fomento (Ministy of Infastuctues).

12 16 nl 69 kilometes o moe along the Costa del Sol and the Alicante coast. Even in elatively maginal aeas, the constuction of second homes and geen-touism complexes has avaged aeas of geat ecological value, such as the foothills of the Pyenees and the inland mountain anges. In tems of land consumption, so-called atificial sufaces expanded by 60 pe cent between 1986 and Politics of the bubble The boom yeas also seved to exacebate long-standing teitoial factues and imbalances within the always-difficult Spanish jigsaw-puzzle. One featue of the popety bubble has been a enewed population dain to the coasts and the big cities, while nealy 75 pe cent of the inland teitoy continued to lose inhabitants. Existing uban hieachies have been stengthened: Madid, the city most favoued by the gowth yeas, is now the cente of a metopolitan egion with moe than 6 million inhabitants and has become the thid lagest Euopean city in demogaphic and economic tems. In addition to Madid s cental position in the seconday cicuit of Spanish financial accumulation, it is home to the headquates of most of the big Spanish multinationals opeating in Latin Ameica and Euope, an emeging global city. By contast, most of the othe big cities in Spain have been elegated to seconday positions, putting thei enegies into diffeent stategies of uban entepeneuialism, aimed at captuing locational ents fom intenational touism. 10 Bacelona has become a global example of this stategy: its policies befoe and afte the 1992 Olympics have been expoted to Latin Ameica, in paticula, as the geat model of uban egeneation, and eduplicated, with contadictoy esults, in Medellín and Valpaaíso; but Bacelona s elative success on this font is still a Pyhic victoy when set alongside its long-tem decline as Spain s leading industial cente. 11 Politically, too, the effect has been to exacebate teitoial ivalies and inflame the paticulaist claims of peipheal nationalisms ove 9 Data fom coine (Coodination of Infomation on the Envionment) Land Cove pogamme, available fom the Euopean Envionment Agency website. 10 See David Havey, Fom Manageialism to Entepeneuialism, Geogafiska Annale, Seies B, Human Geogaphy, vol. 71, no. 1, 1989, pp So insistent has this type of popaganda become that a leading satiical peiodical in Buenos Aies has dubbed itself Bacelona. Una solución euopea a los poblemas de los agentinos Bacelona: a Euopean solution fo Agentinians poblems.

13 lópez & odíguez: Spain 17 questions such as taxes, tanspot, egional configuation and wate, in shot supply acoss two-thids of the county. At the same time, a complete consensus pevailed acoss the mainsteam paties on the meits of the county s economic model. The Spanish political class has histoically exhibited an extaodinay complacency on this question; encouaging the ise in popety values was consideed a matte of state, pusued by both psoe govenments ( ; 2004 to the pesent) and the pp unde Azna ( ). At egional level, the Socialist-un Autonomous Community of Andalusia was just as deeply implicated in handing out loans and constuction pemits to popety developes as wee the had-line pp administations in Mucia and Valencia, o the big-business Catalan nationalists of the Convegence and Union paty in Catalonia. When the CiU was eplaced, fom , by a coalition of the Catalan Socialists and two smalle paties, the Republican Left and the envionmentalist Initiative fo Catalonia Geens, popetydevelopment pactices continued unchanged. The main motgage lendes wee the county s 45 cajas de ahoos, semipublic savings-and-loans banks administeed by depositos, employees and local political epesentatives. Regional and distict councils could ean impotant evenues by e-zoning geen-field sites fo uban development and selling the land to a popety develope, who would pay fo it with a loan fom a caja un by the same councillos o thei fiends. With house pices ising at an aveage 12 pe cent pe yea, it seemed a good deal all ound. The bi-patisan natue of the pocess was illustated in Valencia, whee the pp administation deployed extemely aggessive legislation to expopiate small landownes, in ode to put togethe the lage packages of land that a big develope equied. The legislation had been dafted by the psoe fedeal govenment and was used in seveal othe Autonomous Communities unde psoe contol. Couption and nepotism wee given full ein: fiends and family of the pp in Valencia and of the psoe in Andalusia wee among the most notoious beneficiaies The constuction caze did not go unopposed. In some of the wost-affected aeas, envionmentalist goups, denouncing both the dispopotionate despoliation of the landscape and the couption of local officials involved, succeeded in binging down local govenments and even Autonomous Community administations (Aagon in 2003; the Baleaic Islands in 2007). Between 2005 and 2007, the main Spanish cities wee shaken by an imaginative cycle of potests against ising house pices, mobilizing aound slogans such as V de Vivienda, on the model of V fo Vendetta ( vivienda being the Spanish wod fo housing) and mounting demonstations of tens of thousands of people.

