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Spain: Rajoy's U-turn

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Spain: Rajoy's U-turn
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Six months after taking office, Spain’s prime minister has given way to reality. The crisis has gone from bad to worse, the country is now wedged into recession, all the economic indicators are flashing red, and the public deficit is white hot.

On Monday, Madrid won a sliver of flexibility from Brussels on the terms for reducing its deficit.

It finished last year near nine percent. The concession is: this year’s target was softened by a point to just over six, and next year’s to 4.5 percent. Only in 2014 will it have to buckle down to a deficit of 2.8 percent.

In exchange, Spain will have to save 65 billion euros by then.

For that reason, Mariano Rajoy has had to renege on most of his electoral promises. When the Partidio Popular leader won last November’s elections it was with the biggest majority the PP conservatives had ever enjoyed. Spaniards gave him a powerful mandate, hoping to get out of their already two-year-old crisis.

Inheriting a very tough task, Rajoy at his investiture restated he would not lower pensions. It’s the only pledge he hasn’t ditched today.

He said: “The government is going to respect its big electoral commitments, and bring pensioners’ purchasing power up to date as of January 2012.”

For other things he went the other way, especially with VAT, which he has raised from 18% to 21%.

The socialists the PP had replaced in government lost no opportunity of reminding the PM how he had lambasted their leader’s more modest raising of VAT in 2010.

Here was Rajoy’s video attack, saying: “The increase in VAT is the bad government stealing from Spaniards when they are already so sorely punished by the crisis.”

Today Mariano Rajoy announced the biggest budget cuts democratic Spain has ever faced. A far lower 15 billion euros in cuts cost his predecessor Luis Rodriguez Zapatero his job. Now Rajoy must prove his resilience can match his pragmatism.