But beyond the need for internal reform, Torreblanca fears a Spanish Catch-22: Austerity policies will only depress the country further unless external demand prods the economy into life, yet at the same time, Spain is unable to bring about a change in European policies to make growth the new focus. “You can bring in reforms to reduce labor costs all you like, but if there is no demand, people do not start up companies. We are always hearing that businesses create employment, and that’s a lie; it is demand that creates employment.”
Meanwhile, Rajoy continues to play for time and tries to do good political business even with the poor hand he has been dealt. Presented Sept. 27, the state budget for 2013 includes a 1 percent pension increase with an eye on October’s elections in Galicia — a region with a high proportion of seniors — though Finance Minister Cristóbal Montoro refused to confirm that the customary end-of-year consumer-price-index inflation changes would be administered to pensions. Reforms to boost competitiveness or stimulate new areas of the economy were once again conspicuous by their absence.
Spain’s ultra-cautious conservative leader does not seem to be the man to “rethink Spain,” as Molinas insists is imperative at this juncture. The analyst argues that the country is crying out for a “new political and social pact,” starting with electoral reform to do away with the closed-list system that foments the gravy-train tendency that packed savings banks’ boards with politicians and brought about financial disaster. “It’s make-or-break time,” Molinas says. “And the answer has to be ‘make’ because the ‘break’ is already here.”
James Badcock is editor of the English edition of El País