14 18 nl 69 But if both the majo paties, the psoe and the pp, ae implicated in Spain s asset-pice Keynesian model, it is the talante (appoach, way of going about things) of José Luis Rodíguez Zapateo that has especially maked fist the high boom yeas and then the cash. Spain is the only Euopean county in which mass mobilizations against the 2003 us uk Spanish invasion of Iaq had belatedly an impact at govenment level. Fo the following yea, Azna s attempt to blame the 11 Mach Islamist bomb attacks, which killed 192 people in Madid s cental tain station, on the Basque goup eta povoked a huge social mobilization, diectly linked to those of the pevious yea against Spain s paticipation in the Iaq wa and the Azna govenment s nacissistic authoitaianism. The effect was to evese the two paties standings in the opinion polls and sweep Zapateo into powe. The mobilization expessed the ise of pofessional sectos that had gown thanks to the county s acceleated modenization and, especially, of a younge geneation, affected to a geate o lesse degee by job insecuity, geneally moe educated and secula than its paents. The poge image 13 of Zapateo s Spain was fosteed by policies such as dialogue with the tade unions, a token wage fo caes, a same-sex maiage law and initial gestues towads a tuce with eta. Aboad, Zapateo caied though his pledge to pull Spanish toops out of Iaq, but compensated by sending them to Afghanistan. He fell foul of the poweful pisa media goup, howeve El País, Digital+, Cadena se which had hitheto always backed the Socialists, and depended instead on suppot fom a new pape, Público, and the tv channel La Sexta. Fom the fist, Zapateo s success had a lot to do with the conscious use of political maketing stategies; the new govenment s talante was essentially cosmetic. Social expenditue was vey slightly inceased, but not so as to jeopadize financial pofits, o the income of the supesalaied executives of the multinationals based in Spain. No altenative was developed to the fedeal-state model, hobbled by tensions between peipheal nationalisms and a centalizing Spanish nationalism, in an inteplay that was becoming inceasingly faught yet still functioned as fa as local popety-development machines wee concened. No was thee any attempt to contol the inceasingly ove-heated housing 13 Poge is a half-pleasant, half-sadonic diminutive of pogesista, o pogessive. It denotes the communication style and hetoic of the middle-class, institutional cente left, based on an essentially uncitical, do-goode social libealism.

15 lópez & odíguez: Spain 19 maket let alone to constuct an altenative model. In the 2008 election psoe slightly inceased its shae of the vote, winning 43.6 pe cent, compaed to 42.6 pe cent in 2004 though this may have come mainly fom the leftist Izquieda Unida, whose vote fell fom 5 pe cent in 2004 to 3.8 pe cent in 2008, while the pp vote ose fom 37.7 pe cent in 2004 to 40.1 pe cent in Insecuities As long as cedit flowed and house pices continued to be bone up by the bubble, it seemed little matte that social expenditue was extemely low, that wages had stagnated o even fallen, o that the Spanish labou maket had one of the highest ates of tempoay contacts in Euope. (Spain s chonically high unemployment ates between 8 and 12 pe cent fo most of the ealy 2000s in fact eflect high ates of tempoay wok, affecting moe than a thid of the labou foce, and the high paticipation in seasonal sectos, such as touism; in othe wods, fast otation though insecue employment, athe than stuctual unemployment as such.) Rising popety values came to supplement an unde-funded pension system as a guaantee of income in old age. Young people, often foced to delay leaving thei paents home, might nevetheless hope to benefit fom the inceasing value of family assets, eithe by way of inheitance, family investment o paental help in getting a motgage. The poblem of poviding cae, in the absence of decent social povision, was eased by the aival in Spain of a gigantic amy, seveal million stong, of tansnational domestic wokes. These women, mostly without esidence pemits, took ove looking afte childen, the eldely and the disabled, and did the domestic choes in seveal million middleclass homes. By 2010 thee wee nealy 6 million foeignes in Spain, the county s population inceasing in just ten yeas fom 39.5 million to almost 47 million, a jump of moe than 18 pe cent. Of the incomes, 2.67 million wee eu citizens, in lage pat fom new membe states: nealy 800,000 fom Romania alone; 2 million fom Latin Ameica, pincipally Ecuado, Colombia and Bolivia; a million fom Afica and the Magheb, including 650,000 Mooccans. What bette token of the fact that Spain had left behind its taditional peipheal status than the aival of its fist wave of mass immigation? As expected, the migants lagely occupied low-paid jobs in constuction, agicultue, domestic wok and also sexual sevices. A complex system of esidency pemits,

