Scale of PP's responsibility for Spain's woes becoming harder to hide

Thu, May 31, 2012, 01:00

The conservative Spanish government has much to fear from an investigation of the deepening crisis, writes PADDY WOODWORTH

IT ALL looked so different last November.

Mariano Rajoy had just led the conservative Partido Popular (PP) back to power with an ample overall majority.

Spain’s problems, according to the incoming PP prime minister, were partly due to the chronic mismanagement of a housing bubble by the outgoing Socialist Party (PSOE) government of José Luis Rodríguez Zapatero. And they were partly due to the same party’s profligacy in public sector pay and spending.

Despite a series of recent interventions in regional savings banks, it was thought that most of the banking sector was sound.

A party that, on paper, shared the principles of fiscal rectitude then espoused by both Berlin and Paris only needed to implement its own tough austerity programme to enable the Spanish economy to recover.

Despite draconian budget cuts, however, almost everything Rajoy’s government touches seems to have crumbled, and is crumbling faster all the time.

The appalling vista of a black hole in the banking system expands almost daily, rates on Spanish borrowing keep soaring, and the stock market plummets.

Meanwhile, the ECB this week sharply snubbed Rajoy’s argument that it should bend its own lending rules to directly assist his stricken banks.

As the tough and notoriously taciturn leader of a party not given to internal debates, he is not used to listening, much less responding, to criticism. But his mantra that “there will be no Spanish bailout” sounds less convincing every time he uses it.

There is a widespread fear in Spain, and not only on the left, that the government is rudderless, and sleepwalking through the deepening crisis.

Rather than sleepwalking, however, it may be that the PP is running very scared, as the scale of its own responsibility for Spain’s woes becomes harder and harder to hide.

The PP’s other mantra, repeated ad nauseam, that all problems can be laid at the door of their predecessors in government, is wearing very thin indeed.

The PSOE certainly made egregious errors and was heavily implicated in graft at regional levels.

And Zapatero’s blind optimism about the first stages of the crisis undoubtedly fatally postponed remedial action.

But even a brief look at the political structure of Spain, governed through 17 autonomous regional governments, each with powers mostly reserved to national governments elsewhere, suggests that responsibility for the crisis must be shared.

The PP controlled and controls most of these governments. It was deeply implicated in the housing bubble, in the bad banking practices and outright corruption that spawned it, and in institutions riddled with croneyism.

It was in Madrid, city and province, and in the region of Valencia, all long governed by the PP, that some of the worst scandals related to local savings banks, developers and regional politicians first emerged.

It was a former PP finance minister – and former IMF director – Rodrigo Rato, who headed up Bankia. He resigned earlier this month only when it became impossible to hide the bank’s chronic insolvency. The government has now effectively nationalised the bank, at a cost – so far – of €23 billion to the Spanish taxpayer.

Contradictory statements flew last week between the bank’s new director and the government as to whether this investment was a repayable loan or a recapitalisation. Yesterday Rajoy repeated his refusal to allow parliament to investigate what went wrong at the bank.

Another current scandal, not directly related to the banking crisis, nevertheless epitomises for many Spaniards the institutional arrogance and laxity that made it possible.

The president of the Supreme Court, Carlos Divar, a staunch PP ally, claimed expenses from the public purse, at this time of severe cutbacks, for a series of luxury holiday weekends. He insists he was on official business but refuses to give details.

A judicial investigation, with a conservative majority, decided that, simply by reason of the high office he holds, Divar cannot be guilty of impropriety in this matter. This circular argument caused outrage, but prevailed.

Meanwhile, the government recently removed from parliament the power to appoint the director of Spanish national television.

Its critics say that this is a government more concerned with controlling information about the crisis than in resolving it.