Spain: Can the Left’s economic plan turn back austerity?

The left-wing coalition Unidos Podemos (United We Can), is currently polling over 25% and looks set to surpass the vote of the social-democratic Spanish Socialist Workers Party (PSOE).

By Dick Nichols June 14, 2016 — Links International Journal of Socialist Renewal a much shorter version of this article was first published at Green Left Weekly — United We Can — the joint ticket made up of Podemos, the United Left (IU), the green party Equo and three broader alliances in Catalonia (Together We Can), Galicia (In Tide) and the Valencian Country (A la Valenciana) — is campaigning in the June 26 Spanish general election on a plan to reverse economic austerity. In its updated economic statement for the election, Podemos states: “We maintain as our central tenet the financial need once and for all to abandon the policy of austerity: to avoid further cuts and to restore those that have taken place in recent years” (emphasis in original). Is the new coalition's proposal up to that huge job? Can it be applied without Spain finding itself outside the eurozone? Will it have any better chances of success than SYRIZA in Greece against the media hysteria, blackmail and sabotage from domestic and European powers-that-be? These burning issues, discussion of which so far has been mainly restricted to the more politicised parts of Spanish society, were also not a key part of the campaign before the December 20 election (which failed to produce a government and made the June 26 “second round” poll necessary). However, recent opinion polls confirm that United We Can continues to lead the social-democratic Spanish Socialist Workers Party (PSOE) by up to five percentage points. That lead would also give United We Can a one-seat majority over the PSOE, despite the rigged Spanish electoral system of multi-member electorates of unequal size. At the same time there is no sign so far of a swing back to the right — the ruling People's Party (PP) and the new-right Citizens. Their total vote is still stuck at a ceiling of 45%. Thus, the increasingly possible scenario of a broad progressive relative majority headed by United We Can means the PP, PSOE and Citizens now have no choice but to try to whip up panic about the new coalition's economic policies, which are said to be “devastating” and “catastrophic” according to acting interior minister Jorge Fernández Díaz. The PP has to win back voters who deserted to Citizens in disgust with the ruling party's corruption; Citizens has to appear as tough on “economic irresponsibility” as the PP; and the PSOE has to concoct some sort of economic rationale for choosing a grand coalition with the PP if it eventually judges that as its least evil course. For example, former PSOE minister Jordi Sevilla addressed the annual meeting of the Basque employers' federation Cebek on May 11, where he said that the Podemos economic program was not viable and ran the risk of taking Spain out of the Euro. A February 20 comment piece by C. Rivero in the financial daily Expansión said that Podemos's “rebellion against [European] budget norms reaches the extreme of violating the Fiscal Compact adopted by the Euro nations in 2012, which obliges all partners to guarantee debt repayment in their constitutions. But Podemos, turning a deaf ear, proposes without a blush to repeal article 135 of the Constitution, which would, de facto, put Spain outside the eurozone.” The opposite concern is being expressed on the various social media of the left: that the United We Can program is being watered down so as to make it more palatable to traditional PSOE voters (for example, by excluding IU demands like a million jobs plan), while the critical issues of Spain's adherence to the Euro and the austerity-enforcing EU Growth and Stability Pact are being fudged in the desire to avoid a repeat of SYRIZA's lost war with “Brussels”. On May 30, Socialism 21 (an anti-capitalist politico-cultural association grouping people from left republicans through to IU and Podemos members and anarchists) stated:
The electoral proposals contained in the [IU-Podemos joint document ] “Changing Spain: 50 Steps For Governing Together”) are demonstrably inadequate. They make no effort to address basic needs of the majority, such as the dramatic level of unemployment and there are surprising gaps with regards to popular demands that the left has fully taken on board (35-hour working week without loss of pay, nationalisation of strategic sectors, leaving NATO, repealing section 135 of the Constitution [which makes debt repayment the first obligation of the government budget], the Republic, etc...)