16 20 nl 69 job quotas, Euopean and intenal bodes skilfully subodinated these wokes to the needs of an expanding economy, ceating long, sometimes lifelong, peiods of exclusion fom citizenship that left them defenceless in the labou maket. 14 Nevetheless, as they gadually established themselves and thei families fom the ealy 2000s, the migants too wee invited to join in the popety bonanza. Togethe with the young people bon in the 1970s the post-fanco baby boomes they stimulated and sustained the final yeas of the cycle: Spanish subpimes consisted in ganting at least a million motgages to vulneable segments of society between 2003 and Natually, a widespead incease in indebtedness was one of the side-effects of Spain s assets euphoia the atio of indebtedness to available income ising, by 2007, to the highest level of any oecd county though the isks wee heavily concentated in households with lowe incomes and fewe assets. As in the United States, the magic of efinancing though the sustained incease in housing pices was egaded as sufficient secuity fo the isks in cedit. Unlike the United States, howeve, Spanish law does not conside the asset undelying the motgage i.e., the dwelling to be sufficient guaantee in the event of default by the boowe. This means that the guaantees secuing loans might include the homes of the motgagees elatives and fiends. This would esult in alaming chain eactions of epossessions afte the popety bubble bust. The cash The fist to notice that the bubble was coming to an end wee the popety developes. Afte nealy 900,000 housing stats in 2006 exceeding those of Fance, Gemany and Italy put togethe sales began to fall away. Mediteanean coastal developments wee especially had hit by the busting of the uk housing bubble in mid-2007, leading to poblems fo Bitish second-home ownes. Re-zoned land awaiting development, bought at the height of the bubble with loans fom the cajas, stated to be seen as a bad investment. By the end of 2008 thee wee a million unsold homes on the maket, while Spanish 14 The yeas and saw a seies of mobilizations by undocumented migants, including sit-ins in chuches and official buildings, as well as stikes by migant wokes in the ago-industial disticts of the south-east.

17 lópez & odíguez: Spain 21 household indebtedness had isen to 84 pe cent of gdp. Collapsing popety developes began landing the cajas with massive bad loans: in July 2008 the Matinsa Fadesa constuction company filed fo bankuptcy with debts of ove 5bn. The Zapateo govenment s initial esponse was to ty to pass the cisis off as a global phenomenon, only maginally affecting Spain, in compaison to the fa lage debacle of the subpime-elated maket in the United States. At most, Madid acknowledged that it would be necessay to give some help to the cajas the possibility of a 50bn bail-out fund was floated in Octobe 2008 and to expand shot-tem deficit spending, in tandem with the est of the g20. Howeve, these pedictions wee quickly shown to be hopelessly optimistic as unemployment doubled, pushing the jobless ate up to nealy 20 pe cent by the end of The destuction of jobs was not confined to constuction, but also affected the consume-goods industy and maket sevices. The vituous cicle of asset-pice Keynesianism had gone into evese, geneating a sevee povety effect which, togethe with the contaction of cedit, dastically educed pivate consumption. Owing to the high popotion of employees on shot-tem and tempoay contacts, businesses wee able to educe thei wokfoces quickly and at vey little cost in esponse to falling demand, which was then in tun futhe depessed by ising unemployment, eaching ove 40 pe cent among unde-25s. Govenment evenues plummeted, as gdp contacted by 7.7 points, peak to tough, and the 2006 fiscal suplus of 2 pe cent of gdp tuned into a 2009 deficit of ove 11 pe cent. Like its Euopean countepats, the Zapateo govenment focused on a policy of socializing the losses of the county s oligachic blocs. This vey much included the majo Spanish constuction companies, some of them acs, fcc and Feovial now global playes, having been geneously fattened up by moe than 25 yeas of expansive infastuctue budgets, and who now demanded that thei public-woks contacts be maintained, whateve the cost. The lage pivate banks Santande and bbva ae the biggest appeaed to be bette povisioned than some of thei Bitish and us competitos, having captued the deposits of the middle classes of Latin Ameica. In fact they now went on a spending spee, Santande in paticula adding Bitish building societies and Ameican savings banks to its aleady extensive Latin Ameican and Asian inteests, ceating a behemoth too big to fail and pehaps too big to save.

