As Greece continues to duke it out with the European Union over an end to the bailout and its attendant austerity measures, Spain is no doubt watching very carefully.
The victory of Alexis Tsipras’s Syriza party in the Greek elections, on a platform to end cuts in services and benefits as conditions of its bailout from the EU, has emboldened Spain’s Podemos (We Can) party. Spain too has been laboring under austerity measures, and Podemos has gained popularity in tandem with tough economic conditions that include high unemployment and growing discontent with the country’s leaders.
Greece, facing the possibilty of running out of cash next month, reached an agreement with European finance ministers Friday to keep bailout funds flowing for “four months under conditions” that have yet to be finalized, Bloomberg reported.
While Greece and Spain are very different countries, as both current leaders in Madrid and Podemos itself are quick to point out, the fact remains that many Spaniards have been cheering from the sidelines as Syriza kept its campaign promise to challenge the terms of Greece’s bailout. They hope that at home, Podemos might do the same—although they will have to wait till November’s elections to have the opportunity.
In one similarity to Greece, Podemos, led by Pablo Iglesias, has toned down its anti-austerity rhetoric, much as Syriza did pre-election in Greece. However, that has not dampened the enthusiasm of many for what they see as Podemos’s promise to wreak change that the current Spanish government will not pursue. A massive rally at the end of January saw tens of thousands gathered to cheer Greece and celebrate the possibility that Spain too could renegotiate its financial arrangements with the EU.
Yet Spain’s present government is not excited at the prospect, particularly since it loaned Greece 26 billion euros—a fact that Prime Minister Mariano Rajoy undoubtedly had in mind when at a recent summit in Brussels he insisted that Greece should keep all its financial commitments.
Spain has finally begun to exit from seven years of financial difficulties, and its growth is among the fastest in the euro zone. Still struggling with a high rate of unemployment, however, Spain has seen investors grow happier than people struggling to find jobs and make ends meet. Its borrowing costs are around record lows, and Spain has no trouble with finding cash in capital markets.
According to Fitch Ratings, Spain’s banking system has been growing stronger under restructuring in the wake of the country’s bank bailout. An increase in tax receipts, said the ratings agency, is due “in part to better-than-forecast domestic demand.” In fact, it’s doing so well that Fitch said, “Spain was the only major eurozone economy to see its growth forecast revised up in our September ‘Global Economic Outlook.’”
But austerity has of course not been popular in Spain any more than it has in Greece, and other measures enacted in the areas of labor, the pension system, and the country’s fiscal framework have certainly not won any popularity contests.