In addition:
The voters are not being told the truth when an alternative economic and social policy is proposed without being completed with a project for recovering economic sovereignty that takes into account the strangulation exercised by the Euro and austerity imposed from Brussels...
We shall have to overcome these manifest weaknesses of the coalition through debate and social pressure, forcing the elected representatives of the left to fulfil their promises and enforcing a clash with the European Union as far as necessary.
Some left-aligned foreign visitors to the Spanish state have also not been reticent about commenting on the United We Can approach. On May 11, former Greek finance minister Yanis Varoufakis wrote in Newsweek that “Podemos's greatest weakness, besides SYRIZA's capitulation last summer, is its lack of a coherent European agenda and its silence on how to deal with the Eurogroup [of Eurozone finance ministers] and the European Central Bank (ECB), institutions that will most likely begin asphyxiating a Podemos-centred government even before its appointment.” For Varoufakis, the solution—in contrast to Socialism 21 which wants Spain to leave the Euro — is “a pan-European investment-led recovery initiative, to the tune of 8 percent of the Eurozone's aggregate income, run by the European Investment Bank and funded through a large issuance of the EIB's own bonds, with the ECB standing by to purchase those bonds in the secondary markets as the need arises.” Varoufakis doesn't spell out how the present ECB, apparently intent on asphyxiating a Podemos-led government, could be induced to support a pan-European investment-led recovery in this way. The former Greek finance minister recently visited Barcelona on the invitation of its left city council. At an informal lunch in the company of deputy mayor Gerardo Pisarello and Antoni Domènech, editor of the left web journal Sin Permiso, Varoufakis commented (the account is Domènech's):
Of course, I'm not here to give advice to anyone, even less to interfere in the affairs of the Spanish left. But I think that agreeing to accept the present rules of the EU in the hope of negotiating extensions of deadlines or making exceptions, instead of clearly outlining a policy of open defiance of those anti-democratic rules that are suicidally destructive of the Union — and not posing that “nationalistically”, i.e., not appealing to the exclusive gain for Spain but for the whole EU—that should be a real line in the sand for a possible left government after June 26.
Maybe Ada Colau, who right now as mayoress of Barcelona enjoys deserved national and European prestige, could choose a politically opportune moment to suggest publicly that in no case can one act in accordance with present EU rules.
Another recent left-minded visitor to Spain, University of Newcastle economist Bill Mitchell, even more critical of the United We Can economic proposal, calling it “anything but extreme and radical. It basically signals a willingness to fall in with the European austerity consensus.” Fragile recovery in a wobbly economy It is true that United We Can's economic plan appears modest at first glance, a minimum necessary if Spain's accumulated pile of economic and social ills is to even start being addressed. Its basic goal is to reduce Spain's unemployment rate, presently at 20.1%, to 11.0% by the end of the next parliamentary term (2019). If achieved, it would create 600,000 more jobs than projected in the Stability Program of the acting government of the People's Party (PP). The United We Can plan's core proposal is not to cut public spending over the next four years by the 3.2% of Gross Domestic Product demanded by the European Commission, but instead to keep it at 2015 levels (43.3% of GDP). With output still 5% below its 2008 level, youth unemployment at 45%, 29.2% of families living in poverty, the Spanish social security fund running down at an unsustainable rate and inflation at -1% — would not even a conservative government contemplate boosting growth in such a context? Especially as what growth there has been over the last two years (1.4% in 2014, 3.2% in 2015) is beginning to slow? Not the government of acting PP prime minister Mariano Rajoy. While his government ran a more expansionary policy over 2015 and has been less enthusiastic about deficit reduction than the European Commission would like (Brussels has recently asked the Spanish government for a further €8.2 billion reduction in its deficit), Rajoy has not used this growth to abandon austerity, but to soften it a touch. For example, in 2015 real per capita spending on health and education was still 11% lower than in 2009. The small increase in revenue from 2014-2015 growth has been largely earmarked to contain debt and finance vote-buying tax cuts (worth €7 billion to date). Nor is the collapse in revenue-raising capacity created by the crisis being reversed: company tax receipts that reached €44.8 billion in 2007 were still only €18.7 billion in 2014 and total tax receipts in 2014 were still only 87% of their 2007 figure. Moreover, the recovery itself is not consolidated (and its benefits are flowing overwhelmingly towards the top end of society). Sustained by a combination rare in Spanish economic history—wage cuts, low oil prices, a low euro and the European Central Bank's zero interest rate policy — the recovery could still stumble. The latest European Commission staff report on Spain says why: “The combination of large external and internal debt, both public and private, leaves Spain highly vulnerable to adverse shocks or shifts in market sentiment, which can be especially harmful in a context of high unemployment.” And that is without even beginning to tackle the Spanish economy's chronic structural flaws: exports overly dependent on low-tech sectors like tourism and real estate; high dependency on intermediate goods exported into Spain by multinational firms for finishing by relatively lower-paid Spanish workers; high rate of inward foreign direct investment associated with this “comparative advantage”; high dependency on energy imports; low rate of research and development; the possibility (in an environment of very low interest rates) of the recently rescued banking system again finding itself in trouble; and pervasive corruption and tax avoidance. A growth plan For United We Can, this state of affairs cries out for an increase in public spending and investment—to reverse the running down of public and social welfare and start to reconfigure the shaky foundations of the economy. Austerity aimed at boosting competitiveness would be replaced by an income-led expansion of demand as the main driver of the economy, powered by a €60 billion increase in public spending over four years and leading over time to a greater weight for the public sector. The expanded budget would bring increases in the following areas: social welfare (€21.9 billion), education (€12.6 billion), health (€16.4 billion), housing and community services (€3.4 billion), culture and leisure (€5 billion) and environmental protection (€4.6 billion). These increases would be accompanied by a reduction in the percentage of the budget going to defence, public order and security and “general public services and economic affairs”. The shift in priorities would allow: spending on health and education to recover their 2009 weight in total spending (reversing cuts of up to 20% in their budgets); the return of the pension age to 65 and an increase in the pension (to 100% of the minimum wage for a pensioner without a dependent spouse); increased funding of carer services; and a boost to public investment “centred on financing the energy transition”. In addition, the introduction of a guaranteed minimum income (beginning at €600 a month for an individual) would improve the living conditions of nearly 8.5 million people by extending a benefit already available in the Spanish Basque Country to the whole Spanish state. The minimum wage would be increased from its present level of €9172.80 a year to €11,200 by the end of 2017 and €12,600 by the end of 2019. Other anti-poverty measures would include “a living minimum electricity supply at a rate based on income”, a rent ceiling of 30% of household income, and a range of measures to improve the lives of working and non-working women, including protection of their employment during and after maternity as well as a “jobs plan for women over 45 and women at risk of social exclusion”. A tax plan This increased spending would not see the deficit expand proportionately. Over the same period, tax income — presently 9% of GDP below the EU average — would be boosted by: an attack on tax evasion, increased taxation of the rich, dropping the PP plan to cut the company tax rate, new green taxes, a “Tobin tax” on financial transactions and a temporary “solidarity” levy on a finance sector that has received over €61 billion in direct public support since 2009. The consumption tax scale would be rejigged to reduce the tax rate on basic household items while increasing it on luxury goods. The overall impact would be to make the tax system more progressive, with 0.4% less of GDP coming from indirect taxes even as the overall boost to the tax take would amount to 3.0%-3.5% of GDP. By 2019, total revenue would increase by 2.7% of GDP compared to the PP government's target, leaving a 2.1% deficit instead of the PP's 1.6% deficit target and a public debt figure of 95.3% of GDP as against the PP projection of 96%. The projected overall economic impact of the €60 billion in increased spending less the increased tax take (totalling €52 billion) would be to increase Spain's annual growth rate over 2016-2019 from 2.5% to 3.5%. This sharp jump in growth would be due to the fact that the stimulative impact of each extra euro spent would exceed the restrictive impact of each extra euro collected