18 22 nl 69 Fo thei pat, the cajas emain satuated with debt. Estimates of thei total capital shotfall vay fom 15bn (the Bank of Spain s figue) to aound 100bn, which would be appoaching 10 pe cent of gdp; in Mach 2009 the Caja Castilla La Mancha alone was bailed out to the tune of 9bn. 15 In June 2009, Zapateo announced plans fo a 99bn escue fund, the fob, and a mege pogamme that would educe the 45 cajas to 17; they wee also instucted to aise thei coe-capital levels to 10 pe cent by Septembe 2011, which would equie an exta 20bn 50bn in cash. Sidestepping this, the cajas have also been encouaged, though the Bank of Spain, to swap popety developes debts fo eal estate, land and houses, valued somewhat fictitiously at 10 pe cent below thei peak pice, in ode to flatte thei balance-sheets and avoid technical bankuptcy. As in Ieland, howeve, losses have tended to exceed initial estimates: in Mach 2011 evelations of bigge-than-anticipated poblems at the Alicante-based Caja de Ahoos Mediteáneo, Spain s fouth-lagest caja, scotched the mege plan in which it was involved. Afte thei ecod-beaking ise, Spanish house pices have so fa fallen back by little moe than 10 pe cent (see Figue 4). By mid-2009, the pessue at eu and, moe specifically, Euozone level swiftly shifted fom bank-escue packages the total pledged may have come to 2.5 tillion fom the eu as a whole to the austeity measues necessitated by the tansfe of finance capital s losses onto the nation-states books. Fom ealy 2010, budget cuts, wage feezes and the dismantling of social pogammes wee intoduced in one county afte anothe. The cisis was explicitly seen as an oppotunity fo state-by-state stuctual adjustments accoding to the well-known pesciptions. The ole of the eu s summit institutions in the cisis could not have been moe closely linked to financial inteests. In this sequence of events, the soveeign-debt cises, especially the episodes involving Geece and Ieland, must be seen as poviding an enomous business oppotunity fo the big Euopean Geman, Fench and Bitish banks, the main holdes of the Euopean counties soveeign bonds. Aided by the ating agencies, the announcements of the insolvency o financial fagility of the Euozone s deficit membes Geece, Potugal, Ieland, Spain and Italy enabled them to amass enomous pofits based on debt-bond inteest ates, atificially 15 The Economist has poposed a doomsday scenaio figue of 270bn which, it points out, would be smalle than the Iish banks shotfall, elative to gdp: Unde siege, 13 Januay 2011.

19 lópez & odíguez: Spain 23 Figue 4. House-pice ises, , and subsequent falls Spain Ieland Fance UK Denmak Sweden Finland Italy USA Geece Nethelands Potugal Pe cent change in housing pices, Pe cent change fom ecent peak Souce: Pakash Kannan et al., Macoeconomic Pattens and Monetay Policy in the Run-Up to Asset Pice Busts, imf Woking Pape, Novembe 2009, p. 29.

20 24 nl 69 blown up at a time when it was impossible fo financial pofits in the pivate and household sectos to etun to thei pe-cisis levels. Zapateo s volte-face In Apil 2010, as the Geek debt cisis unfolded, Zapateo came unde inceasing pessue fom Belin, Bussels and the ecb to impose austeity measues and labou-maket estuctuing effectively launching an offensive against the state-secto employees who still had long-tem contacts and wage-bagaining ights. Unwilling to assault key sections of his base, yet incapable of mobilizing it towads any altenative solution, Zapateo pocastinated. Finally on 12 May, appaently afte futhe amtwisting fom the Obama White House, he announced a dastic austeity pogamme: public-secto wages slashed by 5 pe cent, benefits and pensions cut, investment pojects cancelled, the etiement age aised, wage bagaining esticted, sackings made simple. The esult was an immediate plunge in the polls: fom level-pegging with the pp, the psoe dopped to 7 points behind, then caied on falling. Tade-union leades wee tapped between the pessue fom thei ank and file and thei anxieties about pecipitating the fall of the psoe govenment. A geneal stike on 29 Septembe 2010 was the main focus fo social opposition to the Zapateo measues, but the leadeship pevented some of the best-oganized sectos, such as tanspot wokes, fom coming out, and failed to mobilize the huge mass of shot-contact wokes in sevices and etail. The union leadeship then pomptly signed an ageement on cutbacks in pension povision and a ise in the etiement age. The mask of a moden pogessive epublicanism has fallen as the Socialist Paty govenment lined up unambiguously with the hegemonic financial bloc. Following the scipt that has chaacteized the cuent phase of the cisis, the exta budens on Spanish public-debt issue have led to measues in line with the most othodox stuctual adjustment policies. In the final analysis, this means that public expenditue is subject to the political ovesight of the financial agents. The esult has been the desetion of a lage pat of the psoe electoate, the Paty now at an all-time low in the polls. On 2 Apil 2011, with unemployment soaing (see Figue 5) and the Socialists tailing by 16 points, Zapateo announced that he would not be unning as the psoe leade in the Mach 2012 geneal election. The main pessues fo him to esign came fom within the paty, paticulaly fom Socialist candidates in the May 2011 egional elections who wanted

