Spain’s new government has begun the gigantic task of lifting the country out of its worst economic crisis in decades, following an overwhelming general election victory.
The conservative Popular Party won 186 seats in the 350-seats lower chamber of parliament in Sunday’s election compared with 154 in the last legislature. The Socialists plummeted from 169 seats to 110, their worst performance ever.
“There won’t be any miracles. We never promised any,” said Popular Party leader Mariano Rajoy (56) in his victory speech. “But as we have said before, when things are done properly, the results come in.”
The promised change in political direction failed to immediately lift financial markets, with Madrid’s key Ibex index down nearly 2 per cent in early trading.
Spain’s key borrowing rate for 10-year bonds on the secondary market started a second week edging toward 6.5 per cent, close to levels where other euro zone countries such as Greece, Ireland and Portugal had to request huge bailouts from the European Union and the International Monetary Fund.
A 7 per cent rate is considered unsustainable over the long term.
“We have to do all in our power to recover confidence in our country, to recover credibility in the Spanish economy,” Popular Party deputy leader Maria Delores Cospedal said.
“We have to make it clear that the Spanish economy knows how to meet its commitments.
The party won most seats in 45 of the country’s 52 provinces. The result, together with a clean sweep in municipal and regional elections in May, left it in its strongest position ever. It also meant that unlike the outgoing Socialist government, the Popular Party - or PP as it is commonly referred to - will not have to rely on support from any other political party to implement its policies.
Curiously, the PP only edged up from 10.2 million to 10.8 million votes, while the Socialists’ vote plummeted from 11.1 million in 2008 to 6.9 million. That was to the benefit of smaller parties such as the United Left, which saw its seat numbers shoot from two in 2008 to 11 this year.
It was the third time in as many weeks that Europe’s debt crisis has led to a change in government. Financially troubled Greece and Italy have also seen their governments fall.
Spain has the eurozone’s highest jobless rate, at 21.5 per cent - almost 5 million people out of work.
“We stand before one of those crossroads that will determine the future of our country, not just in the next few years but for decades,” said Mr Rajoy, who lost in his two previous electoral bids to run Spain.
“For me, there will be no enemies but unemployment, the deficit, excessive debt, economic stagnation and anything else that keeps our country in these critical circumstances.”
Mr Rajoy has given few hints of how he will tackle the jobless nightmare and has only promised tax cuts for small and medium-sized companies that make up more than 90 per cent of all firms in Spain.
He faces the towering task of restoring investor confidence and lowering Spain’s soaring borrowing costs with deficit-reducing measures, while preventing an already moribund economy from heading into a double-dip recession. The country only just climbed out of one last year that was prompted by the bursting of a property bubble.
At the same time, Mr Rajoy has pledged to protect the welfare state and educational system.
AP