in tax revenue: the extra tax revenue would overwhelmingly come from the richer parts of society while the spending would be done by people who would use the extra income to meet ordinary consumption needs they cannot satisfy at present. According to the Podemos economic statement: “As important as the volume of spending is getting its composition right, giving priority to that spending which has a high multiplier effect, a strong social impact, a greater effect in creating good jobs and greater capacity to advance the needed transformation of the Spanish economy.” The projected unemployment rate by 2019 would be 11% as against the PP government's 14% (and the Bank of Spain's 17.3% by end of 2018), representing 603,000 more people in work. Strengthening labour The second main pillar of the United We Can economic strategy is a complete reworking of the Spanish state's present labour relations framework, chiefly the work of the 2010 (PSOE) and 2012 (PP) workplace relations legislation. United We Can's plan would repeal both laws and replace them with “a new Workers' Statute with the goals of (1) reducing casualisation (2) rebalancing conditions for collective bargaining (3) promoting workers' participation in enterprise management, and (4) eliminating gender-based discrimination”. The third main pillar would be the creation of a public bank (beginning with keeping the rescued banks Bankia and Banco Mare Nostrum in public hands) in order to drive the creation of an economic model less dependent on tourism and real estate. In the words of the Podemos economic statement: “We are not only proposing to grow more, but also to transform growth. An important part of the increase in public spending we propose will be set aside for that transformation — public investments, an increase in research and development and driving a real energy transition.” The first economic measures an incoming United We Can government would take would be to withdraw a planned €3.5 billion cut in funding to the Spanish state's 17 “autonomous communities” (regional government). What obstacles? Others things being equal, the plan — if able to be implemented—would lead to a modest but definite improvement in the lives of millions of people in the Spanish state, where nearly 5.9 million people live below the poverty line and another 4.2 million people have difficulty in “making it to the end of the month” (figures of union GESTHA). It would also start to address the most critical areas of ongoing social injustice and environmental devastation. What obstacles stand in its way? We can discount those that only exist in the overheated imaginations of commentators aligned to the establishment. For example, a May 18 report in Expansión sought to spook its readers with huge-sounding numbers on spending and tax increases, but with no attempt to assess their size relative to the budget and the Spanish economy, nor their overall economic impact. There was no mention of inconvenient facts such as that United We Can's spending commitments would only roughly restore the cuts to spending since 2008, nor that they would amount to much less than the increase in public spending under the 2000-2004 PP government (€87 billion) and the 2004-2008 PSOE government (€126 billion), nor that the increases in spending and revenue would still leave Spain with a public sector smaller than the European Union average. A February 22 “dismantling” of the Podemos plan in El Mundo by Marxist-turned-neoliberal economist Daniel Lacalle and two others said: “The plan is clearly anti-employment and anti-growth, it will increase taxes on small and medium business and the self-employed, and not one case exists in the OECD of a similar climb in taxes and increase in spending generating an increase in employment.” Yet, according to Podemos economics secretary Nacho Álvarez (writing about the original discussion paper that was the foundation of the program) “although our proposal involves a significant increase in public expenditure, it would be perfectly viable in financial terms. “Firstly, through increased revenue stemming from fiscal reform and the fight against fraud. Secondly, because economic growth itself would translate into higher public revenue… “Finally, some fiscal space could be gained from postponing the goal of reducing the public deficit ... The choice, then, lies between prioritising either the rate at which unemployment is reduced or at which the public deficit is reduced” (emphasis added). What, then, are the problems with this modest proposal that Lacalle and his co-writers say “leaves the spending programs of Hollande in France, Renzi in Italy and even Tsipras in Greece to the right”? Maybe the increased public spending proposed would lead to an increased balance of payments deficit as imports increase more than exports? According to Álvarez, this would probably happen, but calculates that the increased deficit would be contained at around -2% of