Pain in Spain spills on to the streets

Protesters take to the streets in the Spanish capital as the pressure grows on prime minister Mariano Rajoy to follow Greece, Portugal and Ireland and accept a full sovereign bailout for the country

THE THOUSANDS gathered outside the Spanish assembly in central Madrid chanted “You do not represent us”, “This crisis is theft” and “The delinquents are in the parliament” on Wednesday night.

Raul Piñuela, a 33-year-old teacher, protested at the Plaza de Neptuno at what he says are costs, including the bailout of profligate Spanish banks, that the Spanish people should not be paying for.

Government cuts have taken 15 per cent out of his wages and he has also lost medical insurance and travel and social benefits over that time. The cuts have left people struggling to pay their bills, he says.

“We are paying for something we have not done – we are paying for something we shouldn’t have to,” he says, complaining about higher and new taxes the government has introduced.

The pressure on Spanish prime minister Mariano Rajoy has grown to follow Greece, Portugal and Ireland and accept a full sovereign bailout for the country from the European Union and the International Monetary Fund – beyond the bailout of up to €100 billion for Spain’s banks agreed last June.

His problems have been compounded by violent clashes between anti-austerity protesters and police on Tuesday night and a constitutional crisis over Catalonia, which has called a snap election for November in what is seen as a referendum on independence from Spain.

While the country’s most economically powerful region, it is also the most indebted and has sought a €5 billion bailout from Madrid. Two other autonomous regions, the Basque Country and Galicia, will hold elections on October 21st.

Rajoy’s regional woes increased further yesterday as Castilla La Mancha, run by his own centre-right Popular party, sought a €850 million bailout, becoming the fifth indebted Spanish region to seek help.

Figures this week showed that Spain’s recession is deepening and that the country will struggle to meet a deficit target of 6.3 per cent for 2012 given the performance of the economy this year as Madrid tries to grapple with a run on its banks.

The flight of capital from the Spanish banks continued last month as deposits fell again, dropping to their lowest level since April 2008. Spain’s borrowing costs have also risen sharply again.

Today, the latest review of Spain from credit ratings agency Moody’s raises the possibility that, in light of Madrid’s difficulties, the country may be downgraded to junk status, while the results of the independent stress tests will determine whether a previous estimate of €60 billion still stands.

“When sorrows come, they come not single spies but in battalions,” El Pais journalist Andrew Sim said of the mounting problems facing Rajoy’s government, citing the famous line by Claudius in Hamlet.

In light of these difficulties, Rajoy’s equivocation, previously seen as tactical to secure the best deal for Spain from Europe, is now viewed as playing a dangerous game of bluff by the euro zone’s fourth largest economy at a time of such uncertainty around the future of the currency.