Spain: Will fall of former IMF boss destroy People’s Party?

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By Dick Nichols, Barcelona

April 27, 2015 – Links International Journal of Socialist Renewal – On April 16, a central member  of the Spanish economic and political establishment came crashing down. Rodrigo Rato, former deputy prime minister in the 1996-2004 People’s Party (PP) government of José María Aznar and head of the International Monetary Fund (IMF) from 2004 to 2007, was detained on suspicion of tax evasion, concealment of assets  and fraud. At the same time it became public that Rato had also taken advantage of a 2012 government amnesty for tax cheats.

Although the former treasurer is no longer in detention, TV coverage of Rato being pushed into a police car like any other suspect continues to dominate comment in the bars and on the social media. Many commentators judge that his detention marks a turning point in Spanish politics.

In this country of squalid political operators and corrupt bankers the former treasurer has long been a prominent target of popular outrage. Also former CEO of the bankrupt and bailed-out bank Bankia, he epitomises what radical party Podemos calls the “caste”: the kleptocratic clique of bent politicians and sleazy money men—“sausages” in local parlance—that runs affairs across the Spanish state.

Recently, when fellow passengers recognised Rato on a flight from Switzerland to Madrid, spontaneous cries of “pay your taxes”, “thief” and “sausage” filled the cabin.

In November 2013, when David Fernández, deputy for the Popular Unity Candidacies (CUP) in the Catalan parliament, threatened to throw his sandal at Rato at a parliamentary inquiry into Catalonia’s bankrupt credit unions, the MP’s popularity took off.

 “See you later, gangster—down with the mafia”, was how Fernández, sandal in hand, ended his intervention.

Who is Rato?

Unlike the scores of PP mayors and regional ministers who have been uncovered awarding juicy public contracts to their mates or to developers prepared to pay a cut into PP coffers, Rato isn’t your run-of-the-mill “sausage”.

As treasurer, he was the central figure in the restructuring of the Spanish economy that took place under the Aznar government. This was Spain’s Thatcher phase, when a vast program of selling off state assets was used to supposedly create a “people’s capitalism” based on share issues in the newly privatised enterprises.

Rato would make always-heeded suggestions as to who should be the CEO of these nominally autonomous firms. Under this guidance the state-dominated economy inherited from the Franco dictatorship (1939-1976) was finally turned into today’s “capitalism of mates”.

The economic foundation of share-owning middle-class support for the PP—Europe’s biggest political party—was laid at the same time.

This restructuring was also used by the Spanish-centralist PP to lessen the economic weight of the Basque and Catalan business elites. Under Rato, Basque capitalism lost control of the BBVA, Spain’s second biggest bank, while Catalan energy giant Gas Natural was blocked, first, from merging with its Basque equivalent Iberdrola, and then from taking over Endesa, the once state-owned, Madrid-based energy giant.

During the 2001-2007 real-estate bubble (“Spanish economic miracle”), Rato was treated as a demi-god by all wings of the establishment. His advice was heeded by all, including the once-reformist Spanish Socialist Workers Party (PSOE) that defeated Aznar in 2004.

Today Rato is no longer a member of a PP that is pretending that this private citizen, reputedly worth €26.6 million, has nothing to do with a party and government whose prime minister once called him “Spain’s best-ever treasurer”.

Yet if Rato isn’t quintessential PP, no one is. Child of a wealthy Asturian family, his father was a enthusiastic supporter of Nazism and the Franco dictatorship despite later falling out with the regime when he was found guilty of funnelling money to Swiss tax havens!

In 1982, the young Rato was set up with a safe parliamentary seat by PP godfather and former Franco minister Manuel Fraga, putting him on the road to a copybook “brilliant career” in banking and politics.

By 2003, after his reboot of Spanish capitalism and Spain’s entry into the euro, Rato was scheming, with big support inside the PP to replace Aznar as prime minister. Aznar, however, preferred the present prime minister Mariano Rajoy. He suspected Rato’s business dealings and also resented Rato’s doubts over the Aznar government’s backing of the 2003 Iraq war.

Rato’s consolation prize was to become IMF managing director. Since then his balloon has steadily deflated, despite his continuing to hold directorships on the boards of various Spanish multinationals.

“Ratoism”, however, survives: his closest collaborators from the days of his push for the prime ministership maintain key positions of power within the Rajoy government. They include treasurer Luis de Guindos and finance minister Cristobal Montoro.

A doomed PP?

Can the PP, already trailing Podemos in some opinion polls, now withstand the enormous shock wave set off by the Rato case?

With the critical May 24 municipal and regional elections approaching, Podemos could not have imagined in their wildest fantasies getting so much political ammunition. The latest gift is the news that Rato has allegedly been involved in funnelling funds through Gibraltar in order to dodge possible personal liabilities arising from the collapse of Bankia.

Moreover, the Rato case comes when the PP is already up to its eyebrows in scandals with potential to destroy it.  For example, Rato himself already admitted, while Bankia CEO, to sanctioning the bank issuing “dark” credit cards for board members to access illicit credit.

This scam took place when Bankia, itself a merger of seven credit unions that had gone broke at the end of the real-estate bubble, was itself bankrupt. For many small investors in Bankia, many of them PP voters who believed in the word and financial genius of “Don Rodrigo”, the share price collapse after its May 2012 bailout will never be forgiven.