21 lópez & odíguez: Spain 25 Figue 5. Selected Euozone unemployment ates, (%) 20 Spain 15 Ieland Geece 10 Potugal Fance Italy 5 Gemany Souce: Wold Economic Outlook Database, Apil to distance themselves fom his political legacy. The font-unne to succeed him is Alfedo Péez Rubalcaba, a vetean of the psoe ight whose political caee began unde Felipe González. Rubalcaba has been at the Inteio Ministy since 2006 and is notoious fo having fomulated an even toughe, wa on teo esponse to the Basque sepaatist movement eta than the pp. As a esult of this stong-man stance, he was ewaded with two othe high positions in the Zapateo govenment: vice-pesident and spokesman of the govenment. As a man of the felipista old guad, Rubalcaba is favoued by the mighty pisa goup and its chief mouthpiece, El País. The leading candidate of the psoe s zapateista wing and the Mediapo goup, Defence Ministe Came Chacón, withdew when she saw which way the wind was blowing. The cisis has bought Spain face to face with the fagility of the economic stuctues undepinning its long decade of pospeity, and the psoe with the apoias that wee the foundation of its politics. Financial engineeing pepetuated the fiction that an expanded home-owning middle-class

22 26 nl 69 majoity had achieved pemanent levels of pospeity. The collapse of the popety bubble has ton the veil fom a highly polaized social ode, with a lage popotion of the population deep in debt, many out of wok and dependent on public sevices doubly hit by spending cuts and pivatization. If to this we add that the wost hit ae the young facing stakly diminished pospects compaed to thei eldes and foeign-bon wokes, then the lines pojecting the cost of the cisis onto the most vulneable goups become clea. Spain has long been the most Euophiliac of eu membe states; Euopeanism was deeply associated in people s imaginations with the post-fanco democatization and modenization of the county, and the Spanish electoate has histoically been almost completely uncitical of the eu. Such complacency has now disappeaed. On 15 May, in the un up to the 22 May egional elections and exactly a yea afte Zapateo had announced his swingeing cuts a huge wave of social potest swept acoss the county. Tens of thousands of young demonstatos took to the steets, then set up camp in the cental squaes of a scoe of Spanish cities, including Plaza Catalunya in Bacelona and Pueta del Sol in Madid: students, wokes, employed and unemployed, staking a claim to public space, with a salute to the young Aab demonstatos of Peal Roundabout and Tahi Squae (see page 29). In Pueta del Sol the occupation established a pemanent popula assembly, voting daily on all decisions. Among the slogans of the 15M movement: Fo a tansition to democacy! We ae not commodities in the hands of politicians and bankes ppsoe: psoe and pp, both the same cap Real democacy now! The 20 May Manifesto appoved by the Sol s popula assembly assailed political couption, the closed-list electoal system (in which only the names of the paty and its leade appea on the ballot pape), the powe of the ecb imf and the injustice of the uling-class esponse to the cisis. At the time of witing, the campes have been holding the squaes fo nealy two weeks duing which peiod the psoe has had the wost dubbing in its histoy, losing contol of Bacelona, Seville and fou acs, as well as town halls acoss its stonghold of Andalusia. 16 But if Maiano Rahoy s pp takes powe in the geneal election, due in less than a yea, it will confont the foces of the 15M movement, the indignados and youth without a futue : No house, no job, no pension no fea! 16 The psoe won only 28 pe cent of the vote in the 22 May egional elections, a 7 point dop; but the pp was only 2 points up, at 38 pe cent. Meanwhile Izquieda Unida polled 6.3 pe cent, up fom 5.5 in 2007, but punished in pat fo local coalitions with psoe taking only 210,000 of the 1.5m votes the Socialists had lost.