GDP, mainly because its chief components would be machinery and technology imports destined to reduce the economy's oil import dependence — unlike the explosion of consumption good imports associated with the real estate bubble up to 2007 (when the Spanish external deficit reached -9.6% of GDP). Maybe a Spanish fiscal expansion would spur inflation? With eurozone inflation at -0.1% in May, no sign of price pressures visible anywhere on the horizon, and the European Central Bank doing all it can to counter deflation, that concern seems misplaced, to say the least. Is it because the United We Can plan would mean violating the European Union's fiscal rules? That is certainly true — indeed Spain has been in violation of these rules and the EU's Excessive Deficit Procedure ever since the recession began in 2009. However, since then the European Commission has surrounded these rules with an increasing maze of exceptions and provisos, such that in recent years the Procedure's targets have already been rescheduled three times for Spain as well as once each for France and Italy. Moreover, which EU rules get applied and with what degree of rigour largely gets determined by the balance of political forces on a European scale. When isolated Greece stood up last year against the Eurogroup it could be brought to heel by the threat of the ECB to turn off liquidity to the insolvent Greek banking system. In cynical contrast, when Jean-Claude Juncker, the president of the European Commission, pushed on May 17 for Spain to be given an extra year to meet its 2017 3% public deficit target, he got it through the Commission — and the Rajoy government was thus nicely spared the embarrassment of a fine for non-compliance with its deficit reduction obligations during the Spanish election campaign. Juncker's effort on behalf of Rajoy was such a blatant violation of Commission rules — which require that the Commission invoke a formal excess deficit procedure for any member state seeking relief from its deficit reduction obligations — that both Germany and the ECB called for the legal service of Ecofin (grouping together EU finance ministers) to rule on whether the Commission decision was legal. The lawyers ruled it wasn't, but that did not matter: now there will not be any fining of Spain, at least until after the elections (and maybe never if the PP gets back). The new €8.2 billion schedule of deficit-reducing measures the Spanish government must undertake in exchange for the new deficit reduction schedule will also only be specified after June 26. The Rajoy government's persistent petitioning of its political co-religionist Juncker, including a sworn commitment to abide by future EU targets for cuts, paid off — even if the price has been to make informed Spanish public opinion about “Brussels” even more cynical. Little wonder that Dutch finance minister Jeroen Djisselbloem, the president of the Eurogroup, who might have to deal with a new recalcitrant Spanish government after June 26, told Süddeutsche Zeitung on June 3 that as a result of the episode “the credibility of the Commission is compromised”. Irreconcilable goals Modest in appearance, the United We Can economic plan actually poses a blunt challenge to the economic policies of the conservative-social democratic coalition presently running the European Commission. This is because it would shift Spain's fundamental priority from defending and extending competitiveness to one of generating investment and growth to meet social and environmental needs. Most importantly, it would reverse austerity's most valued gain for capital — the growing atomisation of the working class and destruction of organised labour. As such, it would, if implemented, set a United We Can government on the road to unavoidable conflict with “Brussels” as guardian of the ruling values and imperatives of the EU and Eurozone. For example, it would also be even more impossible for a Spanish government trying to implement the United We Can program to meet the European Commission's “macroeconomic imbalance procedures”. These were introduced after the 2008 financial and economic crisis in order to set limits to “risky” trends in debt, deficits, labour costs, competitiveness, house prices and other indicators. This is as much as admitted by the European Commission's own recent staff economic analysis of Spain. Take, as an example, the indicator net international investment position (NIIP) — measuring, roughly speaking, the difference between an economy's financial claims on other economies and those of other economies on it. Its quite arbitrary “indicative threshold” — when the European Commission thinks alarm bells should start ringing — is -35% of GDP. Already negative in 2008 for Spain, Portugal, Greece and Cyprus, it has further deteriorated over the past eight years (by between 10% and 50% of GDP). Over the same period, the positive NIIPs of the eurozone's surplus economies — Belgium, Germany, Luxemburg