And what if the case of former national PP treasurer Luis Barcenas again explodes? This top functionary, who has been charged with running a double set of accounts for the PP—one for the agency supervising party-political finances and a real one—and also with arranging brown-envelope payments to various party luminaries, has maintained all along that the top  party echelons were in on the lurk.

While Barcenas’s trial has been put back to after the next national election (set for November but always able to be brought forward), there is no guarantee that highly compromising details won’t leak in the meantime. This is especially so now that more and more moles seem to be appearing in senior public service echelons that sniff that their present political masters may be on the slippery slope to oblivion.

Hanging over the neck of the PP like a guillotine blade is the tax department’s list of those 715 participants in the 2012 amnesty for tax cheats whom it afterwards investigated. To date Rato’s name alone has leaked. However, it is not hard to guess who else might be on it: when Monica Oltra, leader of the Valencian regional party Commitment, moved in 2013 that no beneficiary of the tax amnesty be allowed to hold public office, the PP jumped to vote the proposal down.

An inside job?

In the paranoic universe of Spanish political commentary not a few observers are claiming that Rato was knifed by former PP mates in a desperate effort to create a contrast between a supposedly clean Rajoy government and its soiled predecessor (only four of the 16 members of the last Aznar cabinet have not been charged or investigated for corruption-related offenses).

How come, they ask, Rato’s name alone surfaced from the list of 715? (Against the opposition of the PP all of Spain’s parliamentary parties are demanding that this list now be made public.)

Another theory claims that the leak is part of an anti-Rajoy operation within the PP. The plan is supposedly to produce such an electoral disaster for the party that Rajoy will have to step down as PP leader.

Theory number three, originating among disaffected PP regional “barons”,  is that the Rato leak is actually an operation by Rajoy’s own cabal, aimed at having Podemos and/or Citizens win regional governments in order to give oscillating voters the experience of these new parties in government. The result would supposedly be that after a few months of squabbling and unstable left or centre-left coalition government, they would flee back to the PP devil-they-know in the national elections. Rajoy would have sacrificed his regional satraps to save his own skin.

However, whoever eventually turns out to be the source of the leak, none of these interpretations are credible. They imply a degree of planning and control of events impossible for any player in today’s turbulent Spanish political scene. As the bipartisan PP-PSOE status quo comes apart, all forces, including the besieged Rajoy government, are being forced into day-to-day improvisation in the face of unpredictable shocks.

Yet one thing is certain— a radical decomposition of the PP is now thinkable.  This is confirmed most of all by the panic attacks affecting its legions of ministers, councillors and government appointees. The end-of-regime sensation—up until now really only detected (and hoped for) by the left—is beginning to grip the passengers on the PP gravy train.

It has become clear to all, especially since the PP lost half-a-million votes in the March 22 regional election in Andalusia, that the Rajoy government’s strategy for survival just isn’t working.

That strategy consists in boasting loudly about an economic “upturn” (which has actually destroyed more than 100,000 full-time jobs), blaming the previous PSOE government for all the social pain, denouncing Podemos as dangerous amateurs who will wreck the recovery, and spooking middle-class Spain with nightmarish nonsense about Catalan nationalism and Islamic terrorism (often mentioned in the same breath).

At the same time government proposals that have angered traditional PP voters—like increased payments for use of the court system and privatisation of the administration of government data on citizens—have been quietly dropped.

‘If Rato is a crook, who isn’t?’

Rajoy’s strategy was already in trouble before the Rato case—partly because whatever benefits there have been from the miserable recovery have gone to those who least need them, partly because the “good economic news” is largely restricted to the banking and finance sectors, but mostly because no one believes in official “few rotten apples” theory any more. After all, if Rodrigo Rato is a crook, who isn’t?

A sharp demonstration of the failure of Rajoy’s strategy to connect came at a PP conference presenting candidates for the May 24 elections. As the PM got carried away with the ”great  news” that, for the first time ever, financial investors have had to accept negative interest on their purchases on short-term Spanish treasury notes, the party faithful stared on blankly, doubtless wondering what planet their great leader was on.

(Negative interest rates on short-term debt are spreading in the Eurozone, due to the massive injections of liquidity from the European Central Bank to private banks. Interest rates on short-term government debt in Ireland have also turned negative, as the flood of funds without profitable outlet continues to expand.)

Another telling sign are the desertions of PP councillors and mayors to Citizens, Spanish centralism’s new “spare wheel”, along with growing mutterings in big business circles. Some members of the economic elite have taken to wondering out loud if the Rajoy government is the solution to the critical problems of the Spanish economy and state—especially the threat from the Catalan independence movement.

Off-the-record comments from business figures after an April 21 lunch of Rajoy’s with the Spanish-Catalan business lobby Puente Aereo revealed the PM had nothing new to say beyond his obsessive message that only the PP could be trusted to nurture economic recovery. The Catalonia crisis? Nothing. Rato? I learned about it in the newspapers.  

Of course, the vast political patronage machine that is the PP will not go down without a fight. For the May 24 regional elections the PP’s barons defending their threatened bastions—like Esperanza Aguirre in Madrid and José Antonio Monago in Extremadura—will be campaigning without Rajoy and his ministers and with as microscopic a PP logo on their propaganda as possible.

Before Rato their chances of survival were, according to the polls, pretty slim, but the Rato case may well have eliminated them altogether.

[Dick Nichols is Green Left Weekly and Links International Journal of Socialist Renewal’s European correspondent, based in Barcelona. A shorter version of this article appeared in Green Left Weekly’s April 29 edition.]