From rhetoric to politics

Fernando Fernández. Professor. IE Business School

1 March 2016

Anchoring Spain in the euro, creating Jobs, promoting equal opportunities, reforming the social welfare system... the similarities between the aims of Spain’s two main political parties, PP and PSOE, are greater than they may suggest.

The similarities of the economic policies extoled by Spanish political parties PSOE (Spanish Socialist Party) and PP (Popular Party) are greater than either of them want to admit to their voters. The key objective of both is to anchor Spain in the Euro and create employment. The first of these objectives means that European discipline cannot be questioned. Brussels has already reminded Spain that it needs a stricter fiscal policy. Belonging to the Monetary Union implies the voluntary and democratic cession of sovereignty, which translates into fiscal rules that must be adhered to. Both parties want to renegotiate these rules and achieve more flexible objectives, with more time to achieve fiscal consolidation. They are within their rights to try this, but both know that current market turbulence is not doing anyone any favors and that further cutbacks are inevitable.  It doesn’t look that difficult to reach an agreement on a credible fiscal reform plan by rerouting the tax burden in the direction of figures that will prove less harmful for growth and employment. It should also be possible to review public spending plans in order to center the greater part on aspects related to social wellbeing and investment, particularly if there is agreement to renounce fiscal patronage.

Even in the area of equality there are far more shared ideas than may appear at first sight. The two parties stress the importance of equal opportunities – not equal results – and both criticize the fact that the social benefits system are far too focused on the age and work record of the recipient, which makes for more inequalities in times of mass unemployment. The youngest segment of the population receives zero benefits and those who find themselves pushed out of the work market. The redesign of educational, work, and social welfare policies is key for guaranteeing equal opportunities.

The main parties talk about a minimum income, about extending aid for the long-term unemployed with family responsibilities, about the new poor. The problem is that in a context of successive elections nobody is talking about the other part of the story, even though it is well known – that given that it isn’t possible to make a significant increase in public spending if there is no growth, they have to redefine benefit payments in such a way that they are less dependent on age. Or, to put it more bluntly, retirement pensions cannot continue to comprise such a substantial part of redistributive programs without causing greater social inequalities.

The real differences are a question of nuance, of emphasis

Job creation is an absolute must - if only, it has to be said, for reasons of fairness and efficiency – which is why it features in every economic plan. PSOE and PP agree that it is the responsibility of the public sector (While anti-austerity party Podemos looks to the public sector and the distribution of work). In order for the private sector to create jobs certain conditions need to be met, conditions that the two supposedly incompatible parties agree on. A stable regulatory framework and security enshrined in law is the way to provide the right environment for business and non-hostile work regulations. In strictly labor-related terms, and in spite of the noise made about doing away with the labor reform, what it is really about for the socialist party is correcting aspects they see as excessive, particularly about bringing back union involvement in the collective bargaining process. But both parties agree on the need to increase geographic and functional mobility of work, the transition toward an active policy model focused on increasing the capacity to find work rather than maintaining benefits and subsidies, and the need to find formulae that make for a productive blend of incomes from wages and social welfare payments (mini-jobs with some type of extra aid). They also agree on an absolutely key issue – the need for progressive substitution of the social security payment – a job tax – by other taxes, as a mechanism for funding the welfare state.

They say that the radical differences lie in the intangible aspects, and have more to do with literature and verbal excesses. But fortunately voters already have enough experience to know that disagreement in such areas does not have that much impact on statistics.

In short, the major discrepancy lies in each party’s opinion of how they will manage the situation, and a total lack of confidence in the capabilities of the opposing party. But, just as in other developed countries, the real differences between the PP and PSOE – the two parties that reflect opinion in Spain - are merely a nuance, a question of emphasis, or around the edges as we economists say. In such conditions, is it so difficult to reach an agreement? Citizens would not understand it if they can’t, no matter how much rhetoric they hear. 

*Published in El País on January 27, 2016

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