and the Netherlands — have all increased (by between 10% and 85%). This is the result of the structuring of the eurozone, with nearly all the economies of the EU “periphery” being throttled by “strongly and significantly overvalued” real effective exchange rates according to one recent analysis. To reduce Spain's NIIP to anywhere near -35% of GDP would require it to achieve unprecedented gains in its current account balance, and this when Spanish membership of the Euro leaves it with basically one weapon for increasing export competitiveness and increasing its external surplus — wage restraint. According to the latest Commission staff report, in the Spanish case “a 3.6% current account deficit would suffice to stabilise Spain's negative NIIP. A favourable combination of high current account surpluses and high nominal growth rates would however be required to halve the negative NIIP in the next ten years. Both scenarios are far from granted, especially the former.” The report offers no recommendation except ongoing wage restraint and public sector deficit reduction — that is, ongoing austerity. It also calls, as does the International Monetary Fund and the OECD, for a further round of Spanish labour market reform to entrench enterprise-level bargaining. And this when workers in once-unionised industries are forced to set themselves up as individual companies. The obvious alternative solution within the framework of the eurozone and EU — that of requiring the surplus economies (led by Germany and the Netherlands with their “large and persistent current account surpluses” to run down them down via an expansionary fiscal policy — does not rate a mention in the Commission staff document. That is also why the Commission staff report can only just note — without any serious recommendations for treatment — other chronic problems of Spanish society such as low levels of education and skills, worsening poverty and social exclusion, woefully inadequate child and aged care, energy poverty and the social trauma of mortgage foreclosures. Towards a replay of Greece 2015? So, given the irreconcilability of United We Can's economic proposals and the imperatives of the Spanish and European big business, is Europe headed for a repeat of the SYRIZA-Brussels conflict of 2015 that began with big Greek capital shifting nearly all its money out of the country on the prospect of a SYRIZA win and ended in the brutal execution of the “Athens spring” by the European Council in July? Or does the sheer size of the Spanish economy —the fourth largest in Europe and accounting for 10% of EU GDP — itself preclude that prospect? The likely scenarios are already being played out in the minds of observers of all political stripes. For his part, Varoufakis told his informal Barcelona lunch that:
The argument about the size of the Spanish economy in relation to Greece is obviously not insignificant. But I think the matter will go like this, more or less. If they haven't already done it, the bigwigs of the Eurogroup, the ECB and the European Commission will tell [PSOE leader] Pedro Sánchez: “You can reach an agreement for coalition government with United We Can. Of course you can! But you must come here with a letter personally signed by Pablo Iglesias committing him to respect, as of now, the current rules of the EU and, moreover, the agreements already reached with the previous Rajoy government. We can negotiate a bit, but without that there's nothing to be done...
In a May 26 speech to the annual politicians-talk-to-business meeting of the Barcelona Economy Circle, Pablo Iglesias seemed to indicate possible preparedness to compromise with Brussels. He asked rhetorically:
Is it possible to develop policies like the ones we're proposing within the framework of the eurozone? Of course it is. We are enormously pragmatic and we know the limits and we are fully aware of the pressures to which a government can be subjected, because we have seen how the governments in this country have been pressured.
Yet Iglesias then went on to indicate an approach to achieving deficit reduction that is the opposite to that practised by PSOE and PP governments and one which the Eurogroup is very reluctant to countenance — as revealed by its protracted haggling with the Greek SYRIZA government over conditions for receiving its bailout loans. Iglesias said;
We have learned something — to govern is to choose different options at the time of implementing cuts. As [Podemos advisor] professor Vincenç Navarro reminded me a while ago, [PSOE prime minister] Zapatero froze pensions in order to achieve €1.7 billion in cuts: he could have achieved almost double that figure by reversing his cuts to estate duties. Prime minister Rajoy cut €6 billion out of health when he could have achieved almost the same amount by reversing the tax cuts for companies with more than €140 million in turnover (representing only 0.12% of the firms in the country).