23 lópez & odíguez: Spain 27 Figue 6. Claims to Euozone peiphey domestic banks and public secto Claims as pe cent of equity of banks with foeign exposues, 2010 Q3 Gemany Fance UK Claims as pe cent of total bank equity, 2010 Q3 Gemany Fance UK Claims on Geece, Ieland and Potugal Claims on Spain Souce: imf, Regional Economic Outlook: Euope, May 2011, p. 13. The outlook fo economic ecovey in Spain emains bleak. The scale of the housing bubble; the centality of asset-pice Keynesianism to gowth since the 1990s; the depth of the post-bust ecession, exacebated by tuly daconian austeity measues; the stength of the Euo (thanks in pat to quantitative easing fom the us Fedeal Reseve), which hits non-euozone touism; and a tightening of cedit by the ecb all this suggests that any etun to gowth in Spain is a vey long way off indeed. The immediate pospect is almost cetain to be futhe etenchment and theefoe an incease in Spain s deficit. This poses sevee dilemmas fo the Euozone s attempts to petend that the cisis is just a tempoay liquidity poblem which can be managed by funnelling ecb imf bidging loans to the counties in question duing the time it takes to gow thei way out of debt. In fact, the cisis is that of the majo Geman, Fench and Bitish banks, hugely exposed by the busting of the peiphey s popety bubbles (see Figue 6). Rathe than face the tauma of a

24 28 nl 69 full-blown banking cisis at home, Belin, Pais and London have been unning what one cental banke has descibed as a public-secto Ponzi scheme, only sustainable as long as additional amounts of money ae available to continue the petence : Some of the oiginal bondholdes ae being paid with the official loans that also finance the emaining pimay deficits. When it tuns out that counties cannot meet the austeity and stuctual conditions imposed on them, and theefoe cannot etun to the voluntay maket, these loans will eventually be olled ove and enhanced by Euozone membes and intenational oganizations... Euopean govenments ae finding it moe convenient to postpone the day of eckoning and continue thowing money into the peipheal counties, athe than face domestic financial disuption. 17 The collapse of the Spanish model theatens this pyamid scheme fom seveal diections: fist, Geman and Fench banks exposue is fa geate in Spain than in Geece and Ieland; second, the scale of the cajas poblems has yet to be fathomed; thid, the social poblem a population that has gown by 18 pe cent in the past decade, lagely by immigation; nealy one in two of the younge geneation unemployed is potentially moe explosive, as social and welfae spending shinks still futhe, fom levels aleady low compaed to those in cental Euope. A Spanish debt cisis could finally capsize the eu3 s attempt to make the peipheal populations bail out the sticken banks, which ae eaping usuious, atificially inflated ates on govenment bonds to compensate fo the lack of financial pofits in the pivate secto. Fo that eason, evey effot will no doubt be made to avoid one. 17 Maio Bleje, Euope is unning a giant Ponzi scheme, ft, 5 May 2011.

25 fom pueta del sol Yes, We Question this Democacy Response fom an indignada in Pueta del Sol to a TV pesente who told potestes not to question democacy : Yes, we question this democacy. We question this democacy because it fails to suppot popula soveeignty: the makets impose decisions fo thei own benefit and the paties in Paliament ae not standing up to this global fact. Neithe in ou county no in the Euopean Paliament ae they fighting to put an end to financial speculation, whethe in cuency o in soveeign debt. We question this democacy because the paties in powe do not look out fo the collective good, but fo the good of the ich. Because they undestand gowth as the gowth of businessmen s pofits, not the gowth of social justice, edistibution, public sevices, access to housing and othe necessities. Because the paties in powe ae concened only fo thei own continuation in office, making deals to stay in powe and leaving thei electoal pogamme unfulfilled. Because no politician has to live with what they legislate fo thei subjects : insecuity, motgage debt and uncetainty. We question this democacy because it colludes in couption, allowing politicians to hold a pivate post at the same time as public office, to pofit fom pivileged infomation, to step into jobs as business advisos afte leaving office, making it vey pofitable to be a politician. We question this democacy because it consists in an absolute delegation of decision-making into the hands of politicians that ae nominated in closed lists and to whom we have no access of any kind. No is thee any popotionality between votes and seats. We question this democacy because it is absud that the only way to punish a paty is to vote fo anothe one with which one does not agee. We question this democacy because the paties in powe do not even comply with the social povisions of the Constitution: justice is not applied equally, thee ae no decent jobs no housing fo all, foeign-bon wokes ae not teated as citizens. Excuses ae not good enough fo us. We do not want to choose between eally existing democacy and the dictatoships of the past. We want a diffeent life. Real democacy now! Beatiz Gacía