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Spain awaits a painful dose of medicine

Spain awaits a painful dose of medicine
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It was an election victory the polls had predicted. Second guessing what policies Mariano Rajoy will pursue has not been so easy. Behind his centre right party is a huge parliamentary majority, ahead of him what seems to be a contagious European disease, debt.

Healing the Spanish economy teetering on the edge of recession will be painful, where, when and how will the medicine be administered?

He has promised deep spending cuts announcing he aims to cut the budget deficit by 16.5 billion euros in 2012 and yet such action needs to be balanced against measures to stimulate growth.

He said he will raise pensions in real terms, after the Socialists had frozen them, but assured that would be his only spending increase. Key to winning hearts and minds by the self proclaimed, “Mr. Normal” could be how he gets the message across.

“He is not a particular charismatic figure. He is not terribly good at communicating with the public and this may be a problem, because any future Spanish prime minister will have to do a lot of communicating and will have to work really hard at explaining what measures need to be taken and how they are going to be implemented,” explained Charles Powell, Deputy Director of research and analysis at the Real Instituto Elcano in Madrid.

Getting people back to work remains a key objective, the country’s jobless rate has risen to around 23 percent, peaking higher for the younger age group with almost one out of two people without a job. Reforming the country’s labour laws remains a key objective.

The business friendly government will bring back tax breaks on buying homes and there will be similar incentives for firms taking on a first employee.

The new prime minister will face ideological arguments. The indignados are a reminder that not everyone feels represented by the current system of government. Can he listen or will meeting the EU austerity demands cloud all other issues?

He must also manage the changing face of Basque separatism claims after ETA announced the end of its armed campaign. The 56-year-old Rajoy is a former Minister of the Interior.

The Spanish have already had a taste of what may be the future. Public holidays will be moved to the nearest Monday to avoid long and costly weekends.

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