At the same time Iglesias insisted that a United We Can government would “shift meeting the 3% goal to the end of the parliamentary term. In that sense we must put our money on a balanced fiscal expansion that doesn't increase the deficit, even though it reduces it more slowly than demanded by Brussels.” On June 8, Podemos economy secretary Àlvarez told the media that an incoming United We Can-led government would not implement the €8.2 billion in extra cuts imposed by the European Commission in exchange for rescheduling Spain's debt reduction obligations. He also said that such a government “must sit down with Brussels in order to renegotiate the deficit goal and convey the pressing need to postpone the goal to the second half of the parliamentary term.” The United We Can approach would therefore seem to be to indicate a preparedness to negotiate but to choose to stand firm on the issues that will force the hardliners in the ECB, Eurogroup and European Commission to pay as high a political price as possible if they opt for conflict. The lesson learned from the Greek debacle seems to be to pick fights with Brussels as carefully as possible in the perspective of building up social majorities in Spain and across Europe in favour of a break with austerity policies. Taking Spain out of the eurozone is ruled out for the time being, most importantly because a strong majority in Spain remain in favour of Euro membership. In a May 16 statement the Podemos economic commission said:
The fundamental problem is the unsuitable fiscal framework of the Eurozone, which has aggravated the crisis and its consequences for the majority, has set back recovery and, without any economic justification, privileged over job creation unrealistic deficit reduction goals that subject the whole European economy to deflation...
The new government of Spain must strengthen in the future Council of Europe [of European leaders] those positions in favour of a deep-going reconsideration of present European economic policy, in particular its fiscal framework.
United We Can will be encouraged in that stance by some recent shifts in the European political balance, beginning with the unresolved conflict between the European Central Bank and German financial institutions over how to respond to ongoing deflation and slow growth. Another factor is the rising punishment of European social-democratic parties where they are in government and responsible for austerity, especially where they are in coalition with the right. Overtaken by United We Can in Spain, down to 21% in Germany as against 23% for The Left and the Greens (latest Forsa poll), threatened with the loss of Rome and other Italian regional capitals after the June 5 local government elections, besieged in France by the movement against the Socialist Party's labour law and the Nuit Debout movement—the only country where social democracy is holding up in government is Portugal (where it has been pressured into more progressive policies by the Communist Party and Left Bloc). None of which rules out that the powers-that-be in the Eurogroup — led by German minister of finance Wolfgang Schaüble — won't decide that their best response to a United We Can-led administration committed to renegotiation is still “Greek”: a blunt statement that European treaties and rules take precedence over any democratically-elected government. In such a scenario the Eurogroup “bigwigs” would not have as many weapons to use against Spain as they did against Greece — for instance, the Spanish banking system has returned to solvency for the time being — but it would not be difficult for the EU powers-that-be to stage a scandal about Spanish intransigence and rule-violation, provoking a large withdrawal from Spanish public debt and sending interest rates skyward. As an anticipation of what could happen, after the December 20 election result saw Podemos score over 20%, €19 billion in foreign holdings of Spanish loans, repurchase agreements and deposits was withdrawn from these assets. But what would be the economic and political cost of such an action in a Europe that is stagnating economically and racked by political tensions? Even the Bundesbank and German ministry of finance, which paid a definite political price for their scorched-earth Greek victory, would have to think very carefully before unleashing a punitive expedition with very high political overheads against Spain. Of course, the people of Spain may never even get to see a United We Can government after June 26. The PSOE may decide — or be “persuaded” by massive pressure from the European and local establishments — that it had best to be part of a last-ditch stand in support of policies that continue poverty, social misery and the enrichment of Spain's corrupt elites at the expense of the vast bulk of society. Such a decision would buy the worm-eaten Spanish system a bit more time, but also practically ensure that it — and its PSOE pillar — come crashing down at the next election. Dick Nichols is the European correspondent of Green Left Weekly and Links—International Journal of Socialist Renewal.