Monday, November 21, 2011

Spain: Socialists trounced by center-right Popular Party

  In Sunday elections the Popular Party won an absolute majority in the lower house. The Party won 186 seats of 350. On the other hand the Socialists went from 169 seats to just 111. This is the lowest number the socialists have ever won.
   The socialists are being punished for their inability to tackle high unemployment or solve the financial crisis. The Popular Party leader Rajoy promised to fight against the deficit and unemployment. However that may be a difficult promise to keep. Stock markets were not convinced the change in government will solve debt problems as stocks declined today. Spain's cost of borrowing rose.
   In May of this year there was a nationwide protest movement against the high jobless rate. Rajoy promises to impose many cuts--except for pensions. New austerity measures will be necessary to curry favor with European investors. This may cause even more unrest. There may be no honeymoon period for the new government. The earlier socialist government had cut public sector wages by 5 per cent, frozen pensions, and raised the retirement age by two years. No doubt Rajoy will need to make even deeper cuts and this is bound to bring a reaction in the street. For more see this article.

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